Increasing Profitability in Current Investment Properties

[Nicole Jones]

I have two multi-family properties purchased within the last 8 years in Fresno, Ca. Although I have always passionate about real estate investing I'll be the first to admit that when purchasing these I didn't do my homework or use any calculators to ensure profitability. I was lucky enough to at least break even and some years even come out ahead but I'm wondering if anyone has any advice for re-evaluating these properties to assess the steps I can take in increasing profitability. I'm thinking in terms of fixing things up a bit on them to pull in higher paying renters. One multi-family in particular is literally the worst property on the block, I inherited a very low paying section 8 tenant when I purchased and after doing some rent analysis on the area (as well as getting some complaints about this tenant) have decided to not renew his contract this year... Possibly do some improvements and get the property up to par with its neighborhood. Is there a calculator to evaluate the max amount of money I should put into a property vs. what I can realistically expect to charge for rent? As in when I should expect to recoup my investment. Also, both properties have a bit of equity in them. My goal in the next year is to make sure I am making as much as I can with the deal I already got myself in and then look at my options for possibly using the equity to purchase a new property within the next year. Any advice pertaining to anything I mentioned would be greatly appreciated.

[Kenneth Reimer]

I think their are many things you can do. First off, I would ensure that your marketing is reaching a significant amount of potential renters. Understanding your target market and marketing directly to that group will help. I think focusing on depth rather than width will produce results.

Next, I would look into doing an in depth market analysis. My business partner is a property manager and has no problem going to other complexes and requesting information. This will give you a good understanding of if your rents are too low. Also, if your rents are justifiably lower, you can then look into possible improvements to generate that extra revenue. This is when a nice spreadsheet will help you visualize your cost/benefit analysis.

Next, I would sift through all expenses. Different types of expenses can be lowered or eliminated. Many complexes are now sing RUBS systems to pass on unnecessary utility expenses; this is just one example.

Lastly, I think many owners underestimate the power of asking what types of change the tenants would like to see. All purchasing decisions, including the decision to rent, are cost-value measurements. If you learn what things will provide more perceived value in the eyes of your tenants, higher prices will be justified accordingly.

Hope this helps and feel free to reach out to me if any of these points spark your interest!

Kenneth R. Reimer