Investing in real estate is well-known for being an effective way to build long-term wealth, but it’s also a famously difficult nut to crack. While it’s possible to begin generating an income soon after investing in a property, it can take a long time — often twelve months or more — until the property is profitable. And even then, profit margins can be tight, especially if the property you’ve invested in requires significant work.
There are a few tried-and-tested strategies for boosting your real estate profits. We’ll run through four of the most effective below, including a couple of strategies that are often overlooked but which can have a big impact.
Learn to DIY
Your profitability will depend, in large part, on your ability to make property upgrades that allow you to command higher selling or renting prices. The downside is that in order to make those upgrades, many property investors have to hire professionals to do the job for them, which can make a serious dent in profitability.
While there will be some property work that you can’t — and in fact, shouldn’t — do yourself, it’s worthwhile looking to improve the amount of work you can do. Many tasks that you might outsource can be in-house once you know how. Plus, this is a strategy that keeps on giving; once you have the skill, you can apply it to all your property investments in the future.
Get Smart About The Types of Property You Invest In
You can make a profit off most types of property, but it’s easier with some rather than others, and some specific types tend to offer greater profit value. Student housing, for example, can be particularly profitable due to consistent high demand. Building a duplex house is another good strategy for maximising profits, since it allows for two rental streams from a single property. The construction cost per unit also tends to be significantly cheaper compared with building a single home. Holiday rentals can also be extremely profitable, though that market can be more volatile than others.
Focus On Key Upgrades
It’s easy to get carried away when making improvements to a property. The thinking behind those upgrades goes that the better this property looks, the more it’ll sell/rent for. But that’s not always the case, and it is probably too often not the case to be part of a smart renovation project. Upgrades that have a proven track record of driving up value, such as better kitchens, bathrooms, and energy efficiency, should be the top priority. Upgrades that only have aesthetic benefits should be treated as what they are — nice if you can make them affordably, but not essential.
Secure Reliable Tenants
Finally, perhaps the best way to maximise your profits is to secure reliable, long-term tenants. Putting together a screening process that pushes the best tenants your way can make all the difference, since it’ll increase the chances of getting rental income paid on time and reduce the amount of time that your property stands empty, since reliable tenants tend to stay longer.