Increased cash flow thanks to Commercial Real Estate Investment Strategies

Boost Your Cash Flow: Top Commercial Real Estate Investment Strategies

Posted by Alex Field on June 26th, 2023

The world of commercial real estate can be difficult to navigate when trying to take your portfolio to the next level — but it doesn’t have to be! As an investor, you understand how important it is to monitor your return on investment and determine the best methods for improving your cash flow. Whether you’re a seasoned investor or just starting, increasing the cash flow of your commercial real estate portfolio can be an effective way to enhance your portfolio. Not only does a healthy cash flow ensure that you’re profitable (a necessity in your line of work!) but also opens up growth opportunities and provides financial stability. The team at DeLille | Field has put together a few of our favorite commercial real estate investment strategies and methods for improving the cash flow of your commercial real estate investments. Sit back and get ready to kickstart your journey toward financial success in the commercial real estate market!

5 Strategies to Improve Cash Flow for Real Estate Investors

The world of commercial real estate can be daunting but with the right strategies to improve cash flow, you can watch your portfolio succeed. Here are five of our favorite commercial real estate investment strategies to improve cash flow no matter the commercial property type.

Smart Tenant Selection

Having a solid tenant base is a necessary foundation for boosting your cash flow. When determining if a prospective tenant is the right fit for your property, make sure you are looking for businesses with a solid track record, strong financials, and a good reputation. By thoroughly screening all potential tenants you can have peace of mind knowing they are reliable and can meet their rent obligations. Leasing to a stable tenant base means consistent cash flow and fewer headaches down the road.

Increase Rental Income

As a commercial real estate investor, one of the most important factors to consider is your rental rates — and how they compare to market trends. If you are overcharging, you may increase your bottom line quickly in the short term but find yourself struggling to keep tenants when their lease renewal comes up. Even worse, if you are underselling yourself, you’re not capitalizing on potential gains and going to severely reduce your potential cash flow! Make sure you are monitoring market trends and local comps specific to the areas where your properties are located. If the demand for commercial spaces in your area is high, you might be able to increase your rent.

Negotiate Favorable Lease Terms

One of the biggest areas that commercial real estate investors find themselves spending both time and money is trying to fill vacancies. To reduce the number of vacancies that need to be filled at any given time, we recommend making sure you lock in solid lease terms that benefit your cash flow. Long-term leases provide stability and reduce vacancy risks, while annual rent escalations help keep pace with inflation. The lease should benefit the tenant (so they are comfortable with the terms!) but also keep your best interest in mind — especially when your main focus is improving the cash flow across your entire commercial real estate portfolio. Another lease term to consider is having tenants be responsible for a portion of the expenses going toward ongoing maintenance, utilities, and property taxes to increase your bottom line.

Reduce Operating Expenses

This isn’t going to come as a surprise to anyone but reducing your operating expenses is a surefire way to increase your cash flow. Examine your current operating expenses and identify different areas where you may be able to cut costs. However, you mustn’t compromise the quality of your properties or services you’re offering tenants — if you cut back too much you may find yourself with more and more vacancies! Easy ways to reduce your operating expenses include making energy-efficient upgrades, scheduling regular maintenance, and proactively making repairs to prevent costly breakdowns.

Make Value-Add Renovations

Not all renovations improve the value of your property equally. However, improving the right aspects of your commercial property can help increase its value, which in turn will allow you to lease the space at a higher rate — netting you more profit. Take a step back and review your portfolio against local competitors in your area. Do competing properties offer amenities you don’t have, such as a fitness center, walking trails, rooftop patio, or other value-add opportunities? If your properties are lacking in comparison, you may want to consider renovating or improving your properties to attract higher-paying tenants or to increase their overall value. You don’t always have to shell out the big bucks either. Instead, you can opt for cosmetic enhancements to the lobby or common areas. Value-add renovations not only improve your overall cash flow but also position your properties for long-term appreciation.

Work with DeLille | Field

Investing in commercial real estate is a big decision. The industry’s future in the post-pandemic times is starting to adjust and settle, but does that mean it’s a good time for you to buy based on your goals? Luckily, you can have a DeLille | Field broker by your side to walk you through the process. We can help you learn and understand the important aspects of commercial real estate investment as we work to get the most value out of your potential commercial property investment. We support investors of all sizes and experiences. We know this opportunity is an integral part of your plan to secure your financial future and we can provide you with the information you need to make the best decision. Ready to get the inside scoop on investing? Contact us today!