How to Handle Surplus Cash Flow as a Landlord

How to Handle Surplus Cash Flow as a Landlord


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How to Handle Surplus Cash Flow as a LandlordA well-kept rental property continues to make money for years down the road. It is tempting for a landlord, to pocket any surplus cash flow or put it into other areas of their business. There will be problems when there is a need for repairs or renovations and no cash left to do it. The property can fall into disrepair and become a depreciating asset. Using the surplus cash flow wisely, diminishes the chances of this happening.

 

Here are five ways every smart landlord should make use of their surplus cash flow

 

  1. Keep The Property Safe

The safety of the property is paramount. You can offset any problems that may arise with the right precautions and save on costs in the long run. Safety issues could leave you open to a lawsuit. To ensure everything is in working order, perform regular checks a few times a year. Take a tour of the house and ensure every appliance is in working order.

 

  1. Preventive Maintenance

Over time, things will begin to break down or become outdated. By keeping everything regularly serviced and updated, you protect yourself against even worse expenses when something goes wrong. Even if something is used only seasonally, it should still be serviced once a year. Common things in need of regular servicing include the HVAC system, water heater, oil tank and furnace. By keeping these things maintained, you can stretch their lifespan and save money on costly repairs or replacements.

 

  1. Improve The Quality Of The Home

It is better to fully replace an appliance, rather than getting it serviced again. Spending the surplus cash on quality items, keeps everything updated and increases the value of the property. Tenants like to see updated properties, that are in-line with current technology and aesthetic trends.

 

  1. Pay Down Your Balance

It’s easy to treat the mortgage as just a monthly payment that requires little other thought about. Many homeowners don’t stop to realize that the bulk of those monthly payments are going towards the interest, not the principal balance. Just one extra monthly payment each year towards your principal balance can shave years off your mortgage. By paying down your loan balance you not only move closer to the day when you can fully own the property, but also open doors to home equity and refinance options.

 

  1. Use It To Screen New Tenants

If you don’t have good tenants that pay their bills regularly, nothing else really matters. By using your surplus cash flow to properly screen each tenant applicant you reduce the chances of ending up with a bad tenant. A good screening looks at each applicant’s credit score, employment history and possibly even background. Good tenants should not be taken for granted. By screening each one you’ll feel much more confident that the monthly payments will keep on coming.

 

Having extra cash from a rental, is a great thing. It means your investment is paying off. Follow these five tips and you can avoid greater expenses and headaches in the near future.

 

 

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