Say your real estate portfolio consists of one or more rental units. And you want to maximize how much you’re making from your investment.
What would be some of the best practices you can adopt to boost your ROI?
But firstly, let’s define ROI.
What is ROI?
According to the Corporate Finance Institute, return on investment (ROI) is:
“…a performance measure used to evaluate the returns of an investment or to compare the relative efficiency of different investments. ROI measures the return of an investment relative to the cost of the investment.”
With this definition in mind, this brings us to the very first step you can take to increase your real estate portfolio ROI.
Step #1 Revisit your maintenance clauses
Are you paying more than you should be for maintenance and repairs on your rental units? Unexpected expenses can put a dent in your earnings.
Carefully assess the property you own. Are there maintenance costs that can be minimized?
For example, are you clear on what damages tenants are liable for? Or are you shouldering all the responsibility including repairs outside the scope of what is generally agreed upon as normal wear and tear?
Tenants should be charged for the following issues:
- Broken toilet handle, seat, and or tank
- Ripped or missing curtains
- Cracks in linoleum
- Burns on carpets
- Oil or grease stains on carpets
- Water damage from overflowed bathtubs or sinks
- Countertop burns
- Unauthorized interior painting
- Pet waste stains on carpets and walls
- Broken screens and windows
With repairs taken care off, this leads us to the next point.
Step #2 Consider refinancing your property
Refinancing is an ingenious way to improve your ROI, lower your monthly mortgage while also increasing the cash flow from your rental units. In fact, done right, you can even secure a new property using the equity you have accrued.
Across the U.S., real estate prices have appreciated in value at a rate of almost 70% year-on-year since 2012.
And according to the National Realtors Association, the average existing home sales price reached a record-high of 17.2% in March 2021.
Refinancing at this moment is a great option because investment property mortgage rates are also still significantly much lower than pre-pandemic rates.
And finally, the last step.
Step #3 Upgrade appliances and invest in landscaping
There is an old adage that says, “You have to spend money in order to make money.” There is some truth in this, and certainly making improvements on your rental unit will yield significant returns.
We’re not talking about major costly issues such as renewing plumbing and adding square footage – although these aspects can also boost your overall real estate portfolio ROI.
Instead, we’re thinking along the lines of upgrading less expensive appliances such as smoke and carbon dioxide detectors, HVAC systems, refrigerators, and even installing a generator.
That’s not all, but landscaping can do wonders for your property’s market value. A neat-looking place instantly attracts better offers and tenants. So, spending a little on upgrades is in your best interests.
Hire a qualified property manager today
When it comes to improving ROI, it’s a team affair.
The best investors always work with a reliable property manager alongside other professionals.
If you’re in Colorado and are looking for a qualified property manager, then look no further than PMI Front Range Colorado.
Contact our PMI Front Range Colorado agents for more information.