Return on investment (ROI) are magical words for any real estate investor; especially when it comes to maximizing it. Knowing how to maximize the ROI on an income property all comes down to management and number crunching. Here are the top tips to help you maximize your ROI on an investment property.
1. Location – any area of real estate can be broken down into location. In order to maximize ROI select a location for investment property that is close to shopping, is located in desirable school districts and is not on a busy street. Remember, ROI whether renting or selling is all about quick turnover. Faster turnover is always accomplished on properties that display desirable features.
2. Repairs – as opposed to using contractors for all repair work required on an investment property consider using a home service plan with a low deductible. For example, American Home Shield charges $400 annually with a $60 deductible on repairs. This can be major savings when water heaters or appliances in the property need repair or need to be replaced.
3. Market values – savvy investors stay tuned in to current market values for rent and sale. When considering buying an income property, consider the surrounding market, and the feasibility of rental prices and sale prices. Buy low, sell high.
4. Maintain insurance – the better insured a property is against damage, theft or loss, the better the ROI as the investor does not have to spend a lot of time and money on repairs not covered under the home service plan.
5. Be picky about tenants – better tenants mean paid rent, and normally less damage. When a tenant moves out, the rules of the game go back to being able to turn the property around to a new tenant quickly. In order to do this the property needs to be clean and ready for move in within days of the prior tenant moving out. Screen tenants rental histories and credit histories before entering into a lease agreement.
When all else fails, consult an expert. Many real estate investors can benefit by hiring a property manager to oversee aspects of the properties they own for them. This way they can put their energy into what they do best; investing and finding new opportunities. Property management fees will range from $80 – $300 per month depending on the property and rental amounts, so when considering ROI, factor in the services of a property management company or ask the property manager to do this for you.