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6 Steps To A Higher Return On Your Real Estate Investment

02.10.2007

Cash-chart The goal of making an investment is to make money. Often, the amount one makes comes from taking a hit or miss approach. If that doesn’t work for you, consider these 6 steps to getting a higher return on your real estate investment.

1. 1. Know your holding period

Knowing the amount of time you plan to hold an investment property is an important consideration in determining what you will pay for a property. You make your money going into an investment.

Changes in the market and/or area could dramatically affect the value of your property. For example, if you buy in a redevelopment area, you may plan to buy the property at a low price, renovate it an then lease it out for significant cash flow. If you are among the first to renovate in the area, it may take you awhile to lease out the space.

If your goal is to hold this property for 2 years and you are the only one in the block renovating, you may not realize a very dramatic return, even after you renovate. However, if your holding period is 5 years and others are making significant improvements in the area, you would most likely see a dramatic increase in your property value.

2. Choose the right agent/broker

There are four key factors to consider when making your selection:

Specialty (retail, office, industrial, land, apartment);
Leasing agent/broker vs. Investment agent/broker;
Time to dedicate to your property;
Ongoing communication with you about your property.

3. Set the right price

Performance measures are ratios (ie. cap rate, cash on cash, etc). Working with performance measures can often lead to opinions, causing you to either leave money on the table or price your property out of the market.

Measures of value allow you to make comparisons between investments and and take into account the time value of money. When you can reduce numbers to a comparable measure that takes into account the most relevant factors of property ownership, then you have numbers you can use for sound decision making in pricing.

4. Marketing Mastery

Cast a broad net. You and/ or your agent/broker may have knowledge of certain buyers. Those buyers may not be buying your specific property at this time. For this reason, it is important to get the message out to as many people as possible. After all, you do not know where your next buyer is!

5. Negotiate skillfully

Time and Money are what most deal points break down to. Because your agent/broker works for you, when they understand your objectives, they can make sure you keep the deal in play while protecting your interests. If the deal dies, you want it dead because you were unable to reach an agreement on your terms.

6. Post Contract details

A time line with accountability is key. It is not just the job of the escrow officer to make sure all of your details are handled on time. A detail-oriented professional should be a part of your team. This can help you avoid those last minute details that can kill your deal.

Keeping these six factors at top of mind can help you get to the finish line on your transaction and for you to be happy with the result when you get there.

Go to Smith Real Estate Services to find tools to help you get on the right path to maximizing the return on your real estate investment, including training, financial analysis and brokerage services .