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If you have an income producing property, the amount of money you are left with at the end of your property expenses is considered cash flow. 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 your mortgage 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. 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. 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. Keep in mind, when doing any kind of repairs to the home, including landscaping, 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.
Article Source: http://www.articledestination.com
Jennifer Hershey has more than twenty years of experience in the Mortgage Industry as a loan officer. She is the owner of www.explainingmortgages.com/, a mortgage resource site devoted to making mortgage terms and products easy to understand.
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