Turning poor cash flow properties into great cash flow properties - part 1

By: Mark Frentz
www.akerahomes.com
mfrentz@akerahomes.com

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Why is this even an important topic?

If you have been reading my blogs, learning from the master educators in the business like Kyosaki, or are a saavy investor in Real estate you shouldn't need to read this blog at all. If, however, you have invested in real estate without adequate education on how to decrease risk... keep reading. I am going to give three tips you can consider implementing on your current properties that can turn them from cash flow negative nooses into cash flow positive investments. Most people who claim to invest in real estate simply purchase a house (or a few) and advertize them without true knowledge of how to hold onto those properties for a long period of time. This is why the 'average' investor loses properties in a down trending market (like Calgary in 2007-2009). There is absolutely no reason to ever lose a property because you can't make the payments, but if you have invested in properties that aren't doing what they should be, you may want to implement one of these strategies.

3 Tips for turning no cash flow into great cash flow

While all three of these tips are common knowledge for educated investors, I have to admit I hadn't even thought to mention them in this blog until a friend recently discussed the same three tips in a video he sent out.This first blog will have the first tip. I'll follow this up with two other blogs in the near future.

First tip

Rent out a garage on the property (or get creative about other ways you can make money off the current property; you are only limited by your inability to think creatively). A detached garage is an investment in itself and you should always consider this when analyzing any property. A garage can easily rent for 100-250/month depending on where the property is located. The tenant of the garage may be the same as the one in the house, but often it is someone else who needs space for a vehicle, storage, or even a workshop. An extra $200 may make the difference needed to cash flow on your property.

If you don't have a detached garage, you can always consider building one on the property in order to rent it out separately, even if you borrow the money to do so. I'll give an example of why this makes sense.

-Current interest rates are around 3.5-4% on a HELOC or other secured loan. I'll use 4% for this example.
-To build a garage the cost is going to be around $20,000 (interest only payments on this will be $67/month)
-By having a garage on the property, you have just increased the property value by about the same amount the garage cost to build
-If you are renting the garage for even $150/month and are using $67 to pay the interest and another $33 to pay down principle each month you now owe less and less in debt each month while you are putting more money into your pocket from the investment ($50, which doesn't seem like a lot, but makes an enormous difference to any real estate investor over the long term and CANNOT be overlooked)

Summary:
You now have a garage that has increased the equity (it is now a more desirable house for someone else to purchase with higher demand) in your property and you are making more money each month by having this investment bring in more than it costs on a monthly basis to maintain the debt.


Here's to your future of risk-averse investing!

If you would like to learn more about investing in real estate please contact me at the email address listed at the beginning of this article or go to my website at: www.akerahomes.com/investing-in-real-estate.html