The goal of improving the ROI of a real estate investment is one of the biggest challenges facing both property owners and real estate investors. If you have a real estate investment, it is vital that you understand how to improve the return on it to ensure you get the best results.
What is ROI
To understand the concept of ROI you need to know what it means. ROI is Return on Investment (ROI). In simple terms, it is the amount of money a person gets back on their real estate investment. For example, let's say you decide to invest €100,000 in a property. If the ROI rate of the property is 5%, after one year you would receive a profit of €5,000.
We can distinguish two phases to increase the ROI:
1. BEFORE BUYING THE PROPERTY.
Location: The location is one of the main points to improve the ROI. Preferably, always try to choose a property located in a growing area, with a good supply of services and rental demand. For example, a property located near a hospital, shopping centres, parks, etc.
Purchase price: The purchase price is one of the key decisions to make when buying a property. The purchase price should be adjusted to the profitability that you are looking for, it should be a relation between the market value and the value that can be obtained as rent. For example, if we are looking for a profitability of 5%, and we make a study of the average rental price. It will be the numbers themselves that will tell us the maximum price we will pay for that property.
Problems with the property that you can solve: It is important that before you buy the property, you have knowledge about the problems it may have and what are the possible solutions you can give to these problems. Investigate if there are any problems with the roof, bad lighting, any structural problems, etc. This can help you get a good price for the property.
2. ONCE YOU HAVE PURCHASED THE PROPERTY
Improve the property and maintain it properly : Make structural and surface improvements that will help increase the value of the property. This can considerably improve the rental price you can get for the property. For example, refurbish the kitchen, renovate the bathrooms and make small decorative changes.
Rent according to the season: The time at which a property is rented can be key to improving the ROI. For example, it is better to rent during the summer months if the property is located near a beach, as this is when there is a higher demand for rental properties.
Understand the market: Target and adapt the property to the type of client that is looking for it. In other words, focus on a type of client who is interested in renting the property. This could be a family, students, a young couple, etc. Adapt the property according to your needs and offer a good proposal to increase your ROI.
In conclusion, to improve your ROI with a real estate investment you have to take into account some key aspects, from before making the purchase to once it has been acquired, such as the location, the purchase price, property problems, structural improvements, the moment in which it is rented and understanding the market. If you take these tips into account we assure you that your investment will give you a high ROI.