In the world of Real Estate investing, return on investment, or ROI, is the name of the game. Investors want to know that they are getting optimal ROI on all of their properties. Working with a reputable property management company, like Park Avenue Properties, can help investors achieve a high return on their investments.
The first step to reaching high returns is understanding how to calculate ROI. Here’s a simple example of an ROI calculation:
Jen invests $100 in Sarah’s new online jewelry making business. They agree that since Jen is fronting all of the money for the business, after one year Jen will receive half of the profits from the business. Sarah uses the money to buy tools, materials and web space to start the business. After a year Sarah has earned $2,000 in profits from her new business. Therefore, Jen receives $1,000. After subtracting the original investment of $100, Jen is left with a profit of $900, a 900% return on investment. This can easily be calculated with a simple calculation:
In Real Estate investing, calculating your ROI is more complex than this simple example. A variety of factors come into play like whether the investment is mortgaged or paid in cash, maintenance costs, taxes and other fees. Consulting with a qualified financial adviser may help when you’re running these numbers.
Property management services are an additional investment, but a property management company will help bring in additional revenue and work to cut your costs. How can a property management company help you turn a greater profit?
A property management company will help you set the right price for the property. Being priced too high will drive away potential renters while being priced too low will cause you to miss out on revenue. A property manager will help you determine the correct price for your property and balance getting your property filled without giving the property away.
Aggressive advertising is the only way to go in the rental market. A property management company can meet the urgency of filling a vacant property head on with a strong marketing plan. At Park Avenue Properties, for instance, we advertise through our own site as well as all the major home search sites across the web.
Once a property is filled with a good quality tenant who will treat the home as though it were their own, it’s best to keep it that way. Low tenant turnover in a property means that the investor can save on expenses associated with re-listing the home. A property manager will work to keep the tenant satisfied in the home by addressing maintenance issues and creating a positive rapport with the tenant. Furthermore, by keeping abreast of home maintenance, issues at the property can be addressed swiftly so small routine maintenance does not become a home care disaster that will diminish your ROI.
All of these factors impact your ROI in the form of your monthly cash flow from the property. But beyond monthly revenue from a property, a smart investor knows that an important factor is mitigating risk.
A reputable property management company knows and abides by rental and real estate regulations and can help you cut out risk by complying with the law. A lawsuit can drain the ROI from a home and can, in effect, diminish the gains of the investment entirely. A property management company can help you avoid costly mistakes and ensure that you receive the best ROI possible.
As you can see, property management will more than pay for itself. At Park Avenue Properties we love to assist investors in getting the most out of their investment and bring in the best return on investment possible. Let us be your property management company as you grow your investment portfolio!
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