One of the easiest ways to maximize your return on investment is to reduce how much you put into your investment. Sounds simple, right? Believe it or not, this is one of the most ignored aspects of an investment plan, and, as usual, one of the most important. No matter your investment vehicle, you can reduce your costs to keep your ROI high. In real estate investing, there are numerous things we can do to reduce costs and put more money in our pockets.
1. Have the tenant be the one responsible for repairs
This solution is the most feasible in a lease to own system, however it can work for other real estate investment strategies as well.
2. Hire Reputable and Reliable People
When you do have to hire someone in, always go for the person who is the most reputable and reliable. When you hire the person with the lowest quote, you risk the chance of shoddy work, and will most likely have to have the work done again. The money you will save by checking references and hiring someone good in the first place will make up for the amount you save by going with the cheapest - after all, the adage is usually true - you tend to get what you pay for.
3. Work Your Network
For recurring purchases or processes (like repairs or mortgage financing) refer to your network to find someone you like, trust and can work with continuously. Then, speak to them about a discount for using their services exclusively in exchange for the high volume of your business. If they are unable to extend you such a courtesy, it may be time to expand your network. Organizations like REIN (the Real Estate Investment Network) can put you in contact with other like-minded people who could be vital to your investment success.
4. Call In Favours
How many times have you helped your buddy move? If that buddy has skills that can benefit you, don't be shy - it's time to start calling in favours. No one ever got anywhere without help from someone or another, so why not help yourself and enlist your twice-divorced bachelor friend to paint the fence at your investment property in exchange for all the times you've helped him in a pinch.
5. Outsource When You Can
At first, this could seem like an added expense, but the question is, how much is your time worth? In our last issue, we talked about Time Leveraging as a way to increase your productivity and duplicate your time, energy and efforts. Outsourcing is a great way to do that. Do you need an ad posted to 20 listing agents online? There are plenty of freelancers and students out there looking to make some extra money. Your time is better spent finalizing your new investment property than calling papers to place ads. Outsource when you can to increase your productivity and, in turn, your profit.
6. Use Low-Cost or No Cost Advertising
The internet is a great resource, and these days it's the first place most people go when searching for any kind of resource. Not only is it the most effective, it also tends to be the cheapest way to list your property. Listing sites, forums and message boards - all can be vital to your advertising without spending a fortune. In addition to the internet, use local, community newspapers and free publications to advertise - people pick these publications up because they are free, thereby increasing your exposure.
7. And of course... Buy When the Market is Low
This economy is getting a bad wrap - as investors, now is the time to buy! Find yourself a nice property and a tidy little deal and you'll be setting yourself up for great return on investment when the market swings back up - with little investment.
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