8 Secrets to Increase Cash Flow

One of the most common questions I'm asked is how to increase cash flow. Often property owners have decent gross income, but just can't figure out why their bottom line isn't healthier. Here are 8 ways to increase your real estate cash flow:

1. Get rid of gross leases. Gross leases are your worst enemy. A lot of property owners use these because there’s very little administration involved; collect rent, pay expenses, keep the difference. The problem is that you can’t tell from one year to the next what the expenses are going to be and this leaves you open to a drastic reduction in cash flow every year.

2. No more month to month tenants. Similar to gross leases, month to month tenants can wreak havoc on your cash flow because nothing is holding them to the property. What if half of your tenants decide to leave all at once?

3. Refinance. Not as simple as it once was, but if you have substantial equity in the property, you should still be able to refinance today and reduce your overall debt payments substantially. Interest rates are at an all time low right now.

4. Make a Request for Reconsideration of your property assessment. In Ontario, MPAC provides a system for you to ‘appeal’ your assessment if you feel that your assessment has been unfairly increased. Provide some proof and go through the process and you might be able to get some relief.

5. Include a management fee in addition to your net rent. This secret is one that the larger, more sophisticated, landlords latched onto long ago. Did you even know that you could charge your tenants a ‘management fee’ for administering the property? Of course, this is a negotiated item like everything else, but wouldn’t it be great to get paid for all of the administrative tasks you have to perform all year long?

6. Make sure maintenance is a top priority. Not so much a cash flow secret as a way to ensure that your building is consistently occupied. If you have the best run, best maintained, building on the street, doesn’t it stand to reason that the tenants looking for space would rather be in your building instead of your competitor? Make sure your building is the ‘Taj Mahal’ on your block and you’ll have a lower vacancy rate and better cash flow in the long run.

7. Update the energy efficiency of the property. This will do two things for you: a) it’ll lower the overall operating costs for the property making it more attractive to tenants, and b) modern energy efficient equipment and appliances last longer which lowers your long term capital costs. Both of these will increase your cash flow over time.

8. Treat your real estate as a service vehicle for your tenants. Think of your real estate as a way to provide a menu of services to your tenants to realize higher cash flows. The service you provide is a well run, up to date facility. This doesn’t have to mean doing more and more for less and less – you can charge for additional services – just making extras available will make your property more desirable to tenants and therefore will only help your bottom line.