Maximizing Property ROI
Return On Investment may have multiple flavors. Say you’re looking to cut apartment rental expenses through RV living. Provided you “boondock” (don’t use any camp-sites), you’re just looking at initial purchase costs plus about a 40% increase on auto bills, assuming you use the RV as a primary form of transportation.
So if you bought one for $12k, and rent in your region averaged $1k a month, after a year of full-time living you’ve made your investment back. Add a few months on that time period to account for unexpected repairs or tickets. You see ROI in the form of deferred living expenses in this scenario. But make such an RV last you two years, and you just cut your rent in half.
1. Consultation From Multiple Points Of Reference
Plans will fail if you don’t get good counsel from the right people. Find friends who’ve purchased property, and quiz them about what they didn’t expect, and are now contending with. Talk to real estate agents. Go online and find articles like this one. Determine your budget, figure out hidden fees like HOAs or closing costs.
You need to learn as much as you can, getting advice from people you can trust expedites the process and saves you from “reinventing the wheel” by yourself. You may be surprised at some of the investment possibilities out there.
2. Collateral Profit Methods: Property Enhancement, Rental
Even if you proceed with the best counsel, factor “X” yet exists. To protect against that, you need a margin of error through income. A good way to do that is to use means of enhancing your property’s value quickly, and cost-effectively. For free, in the fullness of time, you can install solar and a tiny home.
Here’s how the concept breaks down: you buy and build a tiny home for $20k, including a driveway and utility hookups. Do this in the backyard of a property adjacent to an alley, and install a mailbox with a “1/2” appended to your regular address. Now rent out that tiny home at $1k a month. In 20 months, you get your money back on the investment.
Meanwhile, install solar yourself at around $100 per 100-Watt panel, or $3,100 for a 3.1 kWh array. Add in another $1,900 for cables, surge controllers, energy banks (golf-cart batteries sequenced together), and power inverters. For $5k you can install a solar array all on your own that will bring your property $10k to $20k in value, depending on region, quality, and installation aesthetic. You double or quadruple your investment. Property value also increases from the tiny home out back, which can be sold or continuously sublet.
Also, you get a tax-break on the solar panels, and can either totally cut out utility bills, or cut them in half. Expect a minimum of $1,200 in energy savings annually. So after the 20 month point of renting out your tiny home, you’re making $13,200 a year for doing almost nothing. This protects you if the property value declines owing to factor X, and you’ve got to sell quick.
3. Closing Cost Considerations, Selling Fast
You may need to sell your property fast. Closing costs are $1k to $3k of taxes and regional fees, plus 1% to 10% on a realtor fee. So if you’ve got a $200k property, expect to pay $3k to $23k in closing costs. The measures explored in point two offset closing costs.
Next, find a means of selling fast. As long as you sit on a property without selling it, monthly expenses continue. Eventually, what you save in a slow realtor you lose in terms of management expenses. Sites like House Heroes have built their service model around facilitating fast sales.
Successful Property Investment
Selling a property fast if necessary can save thousands in losses owing to a neighborhood’s decline. It could affect your closing costs, but secondary income means defer those while expanding property value.