Cash Flow Killers To Your Real Estate Investment

Every seasoned investor should be familiar with the obvious expenses that go into a rental analysis when determining if a potential investment property will be profitable. There’s the mortgage, the taxes, the insurance, the reserve fund, the maintenance; if all these add up to be less than the monthly rent, leaving you with a 6-8% profit, you have a good case for a profitable investment.

But what about the other factors involved with owning a rental property that don’t have a clear dollar amount associated with the bottom line? To help you determine the full financial picture of an investment, I’ve put together a list of some of the biggest cash flow killers that will eat into the profitability of your real estate investment.

Cash Flow Killers To Your Investment

Your real estate investment will only be successful if you keep profits high and avoid these cash flow killers. If your rental property is turning out negative numbers, consider these factors and how to adjust your management style to make your investment more profitable.

Vacancy

Vacancy is an obvious negative in your cash flow analysis of a good investment. If you don’t have a tenant paying rent, it’s on you to cover the mortgage, insurance, taxes and maintenance. All these expenses are real bills that need to be paid each month, regardless if your property is occupied or not.

Prioritize occupancy by providing a desirable property and great customer service to your renters. You can avoid vacancy by creating a housing environment for happy, long-term tenants, limiting the amount of time you property generates zero income.

Bad Management

Bad management goes hand in hand with vacancy. Using a property manager will limit the time you need to personally spend earning passive income on your investment, but if your property manager creates a negative experience with your tenant, you will set yourself up for increased vacancy rates and high tenant turnover.

A bad manager can end up costing you more than a vacant property. If the manager doesn’t handle maintenance requests properly, you could end up with an expensive repair. A bad manager will also try to nickel and dime you for repairs and additional services. Check the management agreement to make sure any additional services and repairs are outlined and your expectations are clearly defined before starting to work together.

When looking for a property manager, check online reviews to see what actual renters say about the manager. Are there signs that the renters are happy? Do managers respond to repair requests? A pattern of the same complaints could be a sign that this particular manager will mishandle your investment and end up costing you money in the long run.

Cash Flow Killers To Your Real Estate Investment curated from Forbes - Real Estate