How I managed to increase my real estate cash flow by $1,092.56 per month in the uncertain times of Covid-19.

I have a small portfolio of buy-and-hold properties (9 properties/ 12 unites). One of my goals for 2020 was to buy 2 more properties and increase my cash flow by $600 per month ($300 per property). Then came along Covid-19, and much like many other investors, I was forced to put my purchase plans on hold.

However, determined to better my numbers, I have done some (major) optimization to my portfolio and succeeded to increase my cash flow by $1,092.56 per month. Here is what I’ve done:

A few months after Covid-19 started I realized that it is here to stay and not going anywhere, at least not any time soon. I started looking for a new investment (Covid or not, I have my goals…), and after a few months on the fence I’ve decided that I need to take an action already, some action, any action – to increase my monthly cash flow. As prices are too high at the moment, and thus purchasing a new property is off the table, I have decided to invest time and effort in analyzing my existing portfolio and optimizing it to the maximum possible.

I started off by reviewing my investment tracking spreadsheet. I know most, if not all of the numbers there by heart. But I also know that 4 years into the process there must be some loopholes there, that I can exploit to optimize cash flow. There surely is money to be saved in the process.

After spotting a few potential saving-opportunities there, I started making some phone calls, and applying some changes;

  • I talked with my 3 insurance brokers and optimized my insurance policies (for example, changing my umbrella liability insurance to a commercial one saved me $632 annually)
  • I changed insurance companies for 2 of my properties and saved $112 and $230 annually.
  • This was also a good time and opportunity for me to change management company in my 4plex. When I reviewed the numbers, I realized that my units are vacant too long between tenants and replacing a tenant costs me too much compared to my other properties (I was aware of that but never had the time to deal with it). I consolidated the 4plex and other 5 properties under another property management company that I’ve been working with and got a management fee ‘bulk’ discount for those 6 properties (9 unites). This change has saved me $97 per month.
  • We have succeeded to increase some rents and add another $180 per month.

Now to where the big money is;

I made a call to my mortgage broker. On a side note, this amazing woman was the only one willing to make an effort for me when I got started back in the day, with low credit score and no credit history. She worked her way through to some fair mortgage terms for me, despite all obstacles! So now, 4 years in, with a good credit score and perfect payment history, I figured she can work some term-miracles to my loans.

We ran the numbers and realized that I can save a lot with the current rates. I do have to mention that I am not a big fan of refinance. I don’t like the idea of starting my 30 years loan all over again, increasing my debt etc’. but – with the monthly savings goal in mind, I decided to do it.

(this is the place to mention – no matter what they tell you, refinance costs money! Your debt grows, and you must take it into consideration)

So, we decided to refinance my 4plex’s $400k loan, (lots of meat on the bone) and I saved $307 per month in mortgage payment + my principle payment is now higher 😊

We continued with 4 single family properties refinances and I saved on each one of them $110 per month in average.

I decided not to refinance 4 other properties as the numbers for those specifically would not be good enough.

Reading this article you might think this was a great year. But it has not. I had more turnovers this year than usual, and more tenants struggle with rent payments than any time in the past (even one with more than $5,000 in debt that I don’t see how I will be able to collect and I cannot evict him yet).

 

Whether you have 1 property or 10, you too can optimize your cash flow.

Run your numbers, check the rates, and start making some calls.

If it is not the time to buy a new investment property, it is definitely the time to optimize current ones!

 

The numbers summarized

  • Umbrella insurance (change type of umbrella): $632 a year or $52.66 per month
  • Dwelling insurance (getting better quotes and changing companies) $342 a year or $28.50 per month
  • Management company (1% discount on management fee for 9 unites) $97 per month
  • Rent increase (upon turn over) $180 per month less management $167.4 per month
  • 4plex refinance saving: $307 per month
  • 4 single family refinances saving: $97 + $117+ $130 +96 = $440

Total monthly saving: $1,092.56

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  1. I completely agree!
    In times like this, if you are uncertain of your next move – make sure your portfolio does its best.
    A little look-back on your expenses every now and then can only better your numbers.