With the latest hike in interest rates and the implementation of the National Credit Act, as an investor you must start to look at how you can make more money from your current investment properties. Optimising your portfolio has never been more important than in the current economic climate.

As an investor you may agree that cash flow is the secret to successful investing. Whether it is a property or business, the key to success is to have a strong grip on your cash flow situation. Interest rates increases, like the one's we have seen since June last year, can significantly eat into your cash flow.

You may think that you need to amass great sums of money to build wealth, but building a strong inflow of cash can also bring about financial freedom without having piles of cash.

The trick is not to focus on all the debt, but to build your strategies around cash flow. It is highly evident that many investors don’t know what to do to generate positive cash flow from an investment property.

By asking yourself, "How do I make money from an investment property I already own?" you will come to the conclusion that you need to generate more income or you need to reduce your expenses on that particular property.

How to reduce expenses on a property

  • Your biggest expense will be the monthly instalment that you have to repay the bank. By extending the bond over a longer period (like 30 years) you will reduce your monthly instalment. Don’t focus on the extra interest that you have to repay; it is the tenant that repays it for you.

  • Negotiate a better interest rate with your bank. Normally when you extend the bond period to 30 years, they are more than willing to drop the rate. In the process, negotiate a discount with the lawyer (up to 20 percent is normal, while some investors get no less than 30 percent).

  • Do your own management on your rental properties. It is a simple exercise of monitoring your bank account to see that the money has been deposited, especially if you only starting out with a few properties. Once you have a strong positive cash flow and the properties, consider using an agent.

How to increase income on a property

  • The easiest is to have a rental escalation clause in your lease contract. Normal escalations are eight to 10 percent per annum.
  • Consider converting a storeroom or double garage into a granny flat. Having more than one tenant on one property can generate substantial cash flow.
  • By adding a granny flat, it will also be far cheaper than buying a new small flat.
  • See if you can subdivide the land, either to sell the divided part or to build a second unit on.
  • Have you ever bothered to ask your tenant what he would like? A second carport or security gate can generate more income.
  • Look at the security of the property. Can you add more security to increase the rent (e.g. burglar bars, alarms, etc)? If you don’t know, ask the tenant if such additions would add value.
  • You can change the nature of the property. Rezone farming land for residential use or changing residential to business rights can be most rewarding.
  • Add additional businesses to your student housing like a laundromat facility, games room with coin-operated pool tables or put vending machines that sells sodas or sweets which can generate additional income. This will also make your property more appealing to the one next door.
  • Convert a four bed two bath house into two two bed apartments. Not only will it generate more income but you reduce your risk as well.

By combining some of these ideas you can easily make your property a positive investment for yourself. Also take note of what to look for when you buy your next property. The more space you have, the more options to consider.

Each property has unique opportunities like extra space, additional buildings or it might be the ideal location. It is your job as an investor to identify these opportunities that others don’t see.

Use your imagination to see with your mind and not only with your eyes... a good idea with interest rates set to continue rising

This article comes from The Property Investor Network.