10 Real Estate Investment Secrets to Crank Your 2019 ROI
Investing in real estate is a fairly simple process – buy a property with positive cash flows, complete some home improvements to bump up the value, manage it very well, and then hold on for the long-term.
Repeat this process a few times, and you’ve become financially secure within 20 years.
Through my own investment journey, I’ve learned a few hacks that quickly boost rental cash flows and improve your bottom line.
Here are 10 battle-tested strategies to take your real-estate portfolio to the next level.
1. Complete smart renovations that appeal to millennial renters. Think minimalistic, modern, and practical:
- Stainless steel appliances
- Solid-surface countertops – these can be affordably purchased from overseas manufacturers
- Fibre internet hookups
- Vinyl flooring products – some products include amazing lifetime warranties
- Fresh paint for the walls - cool grey tones are timeless and very trendy right now
- Smart home features such as Nest to remotely control things like thermostat, security, and door locks at a low cost.
2. Equip your property with a dishwasher and bathtub
Each of these nice-to-haves will command an additional $50/month from renters and cost you around $500/each.
This means they will start to generate positive cash flows in less than two years.
3. Be dog friendly
There are droves of responsible pet owners struggling to find a suitable home for them and their furry best friend.
These tenants expect to pay a premium, tend to stay longer, and provide double the regular security deposit. Once you’ve made the switch away from carpet flooring, renting to a responsible dog owner is a fairly low-risk endeavour.
4. Use an on-time payment discount with your lease agreements
For example, if you plan to rent your property out at $2000/month, write up the lease at $2,200/month, but then offer a $200 on-time payment discount.
An on-time discount makes late payment far less likely and also gives you more flexibility when it comes time to renew the lease. Eliminating an on-time discount does not count as a rental increase.
5. Charge a flat-rate utility fee that covers your combined expenses and then some
Average out the costs for all of the household bills (water, gas, electric, internet) and then add a profit margin acceptable to you.
Your renters will appreciate the convenience and consistency, and you’ll benefit from knowing your utility expenses are covered for the year.
6. Use a long term rent-to-own strategy
This is the Ace strategy to increase your monthly payments and boost ROI.
Rent-to-own payments are significantly higher than regular rent payments since they’re based on the real cost of home ownership and include costs like taxes and insurance.
Rent-to-own also removes repair and maintenance from your side of the ledger, which improves your bottom line by a couple hundred bucks each month.
Tenant vacancy won’t be a concern, as the initial rent-to-own deposit is usually six months rent or more. The only downside to this strategy is that you have to be willing to let the property go at the end of the rent-to-own term.
7. Strategically time your lease resets
The two most competitive months for renters are April/May and August/September, which means they are the best months to be advertising your suite.
This strategy alone will provide quality tenants willing to pay top dollar for your suites. The ebb and flow of supply and demand means that rental rates can swing by as much as 10-20% through the year.
Make sure your rental agreements end during these peak rent seasons, and over the years those percentages will start to stack up.
8. Rent your property as a fully-furnished unit.
Furnished properties tend to attract executives moving into town, homeowners in the process of building a house, and similar high quality tenants. With the rental premium on furniture, you’ll usually make back your investment within 12 months. Generally speaking, the furniture should last for at least 10 years.
9. Now that the place is furnished consider getting a short-term rental licence and take advantage of Airbnb traffic during the summer months.
For well-located properties you can expect to charge your usual monthly rent, but on a weekly basis.
This comes with the added benefit of your suite being professionally cleaned every week, and it’s on the tenant’s dime.
10. Rent by the room
It’s not uncommon for people to pay $800/month or more to rent a bedroom with shared access to a kitchen and bathroom. A three-bedroom suite that would normally rent for $1,800/month can suddenly generate $2,400/month.
The caveat is that you can expect a little more turnover and some additional managerial moments.
These are just some of the strategies we use at Vantage West to optimize returns for our investor clients and in our own personal portfolios.
You don’t need to be a professional property manager to profit from this guide, but should you wish to have us take care of it for you, or if you’d like more details on the strategies above, we’re happy to chat and help you in any way we can.
This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.