Once you understand the situation of your portfolio, then you can begin to see how you can change it to improve it.
There are 4 basic types of changes you can make.
- CASH FLOW – you can improve the cash flow of the property by increasing rents or reducing expenses, or selling and exchanging into a property with increased rents or reduced expenses.
- MARKET CYCLE – shift from a volatile market at the top of its cycle to a market that is stable, or at the bottom of its cycle. Or shift to a market that is showing stronger growth or bigger Cash Flow.
- LEVERAGE – sell a property and leverage into a property of greater value, or refinance and leverage into another investment. This could also increase Depreciation write-offs against other income.
- RESTRUCTURE LOANS – refinance at a lower interest rate, change the term of the loan or the length to pay it off.
By doing these things you can increase the monthly cash flow, build the overall value of the portfolio, and reposition to better meet short or long term objectives.
When you restructure it is important to take risk into account. Some considerations are:
- LEVERAGE TOO HIGH – not letting debt get too high relative to equity.
- COMFORTABLE PAYMENTS – that cash flow will appropriately cover expenses and loan servicing.
- CASH FLOW NEEDS MET – that cash flow can be adjusted to meet your current needs.
Go back to HOW TO ANALYZE A PORTFOLIO.
