In our latest offering, we’ve provided information on purchasing strategies and the intricacies of property investment. Carod Properties has provided you with information in financing and deciding on the perfect location. Next we would like to discuss the importance of establishing and maintaining working capital. For the purposes of this article, working capital is: the liquid assets which an organization has on hand to pay for both unexpected and planned expenses. Working capital gives indication of a measure of both a company's efficiency and its short-term financial health.
Don’t be fooled by thinking that financial concerns are over now that you’ve purchased and completed any renovations. It is the day to day business that can add up at the end of the month. There are of course the expenses for which you claim responsibility for in the lease (ie, utilities, repairs and grounds maintenance). Having enough cash in hand when you become a property owner can determine your future property success.
There are many things that you can do to set yourself up for success and take control of your investment expenses.
- Just like residential communities, you can factor in at least a portion of your monthly costs and additional cost that might arise, by building in a monthly/quarterly fee into rent.
- If you are not comfortable with or question your understanding of day-to-day expenses, it is advisable to hire a bookkeeper or accountant knowledgeable of investment properties.
- Analyze your capital, often. One of the main advantages of looking at the working capital position is being able to foresee any financial difficulties that may arise.
Knowing how to maximize your rental income and decrease your carrying costs is the hidden secret to property investment success. The annual appreciation, passive income and other perks that come with owning an investment property are all built over time. Controlling your working capital when investing in things like turn-key investment property or even properties that require minimal renovation will literally build your wealth. Working capital reveals more about the financial condition of a business than almost any other calculation because it tells you what would be left if a company took all of its short-term resources, and used them to pay off its short-term liabilities. Protect your investment by controlling all aspects, including capital.
