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  • Cash Management

    What is Real Estate Cash Flow and How Do You Maximize It?

    If you live in an expensive market and you’re ready to invest in rental property, one of the greatest advantages of investing OUTSIDE your area is: Cash Flow!

    Cash Flow

    If you want to grow your wealth, create additional income streams, and not have to hop on that hamster wheel every day… two words...

    Cash flow is amazing. It’s awesome. It can create freedom in your life. And financial freedom is a big reason you’re probably reading this right now. So, let’s take a deep dive into one of the most powerful topics in real estate!

    What is Cash Flow?

    When looking at a real estate investment, there are two main components you need to fully understand and be able to forecast: income and expenses. Understanding the key financials of a property allows you to understand exactly what cash flow is.

    Cash flow is the amount of profit you bring in each month after collecting all income, paying all operating expenses, and setting aside cash reserves for future repairs. For buy-and-hold real estate investors, cash flow is the primary lever used to increase passive income.

    Why do you want positive cash flow?

    Well, you want to bring in more money than you spend each month, right? With the right systems and strategies in place (like quality property management), cash flow is essentially passive income. Meaning it’s income you bring in monthly, quarterly, and annually that doesn’t require a lot of your active working hours like a typical 9-5 job.

    Why else do you want to harness the power cash flow?

    • Cash flow creates more opportunity. Reinvesting profits from an investment property into another investment is a great way to exponentially grow your financial well-being.
    • Cash flow creates safety. The extra monthly income you bring in can help create a larger savings reserve to protect you against unexpected life expenses (like medical bills, car maintenance, etc.).
    • Cash flow creates freedom. By building up your cash flow to the point where it covers your monthly expenses, you no longer have to work for a paycheck. With your investments running smoothly, you can spend more time with family and friends. You can focus on education, growth, and passion projects.

    Tenant Turnover

    This is a cash flow killer. Sometimes when a tenant moves out, there will be repairs/cleaning you’ll have to take care of beyond what their security deposit covers.

    Not only that, but many property management companies charge a “new lease fee” when they find a new tenant for you, and it’s sometimes equivalent to one month’s rent. Think about that...with a signed 12-month lease...you may only receive 11 months of rent.

    Missed Rent

    Every once in a while, your tenant may not pay rent on time -- or they may not pay at all. Cash flow is severely reduced when a tenant does not pay in full and it’s literally non-existent if your tenant misses a payment. On top of that, you’re now forced to cover all expenses out of pocket (mortgage, if you have one, insurance, taxes, etc.).

    Vacancy

    A vacant property = a non-cash flowing property. Without any income, there’s no way you have cash flow coming in.

    Factors That Help Your Cash Flow

    Increasing Rent

    The most obvious way to increase cash flow is to increase the rent amount on your property.

    This can be done by acquiring an under-performing property (where current rents are lower than market demand) and aligning the lease to market rent. Or you can renovate a property, add new amenities (central AC, dishwasher, etc.), and improve cosmetic finishes to bump up rent.

    Long-Term Tenants

    As mentioned earlier, turnover and vacancy are two of the biggest cash flow killers, so you must put yourself in a position to have long-term tenants in your property. You can increase your chances of having long-term tenants by keeping them happy.

    That means, ensure your property management company responds to their maintenance requests in a quick and professional manner. That also means you shouldn’t get too greedy in increasing rents when their lease expires.

    Sometimes demanding an extra $50 for rent during a renewal isn’t worth losing the tenant.

    Preventative Maintenance

    Large repair and maintenance expenses can wipe out cash flow for months. Preventative maintenance can protect against much larger expenses in the future.

    HAS Properties recommends cleaning out gutters before the Winter hits, trimming trees that are close to your property, and routinely taking care of your HVAC units. Large expenses don't happen often, but they do happen and it’s important to think ahead to try to avoid these surprises.

    Appealing Property Taxes

    Property taxes can go up every year. If they increase faster than you’re able to raise the rent, you may run into a diminishing cash flow problem.

    Depending on the market you invest in, it sometimes makes sense to appeal your property taxes with the local government if you feel the increase was unjustified.

    Refinancing

    It’s a good idea to occasionally check in with your lender and monitor mortgage interest rates. If you see rates falling, you may be able to refinance, lower your monthly mortgage, and increase your cash flow at the same time.

    Obviously, make sure you run all your numbers and factor in lender and closing fees, but keep this strategy in mind!

     

    Meet Our Team

    Rockstars of HAS Properties

    Sajid Mahmoud CEO

    A little about me: I am a London native, licensed to sell real estate since 1998. My business is built on the referrals of past clients and colleagues from other cities. I would happily provide you with a list of references who would be willing to tell you about their experiences working with me. I work with sellers and buyers in all price ranges – I have now been in the business so long that I am selling houses to (and for) children of clients! I have substantive experience in the oldest established neighborhoods of UK, Turkey and Pakistan cities and also in the newer developments of the suburbs.
    Clients say that my strengths are my knowledge of construction and quality, my use of thorough data and analysis in valuation, my patience during extended buying periods, and that I don’t apply pressure. I don not shy away from pointing out the shortcomings of a property or a neighborhood, and I regularly refer back to your stated goals to keep the process focused and efficient. It is rare that I don’t develop a friendship with my clients during our time together.

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    Samatha Grymes Realtor

    As a London native and Realtor, I decided to embark on my journey to serve my clients in the Residential Real Estate realm. My ultimate goal is to make every client a client for life. My background in communication provides me with a solid foundation to be able to listen to my client’s needs. This allows me to tailor my approach in order to provide the best possible outcome for my clients. Whether you are buying, selling or investing, I am eager to advise.

    As my client, you will be provided an incomparable level of personal attention and constant communication. I have an integrated network of affiliated licensed professionals such as home inspectors, mortgage lenders and transaction specialists who deliver any assistance my clients may need during the process. I value the level of trust my clients have in me and have their best interest above all else.

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    Justin McDaniel Realtor

    A UK native, Justin McDaniel understands the value of hard work and perseverance. Growing up in London as the son of a realtor, Justin was taught that to be successful he would need to put into life what he wanted to get out of it. With this life lesson internalized at an early age, Justin would find success in almost every endeavor he embarked upon in his adult life.

    Though real estate was not his first career, Justin found success in both the freight industry as well as on the golf course as a sales professional and professional golfer, respectively. While the career in the freight industry taught him how to be a keen negotiator, the golf course taught him how to focus on his goals and never lose sight of them. With these skills he would enter the real estate industry with a bang, successfully closing over £3 million pounds in sales within his first year.

    Now a veteran realtor, Justin’s momentum in the industry continues to grow. As an London resident for the past 16 years, along with his prior careers and a reputation for professionalism and integrity, Justin has developed a wide network of both clients and business partners. This network, combined with his passion for sales, has proven to be the catalyst to his initial and continued success in the industry.

    Understanding that his clients count on him throughout the entire process of buying or selling a home, Justin makes it a point to be available for them. In fact, many of his clients rave about his availability, pleased that he is able to accommodate tough schedules and last-minute requests. This, coupled with his excellent negotiation skills, remarkable patience, and in-depth knowledge of the local real estate market, has set him apart from others in the industry. Focusing primarily on residential sales in the tri-cities and north central San Antonio areas, Justin’s clients look to him for expert guidance when navigating the highly competitive UK housing market.

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    Janet Key Realtor

    I graduated from the University of Cambridge with a BS in Economics. I was Licensed to sell real estate in 1983 I began working in field. I was the number one McMASKER agent in the Aberdeen in 1990 and 1991. The Governor at the time, Ann Richards, recognized my contribution in helping jump start the economic recovery of the region. To date, I have over 1200 sales with approximately 850 of those in HAS Properties.

    I believe that there is no substitute for HONESTY, INTEGRITY, KNOWLEDGE and PERSEVERANCE. My motto is “Do it right the first time”.

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