Your real estate investment is a result of your efforts. Whether you intend to purchase a property, renovate a place, promote it for finding a suitable tenant, it all depends on how you keep it up over the years to get the highest possible return.
Investors employ simple mechanisms to be successful. When purchasing stock, you have to wait for the value to increase so you can make a profit. The same goes for real estate investments.
If you own a property, you must appreciate its value in order to sell it again for earning a higher profit. If you want to rent it out, increase your rental income with time to get more out of your property.
Real estate investment is a popular option and has seen tremendous growth over the last fifty years.
However, these may be a little different from your other investments.
Here are Some of the Ways you can Make the Most of your Real Estate Investment
#1. Flipping Properties
Real estate traders purchase properties with the intention of selling them after holding them for a short time.
Trading real estate in this manner is also termed as flipping properties and involves buying undervalued properties or those that are located in a budding market.
Buying for Less and Selling for More
Investors, who don’t want to spend a fortune on buying real estate, buy properties for less than the market value with some good negotiation. Successful investors look for leverage. Leverage can be a large backyard where you can build a swimming pool and add a ton of value to the property.
Leverage can also be in the form of renovation expertise. While first time buyers might find it overwhelming to renovate a property, having to deal with all the tradesmen and so on, seasoned property investors have all the contacts to get a job done right and quickly. You can sell these later for double the investment amount.
#2. Rental Income
This is one of the main sources of profit for investors who buy or renovate properties before renting them out.
Renting to Businesses
You can get a higher rent from a business as compared to an individual. That’s why some people prefer renting their property to businesses for earning more revenue. Just be careful to rent out to safe and well-known companies.
#3. Leveraging Increase Returns
John from Malta Sothebys Property in a recent interview talks about how you can make the down payment on a property and yet be able to rent it out.
For instance, if a property is worth $100,000 and you rent it out for $750 with $500 in taxes, fees and mortgage, you still make a $250 profit on a 20% down payment, which means an incredible 15% return on your deposit.
Leverage Also Gives You a Profit on the Full Selling Price
The more leverage you have, the higher your return will be. Consider the same $100,000 property you purchased with a $20,000 down payment and then sell it for $120,000 later. You recover the $20,000 you paid, plus another $20,000 profit and the principal payments you made.
Even though it is a small profit over the full value, thanks to the leverage, you make a 100% profit, without the principal payments on the $80,000 mortgage.
#4. Tax Benefits on Interest and Improvements
You can earn tax-free profit by deducting the mortgage interest from the rental income, depending on your place of residence.
You can also get back the cost of the improvements from the rental income, keeping the added value to the property to yourself.
#5. Profits from Refinancing
If you manage to refinance a property for reducing mortgage bill payments, you can generate more cash every month by keeping the same rent. This way you create a cushion for maintenance or have more passive income to live off.