Tips To Help Safeguard The Cash Flow Of Your Investment Property Business
If you own an investment property, you have to run it like a business, and that includes a number of things, including managing your cash flow closely. Unfortunately, even if you have a building full of tenants, a mismanaged cash flow may result in an empty bank account in the middle of the month, and that can make it impossible to deal with property management emergencies. Want to protect your cash flow? Here are some questions to keep in mind:
1. Where is the leak?
In order to address a cash flow issue, you need to identify issues with the flow. Are your tenants paying their rent late? Is the rent below market value? Do you have costly repair or maintenance issues that keep popping up? Are your buildings half empty?
If you have answered yes to any of those questions, you have unearthed at least part of your cash flow issues, and you need to take steps to remedy the situation. Implement late fees for tenants who consistently pay late. Raise the rents as needed. Find the money to do a single repair that lasts instead of dealing with little repairs every month. Finally, hire a property management company to advertise your rentals and help you fill up empty units.
2. Can you tighten your application process?
When you rent a unit or a house to tenants, you are essentially handing them a very expensive asset and letting them borrow it on credit. If they fail to pay each month, it seriously disrupts your earning potential. To avoid issues with tenants, look for ways to tighten up your application process.
Screen tenants more closely, do background checks on them, and talk with previous landlords. If you don't want to handle those aspects of vetting tenants, outsource the process to a property management company.
3. How can you be more engaged?
Engaging with your tenants is also important. Ideally, you should know your tenants, you should reach out to them if there is an issue, and you should respond promptly if they contact you with an issue. According to the Minneapolis Housing Inspection Services, engaged landlords get to enjoy a more stable, more satisfied tenant base. Stable, satisfied tenants tend to pay their rent on time and respect your property, both things which help to protect cash flow.
4. Do you need to track expenses better?
Additionally, keep an eye on your accounting practices. In particular, make sure that you track all of the expenditures that you make on your investment properties. Every expense from buying weed killer, to paying plumbers, to purchasing rakes for yard maintenance, are considered business expenses. These expenses, in most cases, can be claimed against your rental income, lowering your profits on paper and helping to reduce your tax burden. That can also help to safeguard your cash flow and avoid unnecessary expenses.
Want more help safeguarding your cash flow or managing other aspects of owning an investment property? Consider contacting a property management company for help. They can handle every aspect of running your rental, or they may be willing to offer you a la carte options for the services you need.