If you have an income producing property, the amount of money you are left after paying your property expenses is considered cash flow. Please remember Cash Flow is King, but it is only one way you profit from an Investment property, the other two ways are Appreciation and Mortgage paydown.
Here is how it works . . .
Lets suppose you own a duplex and your monthly mortgage payment including taxes and insurance is approximately $1200.00. Now lets suppose you have a tenant on each floor with a one year lease, and you charge each tenant $850.00 a month to live there. This is a total of $1700.00 paid to you on a monthly basis. Once you have paid all your expenses of $1200.00, you are left with a balance of $500.00, this would be your monthly cash flow from the income producing property.
If you are looking to increase your monthly cash flow, one of the easiest ways to do it would be to raise the rent. This is by far one of the most effective and common ways of increasing cash flow. In Ontario this is regulated by the landlord and tenant Tribunal, for example the rate for allowable rent increase for 2014 is 0.8 per cent. However if a tenant vacates the unit, there in No rent increase regulations, meaning you can increase the rent to whatever the market will allow.
Another way to increase cash flow depending on the amount of equity you have established in a property would be to use some of that investment property’s equity to purchase another income producing property. This is a technique used by many veteran investors, allowing you to purchase another income producing property. Using the same principal of charging more than the amount of your total expenses on the property, you will once again be increasing your cash flow.
Decreasing expenses is also a great way to increase cash flow. Investing in Energy saving items, such as low flow toilets and shower heads or programmable thermostats. With this said, I always recommend purchasing a income property that allows the tenant to pay for most, if not, all the utilities.
Keep in mind, when doing any kind of repairs to the home, make sure you save the receipts to be used as a write off. This to will help to reduce earnings, resulting in cash flow in the way of an annual tax return.
For all your London Ontario Real Estate Investing needs, please feel free to contact me directly