These 9 Things Will Boost Your ROI
Oct 10, 2022
Business professionals know the importance of measuring an investment’s profitability and a good metric to use is the return on investment. The ROI is used to assess how well your investment dollars are working towards your business goals. It is an important metric and a good tool for real estate investors to assess the performance of each property within their portfolio.
The ROI is calculated by dividing the net income that a property has generated by the initial cost of the investment, then multiplied by 100. For most investors this means that you add up all the rents collected, subtract all of your expenses for that period, divide that number by the purchase price paid for the property, and multiply by 100 to arrive at a figure that can be expressed as a percentage. A healthy annual ROI for rental properties can range anywhere between 4% and 10%.
As a property investor there are some things you can do to boost your ROI. Property managers can add to their professional worth by implementing some changes too or make suggestions to property owners when appropriate. Here are our best tips for boosting the ROI on your rental properties.
1. Invest In The Right Property
The most influential part of your ROI is the property itself. Factors such as location, property size, purchase price, and property type will be the determining factors in how much return you can get out of your investment. Do your research before you make a purchase and if a property isn’t working out as well as expected be prepared to sell and invest your money elsewhere.
2. Increase Productivity With Automation
A growing number of organizations are implementing automation into their operations. This powerful cost saving tool builds efficiencies, reduces errors, eliminates redundancies, and boosts productivity. The investor with a growth oriented approach won’t ignore the positive effect that automation offers to ROIs.
The trigger-condition-action system built into Property Matrix allows the software to perform specific actions when a preset condition is met. Customizable parameters make the system adaptable to suit any need. These automatic actions can free up time while streamlining operations and improving the tenant experience.
3. Add Square Footage
It may seem that you’re stuck with whatever square footage you purchased but this isn’t always the case. Building an addition is one way to increase the livable space but this rather expensive solution is not the only option. Finishing a basement or attic space is a great way of adding square footage to justify a higher rent. Smaller projects such as enclosing a porch or sunroom can make a big impact as well.
4. Update The Flooring
Tired, dated, and worn flooring is visually unappealing and hard to hide. Upgrading flooring can make a dramatic difference that tenants will appreciate making your property more marketable and justifying a higher rent. Vinyl, laminate, tile, hardwood, and even carpet are all good options for most rental properties. Choose modern, neutral, but inexpensive options for the best return on investment.
5. Upgrade The Appliances
The kitchen is an area that can influence potential tenants to sign that lease. People tend to spend a lot of their time in the kitchen and they want a space that is both functional and inviting. A good way to make a statement in the kitchen is by swapping out tired old appliances for fresh and clean ones.
Consider the laundry room with the same careful scrutiny. If the washer and dryer are showing their age it might be time for an upgrade. You could even consider an upright model to save on floor space and make the laundry area appear larger.
Effective landscaping improves curb appeal but if done with care it can expand the liveable space. Adding a porch or a patio, installing lighting, and placing some outdoor furniture allows tenants to use the outside as part of their home. Trees, flowers, and a manicured lawn are low cost additions with the potential to get your property noticed while helping people imagine themselves living there.
7. Use Effective Advertising
Managing rental properties requires advertising vacancies and you can improve your ROI by getting the most out of your advertising budget. Advertise in places where your target audience is likely to see your listing. You can simplify the process by creating listings with Property Matrix and automatically post them to main rental sites such as Zillow, Trulia, Apartments.com, and LiveLovely.
Make sure you mention each feature of the property and all the amenities in the area using plenty of descriptive words to showcase your property. Listings with high quality photos get more interest making it crucial to prepare the property and take well lit photographs with a professional camera.
8. Price Your Rent Competitively
Competitive pricing is an important aspect of any business. Prices that are too high will send tenants looking elsewhere but aiming too low means not getting the best ROI either. Check popular listing websites and look at comparable properties in the same area. Be realistic with your property and price according to the market.
9. Improve Your Tenant Screening
Problematic tenants can cause damage to your property, cost you in legal fees, skip out on the rent, and be detrimental to your ROI. The best defense is to properly screen potential tenants before offering them the lease. Every landlord should confirm that the tenant will be able to afford the rent by verifying income, as well as checking credit history and doing a criminal background check. Another good source of information are previous landlords who can shed light on what kind of tenant someone is.
Boosting the ROI on your rental property is possible if you are objective and open to making changes. The property itself will have the largest impact and you can improve the desirability of your rental with upgrades and renovations. Making changes to your operations can boost your ROI too and reduce costs while improving revenue. Know the market, make wise investments, utilize the right tools, and watch your ROI grow.