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One of the biggest problems junior real estate investors come up against is finding property that cash flows. In other words property that puts money in your account each month rather than taking from it! If you are a regular reader of our column you will know that I am a cash flow investor primarily and not an equity investor. Don`t get me wrong we like equity appreciation but it isn`t our primary focus. Cash flow is what got us through the tough times that caught a lot of investors off guard and for that we are extremely thankful. A fellow investor, Thomas Buyer, once said "Cash is king but cash flow is queen!"
So how do you create cash flow with your income property? Here are a few tricks and secrets that I have used over the years to create the revenue that lets your free up your life.
Basements Suites! All of our top properties have a secondary suite. Simply put, these suites super charge your investment home! Our average rent for a 2 bedroom suite is about $950. This adds a substantial amount of revenue to the property.
This all sounds good but there are some dangers here to be aware of. First of all if the zoning isn`t correct this could be against by-law rules. Now depending on where your property is by-law may or may not turn a blind eye but if you get any complaints about the suite be prepared to remove the kitchen. Also, even if the suite is zoned properly you may have to jump through a bunch of hoops to make it legal. Fire codes, separate heating and other code based requirements may be prohibitive.
Lastly, Basement suites can be dark, cold and dingy so do everything you can to minimize this. Get lots of heat down there, make the windows as large as possible and paint it with bright colors to help entice great tenants.
Garages: We look for double detached garages with ally access. Again, check with your local by-law for regulations here but if you are allowed to rent these out to your local mechanic, painter, car enthusiast or guy with a boat that his wife doesn`t want in the back yard anymore then say hello to an extra couple hundred bucks a month! You would be amazed who needs a little extra secure storage space. If you can heat and power it all the better!!
Your biggest expense is your mortgage. Right now 5 year fixed rates are in the 3.75 realm but variable is prime minus 0.6. A fixed rate mortgage will cost you $1532 and a variable rate will cost you $1270 on a $300,000 mortgage over 25 years. That is a big spread if you are willing to deal with an increasing prime rate. Also, if you if you have mortgages that more expensive you may want to think about having a chat with your bank or mortgage broker to get you into these historically low interest rates. Do what you can to minimize your largest expense.
Consider doing a Rent-to-Own with your tenants. This is a strategy you have heard Leons doing for stereos and furniture but it also works for houses. A lot of people have road blocks when it comes to home ownership such as bad or no credit, new businesses, no down payment etc and some of these people are good candidates for RTO programs. Basically you become the bank and help them into ownership as a stepping stone. I highly recommend reading Investing in Rent To Own Property by Mark Loeffler. This is an advanced investment strategy but it can be very effective and rewarding way to invest and increase your cash flow.
Furnished rentals: During the boom these were all the rage. People were being transferred from place to place and needed short term housing. Corporate execs and trades a like and many investors were taking advantage of this. Companies were happy to pay for housing and pay a premium. All you needed to do was furnish your rental and then market it towards the appropriate cliental. The management is a lot more hands on depending on how short term your rentals are and how demanding your clients are but it was often worth the efforts. You can expect a 50% premium for a furnished home over your everyday rental. Vacancy and marketing expenses can be higher as well but those who have focused here have done well in the past.
So there you have it. Some great ways to make your rental perform in overdrive. Why not combine a few of these strategies and really get your portfolio hopping?
If you have other strategies that you like using we would love to hear about them! You never know who might benefit from sharing a great strategy!
So how do you create cash flow with your income property? Here are a few tricks and secrets that I have used over the years to create the revenue that lets your free up your life.
Basements Suites! All of our top properties have a secondary suite. Simply put, these suites super charge your investment home! Our average rent for a 2 bedroom suite is about $950. This adds a substantial amount of revenue to the property.
This all sounds good but there are some dangers here to be aware of. First of all if the zoning isn`t correct this could be against by-law rules. Now depending on where your property is by-law may or may not turn a blind eye but if you get any complaints about the suite be prepared to remove the kitchen. Also, even if the suite is zoned properly you may have to jump through a bunch of hoops to make it legal. Fire codes, separate heating and other code based requirements may be prohibitive.
Lastly, Basement suites can be dark, cold and dingy so do everything you can to minimize this. Get lots of heat down there, make the windows as large as possible and paint it with bright colors to help entice great tenants.
Garages: We look for double detached garages with ally access. Again, check with your local by-law for regulations here but if you are allowed to rent these out to your local mechanic, painter, car enthusiast or guy with a boat that his wife doesn`t want in the back yard anymore then say hello to an extra couple hundred bucks a month! You would be amazed who needs a little extra secure storage space. If you can heat and power it all the better!!
Your biggest expense is your mortgage. Right now 5 year fixed rates are in the 3.75 realm but variable is prime minus 0.6. A fixed rate mortgage will cost you $1532 and a variable rate will cost you $1270 on a $300,000 mortgage over 25 years. That is a big spread if you are willing to deal with an increasing prime rate. Also, if you if you have mortgages that more expensive you may want to think about having a chat with your bank or mortgage broker to get you into these historically low interest rates. Do what you can to minimize your largest expense.
Consider doing a Rent-to-Own with your tenants. This is a strategy you have heard Leons doing for stereos and furniture but it also works for houses. A lot of people have road blocks when it comes to home ownership such as bad or no credit, new businesses, no down payment etc and some of these people are good candidates for RTO programs. Basically you become the bank and help them into ownership as a stepping stone. I highly recommend reading Investing in Rent To Own Property by Mark Loeffler. This is an advanced investment strategy but it can be very effective and rewarding way to invest and increase your cash flow.
Furnished rentals: During the boom these were all the rage. People were being transferred from place to place and needed short term housing. Corporate execs and trades a like and many investors were taking advantage of this. Companies were happy to pay for housing and pay a premium. All you needed to do was furnish your rental and then market it towards the appropriate cliental. The management is a lot more hands on depending on how short term your rentals are and how demanding your clients are but it was often worth the efforts. You can expect a 50% premium for a furnished home over your everyday rental. Vacancy and marketing expenses can be higher as well but those who have focused here have done well in the past.
So there you have it. Some great ways to make your rental perform in overdrive. Why not combine a few of these strategies and really get your portfolio hopping?
If you have other strategies that you like using we would love to hear about them! You never know who might benefit from sharing a great strategy!
