For any investment property, there are two main revenue streams: market value appreciation and rental yield. Sadly, the rental yield aspect is often overlooked because as investors, we are always thinking of the profit to be made from buying low and selling high.
A savvy investor considers every factor that can help maximise revenue generated by a property. We think you should profit long term by holding onto a property but we also think you should try to generate positive cash flow on a property whenever possible. Here are a few ways to maximise cash flow on your investment property now.
Keep Your Rent in the “Sweet Spot”
This involves keeping your eye on the market. The trick is to keep your rents as high as you can get them without losing any revenue to vacancy. It’s not that difficult. Make sure you keep an eye on similar properties in the same neighbourhood as your rental property and manage the tenants to expect rental prices to rise in line with the market.
Interest Only Loan
While repayments on an interest only loan won’t pay off your investment property, it will make it a lot easier to turn a positive cash flow. Since property appreciates in the long term, you should still turn a tidy profit when it’s time to sell.
When interest rates are lower, see if you can profit by refinancing at a lower rate of interest. Especially a good idea if you have no plans to sell for the period you are locking the loan in for, otherwise you can have a high break fee to pay if you repay the loan earlier.
Try to buy properties that don’t require a lot of maintenance. As a rule, this means newer properties, but don’t automatically disqualify an established property. Don’t buy a “money drain.”
Take Advantage of Tax Deductions
You want to have a great tax accountant who can maximise the amount of money you can deduct from your taxes. Some examples of deductions: advertising, body corporate fees, bank fees, land tax, council rates, insurances, repairs, legal costs and cleaning.
Have a quantity surveyor formulate a depreciation schedule for you. This goes back to the last step: maximising tax deductions. Make sure you get all you deserve.
See if a couple of extra bedrooms can make your property more profitable. More bedrooms can make your property perfect for renting rooms to students for a higher total price than a family would pay.
Call 1300 472 427 to learn more.