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2007-02-16 16:18:00

16 Ways to Alleviate Negative Cash Flow Situations

Steve Dexter, author and investment advisor, is a popular RealTown contributor.


Here are 16 ways to alleviate negative cash flow situations that you can add to previously published methods.

This year promises to be a stressful year for real estate property flippers and investors that over imbibed at the real estate purchase party of 2006. Stay tuned throughout this year for more ideas on how to make better financial decisions, and if you are worried about missing out, don't worry, because if you know where to look and how to buy the deal of a lifetime comes by once a week.

 To generate more income:

1. Rent out your garage for storage.

2. Convert your garage to an extra bedroom.

3. Rent out your property by the room (college students come to mind).

4. Change the use of your property to special needs housing or to a board and care facility. Elderly, disabled, mentally challenged and drug/alcohol rehab are market groups suffering severe housing shortages.

5. Build in additional square footage (a bedroom, for example) that will command higher rent.

6. Renegotiate management fees by a giving your property manager a piece of the action. Modify your management relationship to a partnership.

7. Increase your tax benefits by becoming a full time real estate investor to escape the limited $25,000 Federal capital loss exclusion. Be careful because word on the street is that the IRS is cracking down.

If you want to sell but are having trouble:

8. Keep and rent out the good houses and dump the bad ones.

9. Offer a lease/option alternative. Advertise your property as “rent to own.” Sell your property via lease/option and get upfront money plus much higher rent, part of which is credited to the buyer's down payment should he exercise his option to purchase the property.

10. Do a 1031 tax deferred exchange into an income property, like an apartment building, or into higher rent areas where the price to rent ratios are better.

11. Offer a higher commission (4%-5%) as an incentive to the buyer's agent. Your house gets shown first.

12. Use creative financing to sell your property on terms for a long term stream of income. You will become a lender instead of an owner by using wrap-around mortgages, installment sales, and AITD's that convert equity into income. Owners carrying mortgages to sell property in soft markets were once commonplace and will be again.

13. You are a lender when you creatively finance, As a lender, you can offer a low price and a zero down payment in exchange for marked up interest rate In the future.

14. Buy low. Unless you can buy from a builder in distress, stay away from overpriced brand new houses. Only buy resale property in principally owner-occupied pride of ownership neighborhoods that are priced well below your town's median price.

15. Deals will abound in areas of foreclosures and high seller distress so you will be able to buy well located houses in high demand neighborhoods (close to the work centers, shopping, and freeways that your customer, the renter, prefers). Position yourself to be credit rich and cash heavy.

16. Buy no investment condos, condo conversions, and don't buy houses far outside of town. As markets turn soft, these properties sink first.  A three-bedroom, two-bath, single-family detached house is the most in-demand piece of real estate in this country today.

And finally, if your financial ship is spinning out of control, give the folks at Consumer Credit Counseling Services a call at 888.656.CCCS (2227. They have helped thousands of Americans plug their budgetary leaks.

Credo of the Month:

Buying well located houses in high demand neighborhoods eliminates the most risk in all of real estate because, in good times and bad, there will always be somebody who will want to rent or buy your house.

Read Steve Dexter's: Top 15 Negative Cash Flow Busters.

(Steve Dexter is the author of Real Estate Debt Can Make You Rich. He is also a loan officer licensed in AZ, CA, CO, CT, DC, FL, HI, ID, MD, MI, MN, NV, OR, UT, VA, WA.)

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