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There are two parts to Real Estate Investing: the choosing and closing on properties and the financial aspect. You put the time, the effort and most of all the money into purchasing a property and what kind of Return On Investment you get back depends on a few factors. Some issues like market volatility are out of your control. However, there are several proactive and inventive strategies to keep your new property or land investment generating revenue. Here are some easy tips on how to raise your ROI.
The the true entrepreneur in you run wild! If you are eying or own a property in a great location, but it is under performing in its current form, consider changing the use. Make sure your property is being used for its most optimal function to get the best return long range. Do you have a low performing retail location? Think about converting to a Rental Property. A warehouse lagging behind with low occupancy? Re-imagine it as Lofts for artists and young professionals. Work with an Appraiser,an Agent and even purchase some market research to determine the most successful type of building to lease or rent in the area.
Raising rent is a fact of life for property managers. Painful and predictable, you want to tread carefully on tenants nowadays, especially in this economy. Still, there are many ways to reduce operating expenses and increase ROI without jumping to raise rents too soon. Making your property more energy efficient through upgrades and switching to better products like HVAC and light fixtures can be big money savers long range. Inexpensive fixes like enlisting tenants to participate in energy saving tactics makes them a stakeholder in reducing costs. After making some changes and monitoring them for a few months call your gas, electric and water companies and ask them for a reduced pricing plan if you are able to show a marked improvement.
Although this costs more money in the short term, renovations, repairs and upgrades significantly increase a the value of a property. If you are a landlord and know the fixtures and appliances in your rentals are old, have a goal in place to switch them out after "x" number of years. In a commercial property creative upgrades in common areas, fixtures and windows are always welcomed and spruce up an old building just fine. This is not a cost you should ever try to pass on to the tenant(s) as it will seem dishonest and unfair to say the least.
Taxes are another somewhat overlooked area for saving money. Not only can you appeal to have your assessment re-examined, many property holders don't fully explore all of the tax options and shelters available to them. Changes to the capital gains taxes on large properties, deferments, breaks on exchanges and sales and other strategies should all be explored. This is where having a great tax expert/accountant on your investment team before you buy a property pays off big time.
How did Tampa Bay become the top place for retirement communities? How did Des Moines gain a reputation for being a great place for young professionals? In Tampa's Bay's case the weather certainly helps, but Developers and Real Estate Investors saw opportunity many years ago and catered to a specific niche. This created an entire cottage industry that was and continues to be highly profitable. Explore niche market segments and key segment demographics to serve, even in surrounding neighborhoods.