How To Improve Cash Flow
I'm interested in a 4-unit building in Waynesboro, Pennsylvania. It is in good shape and has long-term tenants. The catch? It's listed for $192,500 and has annual expenses of $14,077 (Heat, water, sewer, trash, maintenance, etc.). The rents bring in $21,300. It seems that any mortgage amount creates a negative cash flow. A substantial downpayment might lower the mortgage, but I don't have the cash to make a downpayment. Is there a way to structure this deal (with a partner, hard money loan or other) that would make the cash flow positive?
Basically you must do one of two things: lower expenses or increase income.
1. Lowering expenes: manage the property youself, do your own maintenence, consider improvements to increase energy efficiency
2. Increase income: raise rents, do improvements that are not costly but increase rent, add laundry or vending[ Edited by myfrogger on Date 10/22/2003 ]
Thanks MyFrogger. I'll look into ways to do both.
I don't know the entire situation but you might want to futher concentrate your efforts into another property.
However putting a lot of effort into trying to make a property cash flow may be justified if your main objective is something other than cash flow (appreciation, convert to condos, etc)
Your expenses sound really high for the income the property produces. You have to increase rents to pass on the costs, or simply reduce your costs. From you posted, it makes no sense to acquire this property if you can not make it work.
Respectfully,
Phil
Phillip Herrejon
President of the Chicago Real Estate Investment Club
[ Edited by Pherrejon on Date 10/29/2003 ]
i say have the tenants pay their own heat, water, and sewage. i'm not sure about the law there, but that's what my grandfather does here in Vegas. it will cut expenses. also raise the rent by $20 per unit if you can. 20 x 4=80 x 12 = 960 extra per year. not much but then again it's money you don't have to work for.
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