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The 3 Top Strategies for Managing Investment Property Cash Flow

Posted by Craig Wise on September 17, 2019
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The 3 Top Strategies for Managing Investment Property Cash Flow

Whether you’re looking to buy or simply to maximize the value of a current investment property, cash flow should be at the forefront of your mind.  That’s because cash flow is arguably the most important (or at least the most common) measure when evaluating a property’s profitability and assessing future profit projections.

Ultimately, a property with “positive cash flow” is a lower risk investment than one with a negative or fluctuating history.  As a current owner of an investment property, cash flow immediately translates into whether you’re turning a profit or losing money – and, of course, that’s important.  However, it’s even more important when we consider the longer-term implications, as properties that aren’t experiencing positive cash flow become much harder to sell (when the time comes).

In this post, we’ll explore the three most important strategies for managing cash flow, which you can apply to properties in your current real estate portfolio or proactively consider prior to purchasing a new property.

#1 Calculate Your Monthly Net Operating Income

A surprising number of real estate investors – both casual investors and professional ones – maintain negative or flat-lined cash flows simply because they haven’t tracked the property’s monthly net operating income.  They have an anecdotal idea of whether the property is profitable or not, and that feels good enough.  If this sounds like you, don’t be embarrassed.  You’re in good company.  But, it’s time to change your ways.

Understanding each property’s cash flow begins with calculating its net operating income and tracking it month-after-month.  At the simplest level, this means calculating the gross income (aka all of the money coming in from rent, etc.) and subtracting all of the expenses.  It’s only after you understand your current situation that you’ll be able to develop strategies for reducing expenses and maximizing profits.

As you calculate your monthly net operating income (or as you assess the cash flow of a prospective property), pay close attention to maintenance and repair costs.  It’s incredibly common to find that you’re paying a substantial amount on temporary fixes instead of addressing core issues with permanent solutions.

#2 Consider Adding Capital

Simply put – the more upfront capital you invest in a property, the lower your monthly mortgage payments will be.  And that’s good for cash flow, since it frees up more of the gross profits.

Of course, there’s a lot to consider when deciding if that’s a viable option for your circumstances, including your access to capital, the details of your loan, refinancing opportunities and implications, and potential opportunity costs.  Be sure you work with a trusted and experienced real estate consultant who can help you identify what’s best for your unique situation.

#3 Assess Occupancy Rate and Tenant Turnover

While your property may have the ‘potential’ to make a certain level of gross income, tenant turnover (for long-term rentals) and occupancy rate (for short-term rentals) has a massive impact on the actual amount you’ll see coming in.

Of course, we all know that vacant units fail to bring in profits, but beyond that, there are substantial costs you incur each time you have to fill a vacant long-term unit, such as broker fees and tenant improvement costs (for commercial properties).  Legally, you can’t deny an application based on whether you think the tenant will plan to stay long-term or not, but you can set certain terms to help ease the potential burden.  For example, if you’re renting a commercial unit to a start-up or higher-risk tenant, you can require personal guarantees for the lease.

If your investment property targets short-term renters (such as AirBnB rentals), be sure you’re assessing the impacts of seasonality with your rental strategy.  For example, you may decide it’s best to rent on a short-term basis during the summer months while renting to university students during the school year.

Let’s Talk About How Investment Property Cash Flow May Impact Your Next Transaction!

Your Southern California real estate specialists.  Allwest Properties, Inc. offers a full range of real estate services for commercial, industrial, and multi-family apartment properties throughout Los Angeles, Orange, San Diego, Riverside, and San Bernardino counties.

With over 25 years of industry experience, we offer a comprehensive suite of solutions, including sales, leasing, tenant representation, landlord representation, investments, site selection, and consulting services.  Our goal is to exceed our clients’ expectations with each and every transaction.

Contact us today by calling 888-400-2966 or emailing info@allwestproperties.com.

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    Paul M.

    “Craig, I would like to thank you for your expertise in helping me along with the Mies Family Trust in selling the rental properties located in Long Beach and Costa Mesa. These transactions went very smoothly and professionally.” I would also like to thank you for assisting the Mies Family Trust in the acquisition of the 8 unit apartment building in Santa Ana. Every year this building has proven to be a winner for the Trust with some great cash flow. Since acquiring this building, we have been able to refinance and pull out some built up equity and purchase a 10 unit building in Long Beach in which you assisted.

    All of our transactions over the years have gone very smoothly and I look forward to working with you again in my next real estate transaction. I will also continue to recommend you to my clients.”
    2016-10-29T19:08:21-07:00
    “Craig, I would like to thank you for your expertise in helping me along with the Mies Family Trust in selling the rental properties located in Long Beach and Costa Mesa. These transactions went very smoothly and professionally.” I would also like to thank you for assisting the Mies Family Trust in the acquisition of the 8 unit apartment building in Santa Ana. Every year this building has proven to be a winner for the Trust with some great cash flow. Since acquiring this building, we have been able to refinance and pull out some built up equity and purchase a 10 unit building in Long Beach in which you assisted. All of our transactions over the years have gone very smoothly and I look forward to working with you again in my next real estate transaction. I will also continue to recommend you to my clients.”

    Ken E.

    “Craig Wise did a great job in selling my rental property. He provided me with quality information about pricing it correctly, advertised and marketed it effectively, and provided solid guidance in negotiating a sales price. Craig was extremely professional in handling all aspects of my sale and got me top dollar for my property after only being on the market a few weeks. Craig will be my realtor for any future real estate needs.”
    2016-10-29T19:08:59-07:00
    “Craig Wise did a great job in selling my rental property. He provided me with quality information about pricing it correctly, advertised and marketed it effectively, and provided solid guidance in negotiating a sales price. Craig was extremely professional in handling all aspects of my sale and got me top dollar for my property after only being on the market a few weeks. Craig will be my realtor for any future real estate needs.”

    Estella G

    “I have known Craig Wise for over twenty years on both a personal and business level. Craig has done a phenomenal job in building a loyal list of clients and a very professional image. Craig’s success stems from his ability to keep his client’s needs a high priority and consistently meeting expectations, even in the toughest markets.

    My house was recently sold by Craig in only 2 weeks. He thoroughly impressed me with his tenacity and dedication in finding me a single story home in this challenging market.

    Craig is an ideal realtor, he is a savvy yet humble individual, has a very energetic work ethic, is always eager to go above and beyond for his clients.”
    2016-10-29T19:10:18-07:00
    “I have known Craig Wise for over twenty years on both a personal and business level. Craig has done a phenomenal job in building a loyal list of clients and a very professional image. Craig’s success stems from his ability to keep his client’s needs a high priority and consistently meeting expectations, even in the toughest markets. My house was recently sold by Craig in only 2 weeks. He thoroughly impressed me with his tenacity and dedication in finding me a single story home in this challenging market. Craig is an ideal realtor, he is a savvy yet humble individual, has a very energetic work ethic, is always eager to go above and beyond for his clients.”

    Wally L.

    “I had the pleasure of working with Craig while searching for a rental home for my family in South Orange County. As this was a new process for my wife and I, it was great to finally find a real estate professional that genuinely cared about us and our needs. Craig went out of his way to answer questions, solve issues when they arose, and step us through the necessary paperwork. He was always on time and had a wealth of knowledge to share with us. I would highly recommend Craig and will be using his services in the future.”
    2016-10-29T19:06:51-07:00
    “I had the pleasure of working with Craig while searching for a rental home for my family in South Orange County. As this was a new process for my wife and I, it was great to finally find a real estate professional that genuinely cared about us and our needs. Craig went out of his way to answer questions, solve issues when they arose, and step us through the necessary paperwork. He was always on time and had a wealth of knowledge to share with us. I would highly recommend Craig and will be using his services in the future.”

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    “I cannot tell you how happy I am to enthusiastically recommend the services of Allwest Properties.

    Allwest made it possible for our rapid expanding law firm to relocate to a much larger office space. We chose Allwest not only for their expertise in the industry, but the personal level of service they provide, as well as expert negotiation skills. They not only negotiated a cost effective lease rate for our new space but also received an allowance to cover the rent on the remaining lease term for our existing space -- well above our expectations.

    Their knowledge, extensive experience, responsiveness, familiarity with this areas commercial real estate and network of related professionals make them the ”go to professional” to get things done. The process could have not gone any better! I am fully convinced that if they have not been involved, none of this would happen.”

    - Newport Trial Group
    2016-10-29T19:02:51-07:00
    “I cannot tell you how happy I am to enthusiastically recommend the services of Allwest Properties. Allwest made it possible for our rapid expanding law firm to relocate to a much larger office space. We chose Allwest not only for their expertise in the industry, but the personal level of service they provide, as well as expert negotiation skills. They not only negotiated a cost effective lease rate for our new space but also received an allowance to cover the rent on the remaining lease term for our existing space -- well above our expectations. Their knowledge, extensive experience, responsiveness, familiarity with this areas commercial real estate and network of related professionals make them the ”go to professional” to get things done. The process could have not gone any better! I am fully convinced that if they have not been involved, none of this would happen.” - Newport Trial Group

    Gina G.- Chomp Chomp Nation

    Craig has a broad skill set which has resulted in successful site selection based on short and long term brand strategies. Craig is a superior negotiator and expert in commercial leasing which have a dramatic effect on the bottom line of any growing business. Craig’s business acumen and integrity are second to none.

     
    2016-10-29T19:03:36-07:00
    Craig has a broad skill set which has resulted in successful site selection based on short and long term brand strategies. Craig is a superior negotiator and expert in commercial leasing which have a dramatic effect on the bottom line of any growing business. Craig’s business acumen and integrity are second to none.  

    John T.

    “Craig is detail oriented and looks out to protect the interests of his clients. He’s professional, courteous and cooperative. He would be a great person to have on your side.”
    2016-10-29T19:05:54-07:00
    “Craig is detail oriented and looks out to protect the interests of his clients. He’s professional, courteous and cooperative. He would be a great person to have on your side.”

    Robert B.

    “I count it a great privilege to recommend Craig Wise for any of your Real Estate dealings. I first became acquainted with Craig as we worked side by side in the Real Estate Department of a major lender. During the fifteen years we have know each other we have gone from coworkers to good friends. I have always know Craig to deal with people with the utmost of character. This is the reason that when my son and daughter-in-law were first time buyers and I asked Craig to assist them through the entire process and he made sure the transaction went smoothly. You will not find someone who combines knowledge, skill and integrity to a greater degree than Craig.”
    2016-11-02T21:48:42-07:00
    “I count it a great privilege to recommend Craig Wise for any of your Real Estate dealings. I first became acquainted with Craig as we worked side by side in the Real Estate Department of a major lender. During the fifteen years we have know each other we have gone from coworkers to good friends. I have always know Craig to deal with people with the utmost of character. This is the reason that when my son and daughter-in-law were first time buyers and I asked Craig to assist them through the entire process and he made sure the transaction went smoothly. You will not find someone who combines knowledge, skill and integrity to a greater degree than Craig.”

    Chris Z

    Craig - thank you, I sincerely appreciate your dedication to getting things accomplished with the commercial association. You showed great fortitude given the difficult personalities over the years and I thank you for everything you have done

    2016-11-15T05:27:27-07:00
    Craig - thank you, I sincerely appreciate your dedication to getting things accomplished with the commercial association. You showed great fortitude given the difficult personalities over the years and I thank you for everything you have done