Results
In the end, results are all that matter
It all comes down to net profit.
Net Profit is the driver of all multifamily real estate. It allows for lower risk, greater reinvestment funds, higher value, and most importantly more money in your pocket.
Many property owners lack real world experience when it comes to maximizing properties. The buy, hold and wait strategy, although effective over time is slow and is only guaranteed in up markets. Why Wait? Adopting a take charge strategy is not only more empowering, it eliminates limits on your potential. We’ve all heard that money makes money, this is only accurate over time if low risk, high reward strategies are applied. If a proper, structured formula is applied, success is guaranteed.
Average Approach: Capital X Leverage = Return. 2 X 2 = 4
Maximized Approach. Capital X Leverage X Maximize = Return. 2 X 2 X 2 = 8
Scenario:
A down payment investment of $2 million would buy an $8 million property. Assuming a 5% cap rate and a 4%, interest only, loan rate the property would return $160k annually. An additional investment in the property of $1 million (this would be a moderate maximizing investment using specific strategies) would yield at least a 2% increase in cap rate. This would double the owners net income to $320k per year. The value increase, assuming a 1-year time frame with no appreciation, would be $3,2000,00 minus the $1,000,000 investment for a total of $2,200,000. The owner, after 12 months, could sell for a profit of over $2,400,000 or an ROI of 80% (includes Cash Flow of $200k) or hold the property for a net return of 10.6% on their cash per annum thereafter.
The beauty of this scenario is that it doesn’t matter what the market does. If the market goes up, more money will be made. If the market goes down the owner is insulated, and risk is greatly reduced. It’s a Win/Win for the owner on both risk and reward.
REal World Example- Utility expense reduction
Utilities are one of the biggest expenses of any property. Every extra dollar spent on common area utilities is wasted money. Energy efficient light bulbs, appliances, fixtures, and HVAC can make significant reductions in utility usage. Investments in solar panels, solar thermal, and energy storage should also be considered. Reductions of 5% to 80% in utility usage are achievable. It’s also possible to do this with little or no money invested once you know how. This investment becomes more valuable as time goes by due to ever increasing utility prices.
REal World Example- Presentation
The Presentation of a property is one of the most crucial aspects of attracting high quality tenants. Properly staged units with good layouts and color schemes can make the difference between you and your competitors. A properly composed sales presentation with follow up is vital to close potential quality residents. Knowing your competition is crucial to presentation, pricing and keeping occupancy high. It’s important to maximize rental income while simultaneously keeping vacancy and concessions low.
Results
The Ultimate goal of investment in real estate is making money. If the property consistently makes a lot of money it plays into whatever your overall real estate strategy is. Be it flipping, buy and hold, or large portfolio plays. This is not rocket science but it is complicated, intricate work. Don’t use trial and error with your money. The Wheel has already been created, you don’t have to recreate it on your own.
Take Action
Time will most likely add value through appreciation. But why wait? Taking Action is vital to multiplying your real estate success. Your property will never maximize itself.
Probably not glamorous
It may not be exciting out glamorous work but the payoff will be.
Rinse and REpeat
As time goes by and the results are repeated your investments will grow and compound exponentially. Whatever your goals are, include the maximizing strategies to get there faster!