Friday, 09 December 2016 00:00

Three Primary Real Estate Investment Portfolio Profits

profits investorsReal estate investing has three primary vectors to increased profits, there are a few other niche avenues but for the most part, it boils down to these three points.

The three primary real estate profit venues:

  1. Property value
  2. Rental income
  3. Property services income

You could employ blanket mortgages to lower costs, (check our blanket mortgage section), you could also try things like tax lien certificates or other unique banking alternatives but the three items above applies across the board for a vast majority of the investor's rental income. Learn to take advantage of the big three for your own portfolio.

Property Value

Property values do not always increase on their own. Not everyone has the foresight to purchase rentals in the most optimal locations, and even then, no location is bullet proof to inflation and changes in socioeconomic factors. The challenge is to improve property value in a profit formula rather than just sinking money into general improvements.

The key to property improvement is understanding the regional socioeconomic interests of home buyers. Each region will have different factors that individuals will associate with upper class comfortable living. Southern regions will favor in ground swimming pools, northern regions will favor indoor clubs. Intemperate zones may favor an enclosed entrance in the home for energy conservation and maintenance reduction but a warm area may favor wide open entrances with lots of glass. Bottom line, if you are planning improvements on your properties, consider each as a regional niche and you will see more value and long term attraction.

Energy consumption per rental unit is another consideration not often given enough focus. Most Americans spend up to 1/3 or more of their income on energy. More efficient homes means renters have more money to pay their rent. Extra insulation, sealing cracks, energy efficient windows, along with upgrades of more efficient heating and cooling can go a long way to helping ensure renters have funds to pay you and provide a more attractive home for future prospective renters.

Rental Income

Rental income can be looked at in many ways. Improvements on property provided by renters, and improvements you make yourself are both reasons to raise the rent in the future. Most indicators are often overlooked, which can cause your tenants to be able to keep a lower than normal rent, which of course is a loss of potential profits. Keep an eye on new construction, especially new home construction and more specifically rentals. Other new construction to watch for are large nearby potential employers. Factories, plazas, malls, and any place that attracts spending and employment are indicators housing may soon be more scarce and fair standards of rent will rise.

Property Services

Property services can also provide additional investment property income. Apartment buildings should keep attention to any available service which would be of benefit to renters. Laundry rooms, laundry services, cleaning, lawn maintenance, optional scheduled home upgrades, child care, etc... many services are available to which you may integrate into your property. Some apartment complex locations are even providing small convenience stores on the property. Those interested in property services may also be interested in stated income loans.

Take time to interview your renters and ask what type of these things would make their life easier, you will find that helping your renters can be profitable too.

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