If you ask any real estate investor their secrets, many will tell you that investing is something you tend to learn as you go. Though there is some truth in this, you can use the five tips and tricks below to boost your profitability from the very start – even with your first investment property. Below are the five things all seasoned investors do to improve their own profits.
#1 – They Never Let Leases Lapse or Fall Below the Market
For the most part, your leases should be one year to 18 months in length, though in some areas, six months is also acceptable. Month-to-month leases can eat up profits due to the months when the property is unoccupied, so be sure to minimize this wherever you can. What’s more, be sure that you’re keeping up with local rents in the part of the city where your property is located. If rents are rising, yours should rise too. Though it may be hard to raise the rent on a good tenant, it’s necessary to keep your profits stable.
#2 – They Take Over Someone Else’s Mortgage Payments
There are processes in place that will allow you to take over someone’s mortgage payments in the event they find themselves in financial trouble and they want to avoid foreclosure. Not only does this person get to avoid the serious hit to their credit, but you get to buy a house for significantly reduced price. Always keep your eyes peeled for opportunities like this as they are typically wonderful ways to make some fast cash and boost your profits.
#3 – They Always Budget for Unexpected Repairs
If there’s one thing new investors do that really throws them for a loop and eats their profits, it’s failing to budget for the unexpected during their fix-and-flip projects. Though you might know you need to tear out a wall to open the space up, what happens if you discover mold in that wall? If you haven’t set aside at least part of the budget for things like this, you may not turn a profit at all, and your hard work could be for naught. Make sure you buy the home at a low enough price to cover the unexpected without eating into your profits.
#4 – They Invest in Vacation Rentals
Investing in vacation rentals in a way that generates regular profit does take some time. You’ll need to build a network within the local area in a known tourist/vacationer city – think Orlando, Miami, or Virginia Beach, for example – in order to get the word out and keep your vacation rental occupied. You’ll also need to own a property that tourists and vacationers find attractive since property with an ocean view will command far more rent than one three miles inland. Consider utilizing services like HomeAway, FlipKey, and Airbnb to generate income with short-term rentals, but be sure you screen your renters very carefully.
#5 – They Work with the Right Lenders and Financers
All too often, new real estate investors expect their current banks and credit unions to be the best source of financing for all their real estate needs. While they may be able to provide you with some financing, the truth is that it’s often better to find a lender that specializes in real estate investing. Investment property lenders know a good deal when they see one, and this means you’re far more likely to get a better deal yourself in terms of lower interest rates.
Seasoned real estate investors have been around the block a time or two, and they all do at least a few of these things to ensure profits continue to come in. The best thing you can do for yourself, however, is to keep up with your local real estate market and don’t let a great opportunity pass you by.
