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Real Estate ROI ExampleOwning real estate can be a roller coaster for the thrill-seeking investor looking to diversify their portfolio. While some look to real estate investment trusts (REITs) to invest in real estate commodities, others seek larger returns by purchasing and managing their own real estate. Many investors are dissuaded from purchasing rental real estate because of the cost to buy and operate. Others simply don’t know what to do with it once they’ve bought their first house, apartment, or piece of land.

Below are a few tools to keep in mind as you buy and manage real estate properties. Using proper real estate management techniques, the return on your investment could be greater than any you would get working a desk job, investing in the stock market, or any other investment avenue.

Know Your Risk

It is no secret that real estate, in its myriad of forms, is an extremely risky investment. However, I would argue that whether you’re investing in apartments, land, a fixer-upper, or a single-family home, your risk can be substantially diminished through an honest assessment of yourself, your resources, and your skills and weaknesses.

Are you a handyman? If not, a fixer-upper probably isn’t the best choice, unless you want to share potential returns with architects, construction crews, and the like. Can you deal with people efficiently? If not, don’t buy a multi-unit apartment property where you’ll have to communicate with multiple tenants – possibly on a daily basis. Are you familiar with the area? If you don’t know anything about the market or its demographics, look elsewhere.

Presently, I work for a real estate property manager and developer in Gainesville, Florida. We specialize in Gainesville apartments near the University of Florida campus. This allows us to know our target market and significantly lower our risk. By establishing a competent maintenence staff, we are able to please tenants and free up our own time simultaneously.

Hedge Inflation

A huge issue in times of economic turmoil is the distance a dollar can take you. If inflation rises, a salaried or hourly worker will be stuck with their wage and will be forced to spend more on daily necessities. This leaves less disposable income for recreation and leisure. Compare this with an apartment property manager. If his/her costs increase, the apartment manager simply increases rent to match inflation.

Real estate returns are linked directly to the prices on the market. As inflation, the rise in prices of an economy’s goods and services, increases, so will housing costs. This means that the higher prices on food, gas, etc., will not affect your income through real estate. The only problem is, a lazy landlord may miss their opportunities to increase rents and be stuck with inflation eating away at their rental income.

Growing up around real estate and property management companies, I learned early how real estate could be used to combat fluctuations and price changes in the market.

Gauge the Time You Invest

Are you working 80 hours a week or more on your property? Vacation rentals, apartments in low-income areas, and poorly constructed buildings can cause an owner to invest all of their time into management and maintenance of the property. Calculate your hourly income through your apartment property or house rent. Then understand that for each hour you have to work to organize a monthly renter or replace that moldy floorboard you are losing money.

When looking to buy apartment rental properties, I have two questions I repeatedly ask myself: How soon will this building start generating income after the purchase? And, How much weekly/monthly personal time will I have to put into maintenance and management after the  purchase?

Start Basic

If you are new to the real estate game, don’t look to spend your life savings on a down payment for a multi-million dollar apartment complex. Start at square one: looking for the perfect location where you know people will want to rent. In Gainesville, individuals know that apartments and houses for rent near the University of Florida’s campus are in high demand. As long as the properties are well-kept, they will easily rent. Similarly, areas near research parks and technology communities are usually great places to attract tenants.

Once you’ve targeted a location, meet with a realtor. Get any information from them about the local market and any properties you might visit. Look at small duplexes and houses. Once you have that down you can move forward, but the management and operation process should take time to get used to. Be sure to utilize the many tech-based resources at your fingertips to help you with legal documents, tenant background checks, property histories, and similar interests.

Real estate is exciting because it is risky and your return is what you make of it. There are a number of factors that go into a successful apartment property or single-family home or any other rental property. Utilizing these tips, you can limit the time you spend on your investment and increase the return from it. By keeping your finger on the pulse of the market and your own property, you will free up your time and allow the real estate to work for you.

About the Author

Josh Steppling is a Marketing Associate for Trimark Properties, a company that manages Gainesville apartments and commercial properties near the University of Florida. Josh has managed businesses regarding real estate and property management and has knowledge and experience across the advertising and marketing spectrum. Josh also runs a Gainesville Apartments Blog that discusses real estate near UF and innovation in Gainesville and is a graduate of the Warrington College of Business at the University of Florida. Go Gators!