Maybe you invested in a property and at first it looked like a positive cash-flow property but now it's not shaping up that way. The property you purchased may have needed bigger repairs than you anticipated, or it's remained vacant longer than you bargained for or the maintenance numbers you used to calculate your return initially, fell short.
If you have a large stable of properties that can cover the cost of this one negative cash-flow property, then it's not going to make such an impact. But, if you are feeling the pinch you could try some of these ideas. Keep in mind however, you need some expert advice on these options, get your property investing team on the case and figure out which might work best for your situation.
1 - Alter your financing
This is probably step one, can you refinance at a better rate, or lengthen the loan? If you can achieve a smaller payment, the pressure on your cash-flow will ease somewhat.
2 - Divide and conquer
Is the property able to be divided up so you can get various rents off of it? For example, can you rent out the garage as a separate entity? Can you sell of some of the land? Is it a large property that you can split up into 2 rentals? Can you convert a large living space into another bedroom? It will take cash upfront to make some of these changes, but it may work in your favor in the long run.
3 - Change how you rent
If you have a 4-bedroom house close to a university can you rent out rooms separately rather than the whole house? You are likely to have to supply appliances and possibly furnish each room to achieve this.
Since you are renting out rooms and not a house, you will need to have create 'house rules' covering areas such as cleaning, parking, noise etc. It will be a little harder to control if you are not on-site, but figuring out a system where you can check in with everyone regularly, may just the the way out of a negative cash-flow situation.
4 - Investors
Can you find a silent partner - or maybe even a vocal partner - to get your cash-flow back up? Maybe there is someone who wants to get involved with real estate but doesn't have the inclination to get their hands dirty on a day to day basis. Write up a great proposal and see if you can drum up some interest.
5 - Short term leases
If you have a property in the right location - for example downtown - you could pitch your property as short term corporate lease. Most landlords like the security of having long-term tenants in their properties but there are other options. If you have the right property in the right spot and it's fully furnished, short term corporate (higher paying) tenants could be the ticket. (However, this practice looks like it is set to change - read more HERE)
6 - Rent to own
If you really want to get it off your hands you can sell it straight out, or consider a rent-to-own arrangement with your current tenants. The agreement states that the tenant of the property has the option to purchase it at a specified price and date in the future. For more information on how Rent-to-Own works, you can read more here.
A rent-to-own option will need the input of a lawyer to make this legal and binding.
These ideas are thought starters to help you try to figure out a way around the issue. Did you use any of the above or a combination? Have you been in a similar situation? What did you do to get back out of it again?
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