Investing in real estate can be an incredibly profitable endeavor. It provides you with valuable assets, which will likely increase in value over time. Additionally, you could rent your properties to tenants to generate a lucrative source of passive income on the side.
When buying property, be sure that you have a way to generate a return on your investment. Factors such as bad tenants, neglect, and poor choice of property can cause you to lose money, rather than generate income. If you own rental property or are looking to invest, here are 5 ways to profit more from real estate.
It’s obvious the more you spend on your property, the lower return you will get when you sell or convert to a rental. That said, there are some reasons you would invest more in the property. Perhaps, you intend to live there for some time before selling. This is a common scenario for many first-time investors. Though you might want to still watch your expenditures, this could end up bringing you more returns in the future, depending on what you spend the money on.
One thing you can do is learn what you can about home repairs and maintenance. That way you can do minor repairs yourself rather than calling in an expensive professional. That said, don’t attempt anything beyond your capabilities, or you may end up making the problem worse and having to spend more to fix it. Additionally, you can do the property management work yourself to cut the cost of hiring a company to manage tenants.
Be Smart with Taxes
When you own property, there are several costs involved that are tax-deductible. Be aware of these so you can receive the most deductions you can. Mortgage payments, insurance, legal fees, repairs, some home upgrades, and relevant travel are all potential deductions to discuss with your accountant.
You could also hire a professional financial advisor to help you identify the opportunities, or a company such as Tri-Merit to look into cost segregation as a way to accelerate tax deductions and improve cash flow.
Choose Quality Tenants
It’s no secret that allowing the wrong people to live or work on your properties can cost you a lot of money and time. Property damage, lost rental income, and any legal fees incurred from poor tenants can make you think twice about renting at all. Make you screen all applicants to identify any possible causes for concern, and conduct financial and background checks to ensure they are reliable and responsible.
Upgrade Your Property
If you plan to eventually sell your property, you will want to make more money from the sale than you spent on the purchase. By improving the property with modern upgrades, you add value and appeal for a quick sale. Keep it clean and well-maintained, decorate the interior, enhance its curb appeal, and carry out renovations to boost its value.
This is a risky strategy, but if it works it will pay off handsomely. Rather than renting out your investment property to one long-term tenant, instead, try listing it on Airbnb for a regular influx of short term renters. The benefit is that you can charge much higher rates per night and stand less chance of damage from wear and tear. On the other hand, there is no guarantee that your property will stay booked 100% of the time. Do ample research on this strategy to learn all you can about the pros and cons.