Investing in real estate is a powerful way to boost your investment portfolio. It is stable and can offer high returns plus steady cash flow. However, that steady cash flow is only possible through your sustained efforts. Here are three ways to make sure your properties maintain a positive cash flow.
Buy Properties With a Good Cap Rate
A lucrative investment starts with the property itself. Not all properties are created equal. Instead of finding the property with the lowest price, look for properties that have a good capitalization, or cap rate. The cap rate on a property is a mathematical equation designed to estimate the potential return on investment.
You can get a property’s cap rate by dividing the net income by the market value. Your cap rate is the annual gross income you can expect to earn. Look for a property that has a cap rate of at least 5% to 10%. You can use an online cap rate calculator to do the math for you.
Keep Vacancy Rates Low
Of course, you can’t get a steady positive cash flow from your properties if they are vacant. It is vital that you do everything you can to keep your properties occupied. One way to do this is to select tenants who are likely to stick around long-term. Picking long-term tenants helps keep your vacancies low. It also helps when you manage your properties well. Keep them clean, nice, and in good repair. Gain a reputation for being a fair and attentive landlord. This will attract the best tenants.
Add Amenities
Study the market to find out which amenities renters are currently looking for. You could significantly boost your occupancy rate by adding these amenities, even if it costs you some money upfront. Examples might include a washer or dryer, a dishwasher, or even covered parking. Other popular amenities include fitness equipment, playground equipment, and access to a pool. Adding these amenities also allows you to increase your rent.
Successful real estate investments require effort and strategic thinking. Before you even make that first purchase, think about the type of renters you want to attract. That might be students if you live in a college town or families if you want long-term renters. Then, purchase a property and fit it up in whatever way will best attract your target renters. Once you have a steady cash flow coming in, be sure to maintain it with good management.
Did you enjoy this article? Here’s more to read: Why Real Estate is the Best Tool for Early Retirement
