There are many ways to make money from a real estate investment. You might have an income property where you collect passive income from rent payments, or you could be a house flipper looking to raise the value of a property through renovations and a growing market. Either way, there are usually ways to maximize the earning potential of your properties.
It can be very difficult to maintain a steady profit, no matter what real estate niche you’re pursuing. However, there are several things that can be done to improve your investments.
- Increase the Rent Competitively
Pricing a property low may fill a unit quickly, but you’ll miss out on the potential thousands a higher priced property could bring. On the other hand, pricing it too high will result in a vacancy that will be very difficult, if not impossible, to fill.
Watch the market to make sure your rental properties are priced just right. If possible, raise prices to match more current values. This will help you to keep your properties filled without missing out on potential income.
- Use Property Managers
Many real estate investors want to save money, so they immediately dismiss property managers who usually charge a percentage fee, based on the income of a property. However, the value property managers bring to the table will usually increase your earnings rather than decrease them.
When you use property managers, you raise the quality of your property, which attracts better tenants. You’ll also be able to take some time-consuming tasks off your list that make it difficult to focus on other ways to bring in revenue.
- Make Appropriate Upgrades
There are some improvements that will greatly enhance the income from a property, but you have to be selective about these renovations. Some will hurt your profits while others will bring a high return on investment. The smartest updates from a financial perspective include:
- Attic insulation
- Garage door
- Master suite renovations
- Deck or patio addition
- Take Advantage of Tax Credits
When you work in a business like real estate, the more you spend, the less you have to pay at tax time. Writing down every business expense and connecting tax breaks are the best ways to increase earning potential and keep your expenses down.
Tax breaks usually differ by state, so it’s always wise to research some of the available credits. In general, you can deduct things like mortgage interest, annual depreciation, assets, insurance, travel, contractors, renovations, and other business-related expenses.
- Screen Tenants Carefully
Your properties will depreciate a lot faster if you have disrespectful and destructive tenants. You’ll also have a harder time collecting rent. Screening tenants very carefully during the application process is an important part of avoiding this problem. As you actively seek higher quality tenants, you’ll automatically extend the life and value of your rental property, which allows you to maintain a top quality asking price and revenue.
- Advertise Intelligently
Marketing is a big expense for rental communities to absorb, but it’s usually necessary to get the highest profits from your rentals. Be smart about it – using free advertising space first, like business social media platforms, free listing services, and free paper advertisements.
Then, look for more affordable ways to get the word out about your property, like social media advertisements, which are often more affordable than other ads. Newspaper space is usually fairly inexpensive, too, and is still a great way to advertise properties.
If you have a website with a large number of followers, you might allow others to advertise on your site to generate passive income. A property located in a busy place can also be used as a billboard of sorts. A simple advertising banner on an exterior wall of the property can bring in hundreds per month.
Much of the wealth your rental property generates depends on you and the effort you extend. If you’re willing to recognize profit potential when you see it and use your tools and expertise to make the most of it, your revenues will reflect long-lasting growth.
Categories: Real Estate