Negative Cash Flowing Rental Properties: How to recognize them?

by Speedprop on May 3, 2018

What’s the best type of real estate investment? Answers to such question vary depending on whom you ask the question. Despite all different answers you’ll receive, most would probably say, Positive Cash Flow Properties. What about the worst real estate investment? You’ll probably receive the same answer too, Negative Cash Flow Properties.

Negative Cash Flow: Rental Income & Rental Expenses

How to avoid investing in properties that are likely to attract negative cash flow? If you haven’t invested in one, you may want to give Blockchainprop’s real estate market and investment property analysis a try to find out which properties are likely to attract positive cash flow. If you already invested in one, check them out again to make sure that they aren’t gravitating towards the sort of properties that attract negative cash flow. But, how do we recognise negative cash flow properties, to begin with?

How to Recognize Negative Cash Flowing Rental Properties

High volume of vacancies.

Vacancies are known to be one of the leading causes of negative cash flow. They are simply no rental incomes if properties are vacant. This is simply because vacant properties don’t attract income but losses. Be mindful If your properties stayed vacant for a long period of time, they may be gravitating towards what appeared to be properties with negative cash flow. There are no other solutions than to have it immediately occupied. You may want to start learn and identify its immediate causes as you do so.

Excessive upkeep.

Not only can vacant properties be associated with negative cash flow, the same actually can be said about occupied properties too. Occupied properties, if they’re not being properly managed, financially, can eventually become as counterproductive and costly as vacant properties are. For example, say if you earn less than what it costs, the property thus can be deemed to be properties with a tendency of attracting negative cash flow. The cost for the upkeep of the occupied properties sometimes could be the leading factor as to why such properties are at risk of generating losses.

Too much financing costs

Managing and financing costs should also be accordingly taken into account. They could be overly expensive. And it’s not good if the return on investment you receive if far lower than the amount of which you have to spend to manage such properties. There are two possible root causes here, a) Flawed financing agreements b) It wasn’t the right property to start with. Too expensive. If you think these two causes apply to you, ask Blockchainprop to sort out the expenses. If it still doesn’t work, selling the property would be the right thing to do.

Rent is too cheap

The goal of renting out a property is none other than to make money. If you think you’re not earning enough, it’s about time you re-evaluate how much rent should you be charging them. What can you do is, identify the latest property’s fair market value. This, however, requires you to do both, real estate market analysis and investment property analysis. Blockchainprop can do all of that for you.

How to Avoid Negative Cash Flowing Rental Properties

Investment Property and Profitable Location

Identify properties that are located in a profitable location. Doing this will certainly help you avoid negative gearing. Properties in a good profitable location have a tendency to attract positive cash flow. Use our Blockchainprop’s calculator to help you identify such properties.

Financing

Having a secured financing plan is the first crucial step in avoiding negative cash flowing rental properties. It goes without saying, don’t invest in properties that are beyond your means. Make sure you’re comfortable with the plan that you’ve set up with your mortgage provider. Also, make sure your financing credentials are in check so that you’re able to obtain a better deal.

Rental income and expenses

Another way of trying to avoid negative cash flowing rental properties is to maximise its rental income and minimise its expenses. You may want to increase the rental price when there are renovations added to the property. Not only renovations could add rental income, it could also reduce maintenance expenses.

Optimal rental strategy

Opting to rent a property through its optimal rental strategy would be an excellent choice. Such strategy will likely be able to maximise its potential cash flow. Short term rental is also a good way to go. You may want to give Airbnb a try. They can be very profitable in the long run. To be able to learn, identify and later avoid properties with potential negative cash flow is fundamental and also beneficial. It will help real estate investors to better understand real estate investing. Not forgetting that it will also be able to help real estate investors make a lot of money.