Real estate investments tend to provide you with a decent ROI.
The nature of this asset means that it will appreciate in value over time.
You may claim that this is a prediction, but it’s more of an educated assumption based on past data. If you look at the property market over the last 50 years, you can see that house prices have gradually improved.
Sure, there are periods where the market hits a lull, but overall houses are more expensive now than they were in the 1970s!
Thus, generating a positive ROI from a real estate investment can be as easy as sitting in your house and waiting for its value to appreciate. Indeed, this is what a lot of passive investors do. A passive investor is someone who acquires an asset but doesn’t look to really do anything with it. The stock market equivalent is someone that buys shares in a company and holds onto them for decades, rather than looking to actively trade.
A passive approach to real estate is safer, but it won’t help you generate the maximum returns. Not only that, but you have to be very patient to wait for your property to reach a value that you deem worthy enough to sell.
Instead, here are some ideas to help you get an impressive ROI in a shorter time period:
Flip your property
Property flipping is something of an art form. To be able to take a property and transform it into a more valuable piece of real estate – while still earning a profit – is extremely rewarding.
That’s the aim of the game; you want to make improvements to a property, without spending too much money. By doing this, you make the property more appealing than it once was, raising the asking price. It works really well on slightly rundown homes that can look a lot better with some cost-effective TLC. Sometimes, even something as simple as a new lick of paint, new windows/doors, and new interior decor can make a dramatic difference.
The beauty of property flipping is that you influence the house value, rather than relying on external forces. Therefore, it lets you sell the home a lot sooner than if you passively held onto it for decades. In turn, this will generate a quicker ROI – as well as one that’s significantly vaster than if you waited to sell it decades later.
Tips for flipping a property
If you choose to go down this route, here are a few tips you should keep with you at all times:
- Don’t overdo it – Always keep an eye on your expenses when flipping a property. Adding things like extensions and multiple new rooms will increase the value of a property, but it can also cost a lot of money. You need to keep your profit margins as wide as possible, which is why small and affordable improvements are the best.
- Promote the property – This applies to anyone that’s selling a home; you can get so much more money from your sale if you promote the property. Write a good real estate listing description to lure people in, and broadcast the sale across as many platforms as possible. What does this do? It generates interest, meaning there’s more competition for the home. As a result, competition will drive the bids up, and help you fetch the maximum price.
- Choose a suitable home – Some homes aren’t built for flipping. They either require too much work or don’t have anything for you to improve upon. Really rundown and old homes might be too much trouble as you’ll essentially have to knock them down completely, so it’s too expensive. Brand new homes are also poor for a quick flip as they won’t have many faults. It’s all about finding the sweet spot where the home can be improved without spending too much money.
Renting out your property
Aside from property flipping, what else can you do to get a quick and impressive ROI on your real estate investment?
Renting out your property is the obvious answer, giving you a chance to earn a continuous stream of income.
When you think about it, rental payments from tenants can go straight into paying off your mortgage – so the house literally starts paying for itself!
This helps you get a fantastic return as you can keep on earning over the years. In fact, think back to passively investing in a home – you can do the same thing, only you rent it out. Other people can live in your home for decades before you finally decide to sell it.
Some investors will rent their property out until they have earned enough to match the value of the home itself. Then, you can sell the property, basically earning double the return.
Property rental tips
If you prefer renting a property to flipping one, here are some tips that will help you out:
- Hire a property management company – You need to keep your property in the best condition possible to attract tenants and make them stay. A property management company can handle this, as well as act as a contact point for tenants, providing a great service.
- Improve the property to increase the rent – Do a few minor home improvements to make your property more desirable. From here, you can offer a higher rental price, and people may be more obliged to accept. Thus, you get more money!
- Avoid empty periods – Keeping your home occupied is the key to earning a good return on your investment. An empty property generates no rental income, so you make no money. It’s your task to avoid these empty periods as much as possible. Advertise your property before a tenant moves out, increasing the chances that a new person will come in and fill their spot. Or, put your property up as an Airbnb for short-term rentals until you find another long-term tenant.
In conclusion, passively investing in real estate is not the most effective way of dealing with your asset.
If you want to make a sizeable return without waiting decades, try property flipping or renting out your home.
(Disclaimer: This content is a partnered post. This material is provided as news and general information. It should not be construed as an endorsement of any investment service. The opinions expressed are the personal views and experience of the author, and no recommendation is made.)