Charlotte Property Management Monthly: Cash Flow Happens On Both Ends: After You Check Your Rental Comps, Do the “Bank Thang”

A property manager’s most important task is to maximize their client’s cash flow.  This includes looking at most of the inflows (good!) and outflows (bad!) of the property.

Cash Inflows: Rent from the tenants (typically the biggest or only inflow)

Cash Outflows: Repairs, management fees, & vendor fees

What is out of the property manager’s control, however, is typically the largest outflow for landlords- the financing of the property.  This is the mortgage payment that goes to the bank each month.  If this outflow can be sizably reduced, all other expenses (outflows) seem minimal.

So does that mean I need to start doing the “bank thang” (defined as giving up total control of your personal information and providing a ridiculous amount of documentation)?  Unfortunately, yes.

You may not like dealing with the banks again (I didn’t either!).  And you may think that the Fed is crushing the value of our dollar by printing money (I do too!).  But one of the positive results of the Fed’s “Quantitative Easing” we read about in the news is that it has pushed interest rates on mortgages to historic lows (for now).  And, as a landlord, you need to explore taking advantage of these low rates and minimizing your biggest outflow.  And that means having a conversation with the banks about refinancing options. 

The three ways to deal with refinancing (from best to worst option):

1.  Read the mail the banks send you, especially the letters that come via UPS and FedEx.  I got a letter from Chase (one of my existing lenders) the other day via UPS that offered to reduce my interest rate from 6.875% to 4.25% on one of my rental properties.  I called them and it was legitimate (no closing costs and limited documentation needed).  This took my payment down 30% on this house.  That is a good outflow reduction!

2.  Proactively call the lenders who hold your home loans and see if they can do anything for you.  Mention government programs like HARP, HAMP, and HARP2.  Then hope they know what you’re talking about.

3.  Call a mortgage broker and ask them to look over your loans and see if they can refinance any of them with favorable rates.

Property managers can run rental comps to make sure their landlord clients receive the highest possible rents and try to minimize other costs.  But landlords, especially in this historically low interest rate environment, need to do their part to maximize cash flow.  And that means doing the “bank thang”!   

Brett Furniss is the President & Owner of BDF Realty (“Charlotte’s Most Innovative Property Management & Investment Company”), and Rent-To-Sell Realty (“When You Need a New Solution to Sell Your Home”) which  specialize in rent-to-own (lease options) and rent-to-sell homes.  His newest book, A Real Estate Agent’s Complete Guide to Representing Rent-To-Own (Lease Option) Tenants (Delight Clients, Fill Vacant Homes, and Earn $2,250* Upfront! (*Minimum!)