Do you know that the aim of any real estate investor is how to increase the property value? You want the value of your property to be more than when it was purchased. The method of increasing that value of your real estate property could be through some low-cost approach or more expensive and detailed methods.
So, when searching for real estate property for commercial purposes, you should be aware that there are steps you can take to increase or enhance the value of your property investment. It is, therefore, important that when searching you also find out about its historical data and potentials.
Interestingly, the value of your real estate is determined by the cash flow it can generate – this implies that your strategy should be able to boost cash flow, cut down on all expenses, and then increase the value of your property.
Therefore, the following are the five simple ways of increasing the value of your property:
Increase Your Rent
Real estate investors believe that raising the rent brings about greater cash flow. So, the challenge experienced by property owners is how to set and maintain the optimum market-level rents upon turn-over. They fear that they might lose tenants when rent is raised – this is a good concern but should not prevent owners from raising the rent to the market level.
However, as a property owner, you should always strive to improve the property and ensure that the rent is fair and competitive.
So, with your rent at the market level, ensure to upgrade the property to justify the rent increase. Some of the upgrades might include; introducing a mirrored closet door, having reserved parking, storage lockers, microwave, or exhaust vent unit. All these would justify a higher rent.
Besides, you could engage in a rent survey of competitive homes that have what you would like to achieve – check out what they are offering and at what price.
2. Cut-Down On Turnover
Your turnover determines the expenses of your rental properties. When a tenant moves out, there is a loss of rental income – this results in increased expenses such as marketing, repairs and maintenance, leasing commission, tenant screening, and other capital improvements. All these are required to make the property available for prospective tenants.
So, ensuring tenants sign long-term leases (with provision for increment), regular maintenance of the property, and your responsiveness to the tenants can cut-down on your turnover. Therefore, when this is achieved, it improves cash flow and the Net Operating Income.
Besides, when turnover is cut-down, it increases the value of your property – which is your aim, should you wish to sell the property or if you refinance.
3. Renovate And Maintain
The first appeal of your property determines to a large extent your success rate. So, one way of increasing cash flow and the value of your property is by carrying out regular maintenance and renovation as at when due.
Here is the gig; it is recommended to spend money on items that would enhance the property and in turn gives a quick payback.
Sometimes, these renovations could just be painting, cleaning, replacement of some loose fittings, and staging of the properties – these are a low-cost approach to maintaining your property.
However, maintenance could also involve a moderate to high-cost approach – some of these are; adding or changing doors and windows, improving on the architectural detail, changing the flooring, noise reduction within the home, updating a bath or kitchen, and some other renovation works.
4. Consider Using Lease Options
A lease option is an agreement in which a tenant has the right to buy a leased property at an agreed time. Real estate agents employ the lease option to create additional interest in the property.
Therefore, a potential buyer without any down payment has got the opportunity of becoming a homeowner someday.
Some benefits of using the lease options are;
It gives the owner the opportunity of selling the property at a price that is above the actual market value.
The lease option is a one-time service charge that the owner can keep if the buyer backs out of the agreement.
Under this arrangement, the buyer/renter pays a higher monthly rent because a part of the payment is applied to the overall purchase price – if the cash flow for the property is negative, the higher monthly rent payment can be of great benefit to the owner.
5. Cutting Down On Operating Expenses
After buying a rental property, the next step is to examine the running operating expenses – to see whether there could be any improvement without necessarily hurting the tenants.
For instance, one way to cut down expenses is by requesting the local utility company to carry out an energy audit to determine where to reduce costs. The use of solar energy, Hydronics heating, and the use of LED lighting are new technologies that help to reduce expenses.
Therefore, embracing the use of LED lighting alone would go a long way in reducing energy usage, thereby offsetting the constant increased rate from your local electricity authorities.
Also, keeping tabs on your gas usage can make you discover possible leakage that can both be expensive and dangerous.
Also, the high cost of sewer services and water in most parts of the country has necessitated the installation of submeters for individuals where cost is charged to the tenants based on usage.
So, making each tenant responsible for their resource usage helps you save money because the tenant is now in control of his/her costs.
As a real estate investor, you must look beyond the historic data of a property when searching for a property and come up with strategies you can use to increase the market value of the property. You need to have an idea of the potential of the property before closing the deal – you make the best deal when buying a property not when selling the property