You got into real estate investing for one reason: profits! And if your investment isn’t generating returns, you need to reevaluate your strategy.
The biggest areas for improvement that will positively impact your profits are property occupancy, on-time payments and maintenance. This applies to all rental properties, whether you self-manage or use a property management company.
If you use a property management company and they are not assisting in helping you increase profit, take the time to review how you can bring up your profits:
Profits From Rental Income
As is the case with a stock that pays dividends, a properly selected and managed rental property can provide a steady income stream in the form of rental payments. Rental property returns typically exceed dividend yields.
Real estate investors also have more control over risks to their cash flow. Though there are slumps in real estate prices and slow markets, people who own residential investment property usually lease it for many years, without experiencing corresponding decreases in rent amounts.
Increases in Value Due to Appreciation
Historically, real estate has shown to be an excellent source of profits due to the overall increase in investment property value over time. Of course, analysts cannot always predict real estate trends, which vary significantly across Kenya.
Improving Your Investment Property: More Value at Sale
While it’s providing cash flow, you can also improve your investment property to earn more profits should you choose to liquidate it. Therefore, upgrades to the appearance and functionality of an investment property can significantly increase its value. As trends and styles change, keeping the property interesting to renters can help you retain its value.
Note, for a maximum return on investment, make note of improvements that actually increase a property’s value. Installing energy-efficient appliances and windows increases a property’s value, as does by adding a bathroom and remodelling a room. Insulating a property also increases its value.
Related: Home Improvement that increases Value
Inflation Is Your Friend (When It Comes to Rent)
Although your fixed mortgage payment will remain constant, inflation drives up home construction costs as well as rents. Population growth also creates housing demand and drives up rental prices when supply cannot keep pace.
Making Use of Equity
The equity in your investment property will increase as you pay down your mortgage. Though equity is usually determined when you sell a property, some real estate investors take out equity loans when interest rates and loan terms are favourable and use those funds for other real estate investment projects.
Find That ‘IT’ Property to bring profits
Finding a value-priced property is the most effective way to increase your profits. Such deals aren’t easy to come by, and smart investors do their homework, browsing property listings frequently in order to quickly take advantage of opportunities when they arise.
Investors who wish to increase the value of their portfolio with real estate should also ensure that they have their finances in check. Good credit scores are a must, as is having the cash savings for the required downpayment — usually 20% for investment loans.