Ep 53 - How To Correct Negative Cash Flow From High Interest Rates?

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Show Summary:Many investors who own rental properties are facing a challenge due to the high increase in interest rates. This has resulted in a negative cash flow for them, meaning they're not earning as much as they used to from their property portfolio. Variable rate mortgages have been a popular choice for investors because they offer low penalties for exiting and higher pre-payment privileges. However, with the recent rate increases, investors are finding it difficult to generate positive cash flow.To address this problem, there are three main options available. The first option is to consider an interest-only mortgage or line of credit. While these come with higher interest rates, they allow investors to save on the principal portion of their payments, resulting in lower monthly payments and stronger cash flow. It's important to note that the availability of these options may vary depending on location, debt ratios, and credit scores. Seeking advice from an expert is recommended.Another solution is to change lenders. By doing this, investors can extend their mortgage amortization period, potentially up to 30 years. This extension leads to lower monthly payments, even if the interest rate remains the same. It's crucial to understand the natural amortization left on the mortgage before making the switch. Changing lenders can provide more flexibility and improve cash flow.The third option involves adding second suites to the rental property. By refinancing the mortgage and using the extracted equity, investors can create additional rental units. This increases rental income and helps offset the negative cash flow. It's essential to comply with local zoning and municipal regulations when considering this option. If adding a suite is not possible, using the refinanced money to improve the property can still boost cash flow.These strategies have proven effective in helping investors save money on their interest expenses and overcome the challenges posed by the increased interest rates. It's advisable to seek professional advice to determine which option suits individual circumstances. If you believe you're affected by these challenges, reaching out to a knowledgeable expert can provide valuable guidance and support.