Spending money consistently on a cash flow negative rental isn't smart. It might be time to change your strategy.

Vacation rentals are a great way to make extra income from your property investments. Short term rental provider, HomeAway https://www.homeaway.com/info/getting-started/income reports that the run-of-the-mill vacation rental property owner nets $11,000 a year.

But if you consistently have to spend rental profits on roof repairs, vacancies, regular maintenance, bad tenants etc, you probably have a cash flow negative property on your hand. And there are two approaches to dealing with this problem. You can either wait it out and hope things will somehow change or kickstart an exit strategy to move on.

While cash flow doesn't have to be a decisive factor, especially when you have a vacation rental property in an up and coming neighborhood with strong potential appreciation rates. Many times, you might be spending more than you bargained for with your rental. And the faster you discover this, the better.

This article outlines five signs of negative cash flow vacation rentals but before we proceed let's see a simple formula for measuring cash flow on an investment property:

Cash Flow = Total Income (Application fees, Rent, etc.) - Total Expenses (Monthly mortgage (if applicable); General Maintenance, Electricity, HOA, Property Management, vacancies etc.)

As a rule of thumb when buying an investment property, it is wise to set aside an emergency fund to cover at least first six months of expenses. So let's dive right in and see some of the signs to watch for.

1. High vacancy/Low occupancy rate in a location: What's the occupancy rate for your neighborhood? An important sign of a cash flow negative property is high vacancy rate in the neighborhood. According to Turnkey VR https://blog.turnkeyvr.com/much-money-can-make-vacation-rental/ specializing in the management of turnkey vacation rental homes, "Occupancy rates for vacation rentals can be all over the map. For instance, a vacation rental home in a big city might create more demand than a rental property at a seasonal location like the beach". Location is key when buying real estate, especially for investment. Hence it's wise to spend time researching a neighborhood before taking the plunge.

2. High Maintenance property: Are you doling out high monthly fees for property maintenance? Then you might be dealing with a cash flow negative property. A 30-year-old property might offer a great deal but when you have to spend considerable time and money on maintenance and fixes monthly, you have to ask yourself if it's worth it.

3. Declining Rental Property Market: How strong is the rental property market? There is a strong correlation between a thriving property market and low vacancy rates. Many times a declining rental market is a sign of underlying economic issues, most times accompanied by high unemployment rates and slow growth. Sticking around in such a neighborhood would be unwise. Unless you're confident about a significant development in the neighborhood in coming years.

4. High Property Taxes: Did property taxes go up? Taxes can get tricky, especially when you're buying as a foreigner. However, when sudden tax changes are eating up your income, then you have a negative cash flow property.

5. Problem Tenants: Are problem tenants eating up your profits? You have two options, regarding managing your rental property. You can either hire a property management company, which means more expenses but better management. Or you can just ride it solo. While this offers you the chance to take an active role with your property, dealing with problem tenants (tenants who break things, tenants refusing to pay rent or pay promptly, tenants causing disturbance etc.) is a major headache and can eat into your profits.

Hence the importance of having a screening process that's hard to bypass. However, if you deal with problem tenants a lot, it might be time to consider setting an exit strategy in motion.

You can take advantage of short-term rental cash flow with sites like HomeAway and AirBnb. While tenant turnover rates can be high in the short term, short term rentals can be profitable, especially in a popular destination such as a ski resort or beach community.

Depending on your home's value, your market and comps in your neighborhood, you could consider making renovations in your home before listing. In a place like New York, however, where houses are being snapped up fast and prices are over the roof, renovating your house for sale might be a crazy idea. But in suburbs with high inventory, your house needs to measure up.

When selling, you wouldn't be looking through the same eyeglasses as a new homeowner. Your calculations and priorities will be much different. The most important thing when you have to consider value is return on investment. What renovations will make my house sell fast and at the same time give good return on investment? Before you embark on gutting your circa 1990 kitchen, the first thing you might need to do is consult an experienced realtor who knows what works best in your particular neighborhood.

You might find out that minor cosmetic upgrades will get more buyers through the door. And yea, the door is important. Instead of spending money on pricey renovations like adding a deck or basement revamp, Remodeling magazine’s 2015 Cost vs. Value Report says that replacing your existing front door with a new steel door will net you a 101.8% ROI for a minimal replacement cost of $1,230. Knowing which areas to spend on will help save you a lot of money when making renovations. Let's look at five low-cost ways to increase your home's value.

        Inexpensive Home Improvement Tips to Improve Your Home’s Value

1. Consider curb appeal. Nothing says 'welcome to this lovely house' to a prospective buyer as a nicely mowed lawn, a few shrubs here and there and a well-swept walkway. The first impression buyers have as they drive to your home is truly important. So, it's necessary you set the stage right. Hiring a good landscaper will be worth the money. Not only will your home appeal to prospective buyers, your neighbor would also love the effort.

2. Have a cohesive kitchen. Kitchen plays a big role in home improvement. Many Realtors call it the heart of the home. Indeed it is; since an average American homeowner spends at least 37 minutes daily in the kitchen. Sprucing up your kitchen demands that you create the impression of a clean and updated kitchen. One way to achieve this impression is creating cohesiveness, especially with color. Mix and match kitchens are not the best. If your kitchen appliances don't match, consider ordering new doors, e.g new cabinet doors or face panels for them.

3. Work on your bathroom. Next to the kitchen, bathrooms are important to potential home buyers. You can make a difference in your bathroom at a low cost by adding new toilet seat and a pedestal sink. These are also pretty easy for homeowners to install on their own. One thing you may not be able to do on your own but which will add value to your bathroom is replacing an old, discolored, bathroom floor with vinyl tiles. Bright, energy efficient lighting will also improve your bathroom's appeal.

4. Update closets. Cramped storage spaces are not attractive to potential buyers. You can step up your storage by adding a do-it-yourself wire and laminate system to bedrooms and pantries.

5. Check the mechanics. Having a minor inspection and working on existing faults in your home like faulty outlets, loose wires and water leaks give the impression that someone has really taken care of the home.

Despite the ease of access created by the internet, buying a home is still a complicated process. You need third part assistance when making this very important financial transaction. Navigating the complexities of home buying or selling can be especially tough if you're going at it for the first time. While we do not dispute the fact that you can buy or sell your home yourself. Facts reveal that buying or selling a home through a real estate agent would net you more money.

For sellers, 4% of the sales price is charged for real estate agent services. This might be thousands of dollars that you would otherwise count as profit. Statistics however reveal that going it alone can cost you more in profits. The average FSBO seller makes $40,000 lesser in profit than an agent-assisted seller.

When you hire an agent, you're paying for expertise and information. Real estate agents have an exclusive database, the Multiple Listing service (MLS), which shows them how the prices of properties have changed over time. As a buyer, you might be paying more for a house that you feel attracted to. Without an agent, you might be buying a house that will turn out to be a money pit and paying more than you should for it. Experience, access to the MLS, knowledge of the marketplace makes agents invaluable to new buyers and sellers. Still not convinced? Look at these 3 ways buying or selling real estate on your own will cost you more.

1. Shortened range. If you’re going on your own as a seller, buyers with agents might not want to work with you, which limits your reach. Having a real estate agent creates a sense of convenience. The real estate agent's job is to act as liaison between the seller and the buyer. When one party has an agent, the other does not, the party with extra help has the upper hand, since the agent is working in his or her best interest. Also, buyers looking for homes will have a shortened range. Apart from the MLS access, an agent has connections with other agents and can easily match home buyers with a wide range of houses that meet their tastes. A real estate agent will track down homes that meet your criteria; get in touch with seller's agents in charge and make appointments for you to view the homes. You have to play this tag yourself if you're buying on your own.

2. Slip ups. An agent's job sells or buys houses full time. A seller looking to sell on his own probably has a job and cannot be 100% committed to the business of home selling, which does require much work. You have to answer calls from interested parties, answer questions and make appointments. There could be occasional slip ups, which will cost you money. Note that potential buyers are likely to move on if you tend to be busy or don't respond quickly enough.

3. Tricky negotiations. Buyers and sellers do not always have an easy relationship as each is looking for their own best interests. As a buyer, you might not know how well to express the fact that you find the wood-paneled walls and shag carpet contemptible. Your real estate agent can express your concerns to the seller's agent. Acting as a messenger, he would likely be in a better position to negotiate a discount without ruffling the homeowner's feathers.

Buying or selling a home is not a straightforward task, buyers and sellers want to niggle about price, contracts are hard to handle, mortgage issues might crop up. A professional real estate agent can help you achieve a smooth transaction while saving you money in the home deal.