What happens if there is no positive cash flow in a property for some time?

Property Management Blog

Positive cash flow is the lifeline for the business for a landlord. Landlord cannot meet expenses properly and cannot keep the investment property in a top condition if his expenses are more than his rental income. A good property in a good location purchased at a good price means nothing for the landlord if it is not able to generate positive cash flow. In fact, experienced landlords turn down offers of decent real estate properties after finding that they are not producing a positive cash flow.

Even new landlords know that without positive cash flow, their business is bound to fail. If monthly rental income is less than average monthly expenses incurred on repairs, maintenance, taxes, and insurance, a property is like a ticking bomb waiting to become distressed in a matter of months or even weeks. The landlord is likely to delay payments of utility bills or repairs only to reach a situation where bills start to pile up and he runs out of income. What happens next is interesting to know if you are in this business of being a landlord.

Repairs slow down and stop completely

The first casualty of any negative cash flow property is repairs. You can look around you to find out such properties in your market simply by examining their outward appearance. Such properties start to look old and ugly. Their paint starts to wear out and with passage of time their roofs start to leak or sag. The landlord does not have the resources to carry out repair of air conditioning and even faulty appliances are not repaired or replaced.

Good quality tenants are not attracted to such properties

If the landlord does not carry out repairs on time, the first impact is on the condition of the rental property and later on the tenants. You will find that such properties retain only bad quality tenants as good tenants who pay their rent on time move out to live in other rental properties. After all, how long can good quality patience cope up with the condition of the property and the attitude of their landlord? If they find there is no air conditioning during hot summer months, they are bound to look at other options. As tenants move out and new tenants do not move in, the situation of cash flow worsens, and bills continue to pile up.

Landlord allows bad tenants to move in

Landlord has no option but to allow bad tenants with poor credit score to live inside his rental  property when good tenants avoid his property. These tenants are not good at rent payment and they also start to damage the property. They start to pick up quarrels with the remaining good tenants and force them to leave the property. Soon, the reputation of the property turns bad and it stops attracting tenants altogether. Some tenants start to move out in the middle of the night without paying their dues.

It becomes a paradise for thieves and squatters

The condition of the property worsens, and it goes vacant. It does not take long for miscreants to take notice of the situation. Soon, valuable items begin to disappear. Thieves have a good time and they start to take away plumbing parts and electricity fixtures. The property eventually becomes inhabitable and the only ones found inside such a property are squatters.

Landlord is unable to pay dues towards lender and the property reaches the stage of foreclosure. It does not take long for the property to become distressed. Investors have an eye on this property as they know they can buy the property at a very low price.

If you’d like to talk about property management, or you need help with Everest Property Management, please contact us at Everest Realty. 

Property Management Service Areas 

Palm Coast Property Management 

Flagler Beach Property Management

Ormond Beach Property Management

St. Augustine Property Management

Daytona Beach Property Management

Blog Home