Featured Articles

Property Management can Increase your cash flow

Posted on: Friday, January 18 2013

Property Investment Cash Flow Strategy Depending On Professional Property Management.

Most Property Investors buy rental properties for cash flow and understand cash flow is king. However with Insurance premiums doubling this year (mainly to do with the Christchurch earthquakes), yearling council rate increases, repairs & maintenance and so forth can all a affect your bottom line.

Thank goodness for interest rates being so low remember the days not so long ago when they crept up to 9 or 10%. Who knows when this might happen again, but one thing is for sure interest rates will start to increase again given time.

 

Most Investors can sustain Interest rates of up to 7 to 8% for a certain time but what if you could increase your rents substantially today so you could build a buffer for the tougher times ahead. Alternatively, if you have a poor preforming rental negatively geared what if you could turn this around and improve or cash flow significantly.

Have you considered Rent by Room? (RBR)

Firstly, what is RBR? This is when you rent out each individual room, tenants are on a separate tenancy and responsible for the own bedroom and jointly for all common areas.

Tenants like this, as they can leave when they want without being responsible for finding another flat mate. Furnishing is supplied in the lounge, kitchen, and Laundry including white ware, utensils, microwave and the likes.

This works best in properties with four or five bedrooms and because tenants are RBR, they pay more than if rented as one property.

Location is important RBR typically attract tenants early twenties to earlier thirties.

Services typically provided, sky TV (one or two channels only). Unlimited broadband, local calling, and waste bin.

What we do not provide is weekly cleaner or power (some do) in our opinion this allows cost to get out of control. The whole idea is to increase your cash flow.

Boarding house tenancies are different kettle of fish they are ‘hands on’, closely involved in the management of the property, and really need a live in manager to work to be successful as tenants can give 48 hours’ notice to leave. This subject which is not covered in this article.

The numbers – Real live Example

This is five double bedroom character home 1950s renovated interior painted in neutral colours. Furnishing supplied as mentioned above.

As a standalone rental would rent for $350.00 per/week multiplied by fifty weeks $17,500

RBR five rooms rent less services supplied (as above) return a net of $470.0 per/week multiplied by fifty weeks $23,500

This give a total annual increase of six grand per annum or $115.00 per/week

All tenants are on fix term tenancies usually for six months this way we can achieve higher occupancy and cash flow.
 
 
Find Richard on Google+

PinterestLinkedInPrintFriendlyShare

Comments are closed.

Author's Bio

img

All Ways Property Management

All Ways Property Management is a company founded by Richard and Maxine Gardner in April 2009. Maxine and Richard are based in Pahiatua, and decided to make the services that they were using to manage and grow their own investment portfolio available to other investors in both the Manawatu and Tararua regions.