If you own rental properties right now, there’s a good chance you’re dealing with something that shouldn’t be happening – negative cash flow. Your properties should be making you money, not costing you money every month.
Here’s what happened: A lot of investors chose variable rate mortgages because they made sense. Lower rates, easy to exit if needed, and you could pay them down faster if you wanted. But when rates shot up, those same mortgages became a problem. Now investors are calling every day asking about selling their properties because they can’t afford to keep them anymore.
The good news? You don’t have to sell. There are three solid strategies that can flip your situation from negative to positive cash flow. Let me walk you through each one.
Strategy 1: Switch to Interest-Only Payments
This one surprises a lot of people, but it works really well for serious investors. You can convert your current mortgage into an interest-only mortgage or line of credit.
Now, I know what you’re thinking – doesn’t interest-only mean a higher rate? Yes, it does. But here’s the thing: you’re not paying any principal anymore. That chunk of money that was going toward paying down your mortgage? It stays in your pocket instead.
When you do the math, your monthly payments drop significantly. Even with the slightly higher rate, you end up paying less each month. And that’s exactly what you need when cash flow is tight.
Why Real Investors Like This Option
If you’re building a real portfolio, you probably aren’t trying to pay off your mortgages anyway. That money sitting in home equity doesn’t do anything for you – investors call it “dead equity.” You want your money working, earning more money through appreciation and cash flow.
One more bonus: if you get the line of credit version, you can convert it back to a regular mortgage later if rates drop or your situation changes. You’re not locked in forever.
Keep in mind, this option depends on where your properties are located, your overall debt ratios, and your credit score. Not everyone qualifies, but it’s worth checking.
Book Your Strategy CallStrategy 2: Change Lenders and Extend Your Amortization
This strategy is simple but powerful. Instead of staying with your current lender and locking in your variable rate, you switch to a different lender.
Why does this matter? Because when you stay with your current lender, they lock you into whatever amortization you have left. If you started with 30 years and you’ve been paying for 7 years, they’ll give you 23 years. That’s it.
But when you move to a new lender, you can get a fresh 30-year amortization. Same rate (or sometimes even better), but way lower monthly payments.
Here’s a Real Example
Let’s say your current lender offers you 5.2% if you lock in your variable rate. Sounds okay, but you’re stuck with that shorter amortization and higher payments.
Now imagine switching to a new lender at that same 5.2% rate. The rate is identical, but you get 30 years instead of 23. Your monthly payment drops, and suddenly your cash flow improves.
This strategy works especially well if you’ve been on a variable rate for a while and your amortization has gotten shorter. Adding those years back gives you breathing room.
Strategy 3: Add a Second Suite or Renovate
This one requires more work upfront, but it can completely transform your property’s performance. You refinance your mortgage, pull out some equity, and use that money to add a second rental unit.
Yes, your mortgage payment goes up when you take money out. But you’re also adding a whole new stream of rental income. If you do it right, that new income covers the increased payment and then some.
Important Steps Before You Start
Before you run out and start building, check with your local municipality. Make sure second suites are allowed in your area. Check the zoning rules. You don’t want to spend money on renovations only to find out you can’t legally rent the space.
If adding a full second suite isn’t possible, you can still use this strategy. Pull out equity and use it to renovate the property instead. Maybe the place needs updating, or there are repairs you’ve been putting off. A renovated property can command higher rent.
The key is making sure the numbers work. Will the rent increase cover your higher mortgage payment? If yes, then it makes sense. If no, then this might not be your best option.
Which Strategy is Right for You?
Each of these strategies works in different situations. Some investors use just one. Others combine two or even all three approaches across different properties.
The interest-only option works great if you need immediate payment relief and you’re focused on cash flow over everything else.
Switching lenders and extending your amortization makes sense if you want to keep things simple while lowering your payments.
Adding a second suite or renovating is the best choice if you’re willing to do some work upfront for a bigger payoff long-term.
Don’t Give Up on Your Portfolio
Too many investors are ready to sell because they think they’re out of options. But selling in a tough market often means losing money. And if you’ve held these properties for years, you’re giving up all that future appreciation.
These three strategies have helped countless investors stay in the game. Instead of selling at a loss, they fixed their cash flow problems and kept building wealth.
Every situation is different, though. Your credit, your location, your specific properties – all of this affects which options work for you. That’s why it helps to talk to someone who deals with these situations every day and knows what lenders will actually approve.
If you’re struggling with negative cash flow right now, don’t wait until you’re completely underwater. The sooner you explore your options, the more choices you’ll have.
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