Whether you’re a new investor or looking to grow your portfolio, it’s important that you understand how to leverage your property in order to earn the most money on it. Your return on investment (ROI) depends on keeping your rental home in excellent shape and occupied by high-quality residents.
Here are 6 tips for getting the best return on your Portland investment property.
1. Understand Your Market and Your Investment Goals
It's important to stay up-to-date with rental market trends in order to know when and where is best to buy a property. Researching local rental prices and vacancy rates will also help you determine which areas are in demand and which aren't so that you can make an informed decision about what kind of property to invest in.
Location matters. Every investor understands this, and the difference it makes in how much you earn. Investing in a part of Portland that has excellent schools, access to public transportation, and proximity to shops, grocery stores, restaurants, and entertainment will increase your chances of finding and retaining good residents.
You have to buy the right property, too. Before investing in any property, be sure to do your due diligence by researching comparable properties and recent sales data in order to find out what similar properties have sold for recently so that you can make an informed decision about buying at a fair price point.
2. Focus on a Buy and Hold Investment Strategy
The real estate market has had a tumultuous couple of years. There’s been a lot of selling.
If you want to really increase both your short-term and your long-term returns, you’ll stick to a buy-and-hold strategy with your real estate investments. Selling when the market is hot can be tempting; people made a lot of money on their homes. But now, you’re in a stronger position as the market expands and contracts. You’re still earning rent. You’re still building equity.
Short-term income is delivered in consistent, recurring rent payments. That passive income does more than deliver a deposit into your account every month. Basically, your tenants are paying your mortgage for you - even as you maintain control of the asset. In the long term, you’ve got an appreciating property and growing equity. You’ll sell the real estate at a higher price than what you purchased it for, and that’s where your money is made.
You’re also taking advantage of tax breaks and protecting yourself against inflation when you hold your investments over the long term. Decrease your tax liability with deductions for interest, depreciation, and operating expenses. As housing costs rise across the country, you’re still paying the same amount for your property (assuming you have a fixed mortgage). Even as you increase rents. That’s more money for you.
3. Invest in Preventative Maintenance
A strong preventative maintenance plan will increase your ROI. You’ll have to pay for recurring services and frequent inspections, but these preventative maintenance costs are saving you money. Because the repairs that would be needed without these inspections and service calls are always going to cost you more.
Sound preventative maintenance policies and plans will protect the condition of your investment and preserve its value. A rental home that falls into disrepair or deteriorates quickly will not attract any tenants. It will not earn high rents. It will not be easy to sell at an acceptable price in the future.
Keep up with your maintenance contracts. Put together a list of reliable and cost-effective vendors and contractors who will help you keep your property well-maintained. Avoiding those emergency repairs will increase your ROI and leave you with more valuable property.
4. Focus on Portland Tenant Retention
If you focus on tenant retention, you’ll earn more money. That’s because you’ll avoid the expensive turnover process and you’ll also bank fewer vacant days. Keeping your tenants happy and in the same property for as long as possible will save you a lot of time and money in the long run. Good retention delivers higher ROI with:
Lower turnover. Retaining a current tenant will save you far more money than finding a new one. Not only do turnover costs include repairs and upgrades to get the property back into rentable shape, they also include marketing expenses, lost rental income due to vacancy, background checks, application fees, and move-in/move-out costs.
Higher rents over time. Retaining tenants also helps generate higher rent yields over time. When tenants feel comfortable in their space and have no reason to move out, they are likely to renew their lease or sign a new lease at the current market rate each year. This helps ensure that your property remains competitively priced while still generating enough income to cover your expenses and give you a healthy (ROI).
You build better relationships. Tenant retention also allows you to build better relationships with your tenants, creating a more positive and profitable rental experience.
By prioritizing tenant retention, you can ensure that your rental income continues to increase and your ROI grows along with it.
5. Make Cost-Effective Upgrades and Updates
To increase the value of your property and your ROI, keep your rental home modern, updated, and well-maintained. You want more than a home that meets basic maintenance standards. You want a home with upgrades and improvements that will raise your rental value, attract the best tenants, and deliver healthy ROI.
Evaluate your home during every turnover period so you can get an idea of how to make it stand out in the rental market. Some of the improvements that tenants are willing to pay more for include:
Hard surface flooring instead of carpet. This is better for maintenance and appeal.
Fresh, updated paint that’s neutral but not stark white. Don’t forget the trim on the baseboards and doorways.
Energy-efficient appliances. Tenants will be attracted to these.
Cosmetic updates in the kitchens and bathrooms, particularly faucets, drawer pulls, cabinet knobs, and things like a tile backsplash behind sinks and stoves.
Improved lighting (interior and exterior).
You don’t have to spend thousands of dollars on a complete renovation. But, if you make some small renovations every time you have the opportunity, you’ll find you’re earning more in rent and you’re allowing your property to increase in value.
Pay attention to your competition as well. There’s no sense in investing in stainless appliances, for example, if no other properties in your neighborhood are providing them. However, if hardwood floors are showing up in every rental home that your property competes with, it might be time to make that renovation.
6. Prioritize On-Time Rent Collection
ROI depends on consistent and recurring rent.
When your residents pay late, you have to spend time, energy, and other resources collecting those overdue payments. If you ultimately have to evict your tenants, you’re going to spend more than you’d like on the court process and the length of time that no rent is coming in with your property.
Increase what you earn by enforcing a consistent rent collection policy. Include it in your lease agreement and reinforce expectations with your residents. Here are some of the important components of a rent collection policy:
How much rent is due every month.
When that rent is due, and what is the grace period, when there is a grace period.
What the consequences will be for late rent, including late fees and potential eviction.
The methods by which rent will be collected.
The fees and penalties for returned payments or insufficient funds.
Online payments are especially popular with tenants. You can also offer payments by check or credit card, and even money orders or cash through third-party merchants like 7-11 or Walmart.
Managing rental properties can be difficult if you don't have the right team behind you. Increasing ROI requires you to surround yourself with experts, and not try to do everything yourself. Hiring experienced professionals such as accountants and attorneys who specialize in real estate investments can help ensure that everything runs smoothly and that all legalities are taken care of properly when dealing with tenant issues or any problems related to ownership/management responsibilities.
If you find yourself struggling to increase your returns, you might need some professional help from a Portland property management company. We know what tenants are looking for in a home and we understand what the market trends are in this part of Oregon.
While these suggestions we’ve shared today are general tips that can likely help every investor, you might have some unique opportunities with your own property or your entire portfolio. We’d be happy to make some recommendations that are specific to you. Talk to us about where you are currently, and where you want to go. We can help with professional support and resources.
Let’s increase your ROI. Contact us at PropM. We’re open 365 days a year and seven days a week, and we’re happy to help you.