5 easy ways to boost your Cash flow – Ray Higdon

October 19, 2006 — Leave a comment

5 easy ways to boost your Cash flow

I started investing in rental properties a year ago and every time my partner and I take the time to look at the numbers, evaluate the 5 year projections, look over the tax benefits, it just makes sense. Flipping houses, assigning contracts and quick turning real estate can and will make you rich but holding real estate long term is the true way to wealth. Passive income through rental properties is an excellent way to make a living and increase your net worth. Below are 5 easy ways to increase the cash flow on your existing rental properties or perhaps help you determine if being a landlord is something you want to venture into.

1. Do you want fries with that? Retail companies know that the point of sale is the place for suggestive selling. OMS or “One more sale” is used by most smart retail companies to suggest add-ons that may make sense for the consumer to buy in addition to their already chosen purchase. Why not do this with your rental properties? When you are getting the tenant to sign that lease offer them some “Upgrades”. Would you like to have a room painted a custom color of your choice for $5-$10 extra per month? How about Blinds in two rooms for an extra $10 a month? My personal favorite, would you be interested in our convenient pay program? We allow you to pay every two weeks to better fit your schedule rather than once a month. If you were going to charge $625 a month, you would want to charge $325 every two weeks. Compare the numbers, $625 x 12= 7500, $325 x 26 = 8450. An extra $950 per year per unit is a nice way to boost cashflow.

2. Know your financing options. If you are in a high appreciating area or you do not plan to hold the property for more than 5 years, why not do interest only or a pay option arm program? The pay option arm program allows you to pay the MTA rate which is very low and slow moving compared to some of the other options. Did you know that you can get fixed rate interest only loans? Let’s say you had a duplex that you bought for $100k. You plan on holding it for 5 years and the area is appreciating only 5% per year. 30 year fixed at 6% is a principle and interest payment of roughly $599. Interest only would be about $500 per month. Would you rather have an extra $1200 a year in your pocket than pay that small amount of principle down that is paid in the first year? Now if you have quite a few properties with the same holding goals, cashflowing an extra $50-$80 per unit per month can really add up.

3. Make it FEE-sable. I stress to you that each unit you manage or own has to have a late fee attached to the rent payment, and one that will make it worth your time to collect. Research your state laws on this but charging a late fee, a “per week” additional late fee and a service charge if you have to pickup the payment can make you additional money. This is assuming you have the tenants mail in the payment…you do, don’t you?

4. Un-handymen. One handyman quotes you $500 to do a job and the other quotes you $1000 to do the same job. Do you stop there and hire the $500 handyman? We have learned our lesson from this, there is more to it than initial cost. The $500 guy may take twice as long to get the job done, TIME IS MONEY!!! If you are fixing up a duplex that brings in $1,000 a month, each day that passes with no tenants costs you $33 a day. So if handyman #1 takes 16 more days to do the job, you would have been better off paying the $1000 guy. When working with handyman, put in performance incentives. If done in X number of days you get 100% of the quote, 2 days over, 95%, etc.

5. The perfect tenant. How would you describe the perfect tenant? I would describe them as someone who stays in my rental unit for 30 years, pays off my mortgage, never calls me, I never have to visit, and sends their payment through the mail every month. How do you even get close to this type of tenant? You have to avoid doing the “Well, this person has the cash” mentality and do your background checks but also listen to your gut. When tenants call with legitimate problems, get their problem solved fast. If there is a  dispute, realize that working reasonably with your existing tenant is in your best interest as if they move out, you may have to pay for the eviction, pay to get it cleaned up, pay to do new advertising, pay all the days it is vacant, etc and so on. Get good tenants and once you have them, try hard to keep them!

Happy Investing,

Ray Higdon
RLH Holdings



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