There are sure-fire savvy ways to spend extra property investment budget. Forecasting net cash flow gives property investors an idea of how much money is available for ‘CapEx’ or capital expenditures and non-recurring fees like leasing commissions and tenant improvements.
Over time, items such as appliances, heating and air conditioning systems, and roof wear out and need to be replaced. Unexpected expenses can lead to cash flow problems if there isn’t enough net cash flow that has been set aside for CapEx. It would even be more problematic if high-priced items need to be replaced in multiple properties at the same time.
There are many aspects of cash flow management in business and budgeting is a crucial one. When preparing a budget, a good property investor will allow extra money for unforeseen costs that may arise like bad debts, repairing, security, and more. Mostly every budgeted money is utilized in the expenses of the business at the end of the fiscal year. However, there are some occasions where certain leftovers are realized from the budget.
Any leftover is also not good as it could indicate you do not have any tangible thing to show that you used it wisely.
Check out the 4 savvy ways to spend extra property investment budget to avoid falling into this trap.
Asset Investment
For any business new or old, there’s always a need to acquire more assets, and is always a priority.
Any available extra money on a budget can be spent on acquiring more assets or replacing assets.
An asset is anything that adds value to your business. The assets may be intangible like goodwill, trademark, patent, etc, or tangible for example machinery, motor van, equipment, or buildings and other real estate properties that you can then liquidate for cash and gains.
In simple words, after cash, the asset is the most important thing you can possess in your business.
The asset is so valuable that it can be sold individually or along with the business and you will realize back its cost, part of it, or cost with profit on it.
Renovation or Upgrades
Renovation or upgrades are visible indicators that your property business is doing well. A well-maintained property infrastructure also shows the type of property management you provide to tenants. Thus, not only it will increase the property’s face value, but it will also lessen further deterioration which can lead to more money going under.
As far as we know – a good property condition and one upgraded also yields higher rent.
The spending on the physical infrastructure will not only promote the quality of the property as a whole but also make it adorable for tenants to be willing to care for it and maintain it properly.
In saying this – only upgrade to what’s reasonable. You are still aiming for more profit and return on any upgrades.
Roll extra money
The first option for leftover budget money is to roll it into your budget for the following month. After all, if you were disciplined enough to stay under budget, why not make your life easier by giving yourself a little extra room.
Rolling leftover budget money into the following month is a great option that will help to ease your financial life. Plus, if you continue to stay under budget — month after month — your leftover money will act as a financial buffer for any unexpected budgeting mishaps.
Pay Off Debt
We all know that getting out of debt can make life so much easier; and the faster, the better. Paying off debts frees you of monthly interests rates and other dramas debts have.
So, if you have any debt at all, you should use your leftover budget money to pay it off as fast as possible. We are not just talking about credit cards or business loans. If you owe money on a car, your house, or anything else, allot every extra penny to it.
One of your biggest motivations for having an extra leftover budget each month should be the ability to pay extra toward debt.
Getting out of debt means you will have more in the long run and you can then re-invest your money in another asset that yields new returns.
Gil Elliott is the Managing Director and Founder of Positive Income Properties. Gil has a rich background in business consulting and property investment. All of these he gained in his nearly four decades of experience in the real estate and marketing industries.
