How to Optimize the Value of a Building
If you own a rental property, it’s often to generate recurring income and benefit from its growing value over time. You want to get the most out of it, don’t you?
Here’s how you can optimize the value of your building by reducing costs and increasing returns.
Reducing costs
Regardless of whether you have 1, 10 or even 20 rental units, the bottom line is the same: the less you spend, the greater you profit. To reduce your costs, start by shopping around for different service providers:
- Janitorial or cleaning services: have you been letting fees increase over the years, with-out renegotiating your agreement or checking out the competition?
- Your insurance: the original cost of your insurance was probably good at the time, but is it still good? Could you reduce these costs by renegotiating your policy?
- Your Internet provider: if you offer the Internet to your tenants, have you tried reducing your bill? It’s often a good idea to check with your provider to see if a better package is available; this is especially true if you have multiple accounts!
Energy costs can be a heavy burden for rental property owners, especially if heat and elec-tricity are included in the rent.
To reduce your energy costs, you may want to:
- Improve the efficiency of your heating appliances, starting with replacing old thermostats with new ones that you can program to control energy use more effectively;
- Opt for LED lighting by replacing incandescent bulbs with the more efficient LED bulbs;
- Improve the building’s insulation and seal the doors and windows; —replace the oil heating system with a new natural gas one, etc.
Increasing your returns
A rental property generates income through rent. To increase your returns, you will have to increase the price of the rents or increase the number of rental units.
Since it’s difficult to increase a tenant’s rent, take advantage of any vacancy to renovate your units and then increase the price of the rent accordingly.
If your building’s layout supports it, you can also divide up the larger units in order to in-crease the number of apartments to rent and, consequently, the total amount of rent paid.
A second approach is to offer more amenities to your tenants. Parking, laundry, Internet, air conditioning: each additional feature can help you justify higher rental prices.
A long-term investment
Implementing strategies that cut your expenses and increase your returns can generate more income on a regular basis.
But that’s not all: the profitability of a rental property has a huge impact on its sale price. The higher the income stream, the easier it will be to justify a higher price.
Optimizing the value of your rental property will increase the capital gain you will get from your investment, both on an ongoing basis and when you sell it.
Don’t hesitate to team up with a real estate broker to assess the potential of a property you are considering or that you already own. Brokers are the best experts to guide you through the most profitable renovations.
Also read:
5 Tips on How to Optimize the Value of an Income Property