You’re in for a real treat today!

I’ll be giving you 5 ways you can use to maximize the returns on your next investment property.

If haven’t read my blog, How To Make Money on an Investment Property? I highly suggest you do. After reading it you’ll know how to accurately calculate your 1st year return on investment. In that blog, I also breakdown my “FOUR PILLARS” which include: Cash flow, Principal Pay down, Market Appreciation, and Forced Appreciation.

If you understand the “FOUR PILLARS” then you’ll know just how helpful these tips I’m giving you are for maximizing your return on investment.

You may be an investor in the market for your first property, or you may have several properties already. Regardless, I think if you can use at least 1 of the 5 tips I’m giving you it will help turn your return on investment from good to great.

Let’s get right into it!

1. Buy under market value
A sure fire way to make an instant return on any property is buying it under market value. You’re probably thinking that’s a no brainer, right? But who’s selling their property under market value in today’s market? They exist, and there are several ways to go about generating leads. Each will require commitment on your part, but if you develop a process and stay persistent it will pay off for you in the end.

Finding the one, or multiple, processes that work best for you will take some time. Here are a few ideas to get you started:

• Lead generation (social media marketing, direct mail marketing, cold calling)

• Work with wholesalers

• Look at off market and private listings for sale by owner

When you’ve found a strategy that’s generating you consistent leads here are some negotiation tactics to consider implementing in your offer(s):

• Find a real source of motivation (ie: divorce, financial struggle, death, downsizing)

• Be a problem solver and create a Win-Win scenario for everyone

• Eliminate the “used car salesman” perception from the get-go, you’re not trying to take advantage of the situation

• Be honest and show them your numbers, you aren’t trying to screw anyone, but you are an investor and at a certain point the numbers either work or they don’t

• Meet as many of their terms as possible (ie: quick closing date, leave any unwanted material possession and furniture behind, etc.) while making sure you’re numbers still work

• Submit two offers based on varying scenarios, so it gives the seller(s) more time to think about what terms are most important to them

2. Curb appeal
First impressions pull on the emotional heart strings of prospective buyers and renters that leave a lasting impact. Dollar for dollar, investing in the exterior appearance of your home is one of the best uses of your renovation budget.

• Painting the exterior brick and soffit will instantly update the appearance of the property

• Cleanup the existing landscape, or invest in low-maintenance greenery.

• Replace the front door with more character or update the existing front door with an intriguing colour. Bubblegum pink is not what I would call “intriguing”.

By doing all of the above you’re sure to stand out from the competition in the neighbourhood. You’ll be increasing your property’s value and appeal to prospective buyers and renters looking for a place to call their home.

3. Be your own Property Manager
By being your own Property Manager, rather than hiring a Property Management company, you can save anywhere from 5% to 10% on your monthly rental income. If you are investing in single-family homes with 1 or 2 units, and can develop a system for screening quality candidates, you may be better off saving yourself that 5% to 10% every month by self-managing.

There are plenty of resources out there to learn how to properly self-manage your rental properties. Consider that the following Property Manager’s responsibilities would become your responsibilities:  

• Marketing and showing your property

• Screening prospective tenants

• Execution of lease agreements

• Creating a tenant manual for each property

• Conducting quarterly or semi-annual inspections

• Knowing a good handyman for service calls

• Automating rent collection

• Using software to track maintenance, signed agreements, payments records, etc.

• Knowing your rights as a landlord and understanding the Residential Tenancies Act

• Hiring a paralegal when dispute resolution through the Landlord and Tenant Board is needed

If you decide you can handle these responsibilities it will certainly be worth the tradeoff of having more monthly cash flow. Who is going to appreciate a higher monthly cash flow more than you?

4. Add a second suite
If your property has an unfinished basement that is not being utilized, now may be the time to convert that space into a second unit. You’ll nearly double the monthly earning potential of that property, and benefit from forced appreciation. By adding a second unit you now have:

• A brand new space to rent.

• A turn-key property to sell.

• A beautiful home for a family (or families).

• A perfect setup for the aspiring house hacker.

The point is it will appeal to wide audience of renters, investors, and buyers. For a crash course in creating a legal a second suite be sure to read my blog “Legalizing a second suite in Ontario; a step by step process”.

5. Increase rents and minimize vacancy rates
Assess your local market to gauge the current demand and rental prices of comparable units/properties. If you find that you’re charging under market rent it may be time to increase the monthly rent. If it means an extra $50 to $100 per unit that could mean an extra 5% to 10% on your monthly cash flow.

If you are planning to make major improvements, first see how similar properties in your area stack up. Make sure you’ll be getting a worthwhile return on that investment before spending tens of thousands on a renovation.

Don’t reach for the stars and ask for a monthly rent that exceeds that of the competition. In Southern Ontario you will regularly see vacancy rates under 2%, so if you’re not drawing interested renters then price may be a reason.

Having some income coming in to cover your carrying costs is far better than the alternative. If you find your pricing is comparable to other units in the area, you may just need to work on your marketing processes. Your advertising is an important component in generating new renters. Below are several ways you can improve:

• Put a sign on the front lawn

• Take professional photos and make the property description stand out in your ads

• Find out which online marketplaces (ie: Facebook, Kijiji, etc.) attract the best renters

• Change the way you show your property

• Follow up on promising leads more than once.

These are just a few ways to improve on lead generation, but the list of possibilities is endless.

…And there you have it, all 5 of my way to help you maximize your return on investment.

Whether you’re a real estate investor in the market for another property, or you already have a property, hopefully at least one of these tips has ignited a burning desire to make more on your money.