Real Estate Gladiators is an industry leader in the property management industry serving Issaquah, Bellevue, Kirkland, the greater eastside and surrounding areas.
Investors who want to make money in the Bellevue rental market need to be aware of their cash on cash return. We have some ideas about how to maximize that rate of return and increase the overall return that you earn on your investment.
Understanding Cash on Cash Returns
One of the most elemental principles in real estate investing, cash on cash return is the cash income that you earn on the cash investment you made on a property. It gives you an idea of what you can earn over the lifetime of an investment. It compares the income you receive to the payment you made when you bought the property.
To calculate your cash on cash return, you simply divide your annual cash flow, or the income received on your rental property before taxes, by the total dollar investment.
Improving Cash on Cash Return: More Income
One way to improve your cash on cash return and your overall ROI is with more income. Consider making improvements to your unit or your building. When the property is more appealing to great tenants, you can charge a little more and bump up that annual cash flow part of your equation. Create some curb appeal that will get the attention of high quality renters who don’t mind paying top dollar for an attractive, well-maintained home. A fresh coat of paint, new landscaping, and minor upgrades like better lighting and modern security features can make a big difference and bring in higher rents.
Improving Cash on Cash Return: Fewer Expenses
The less you spend on your investment property, the more favorable your cash on cash return will be. Avoiding vacancy and cutting turnover costs will improve your financial situation immensely. Focus on tenant retention so you can project what you’ll earn for a few years down the road and save money on the property improvements and maintenance that’s necessary between tenants. Keep your good tenants by communicating well, responding quickly to maintenance needs, and demonstrating your appreciation when rent is paid on time and the lease requirements are met. If you can keep high performing tenants in place and encourage them to renew their leases year after year, you’ll be able to maximize your rate of return.
Expand Your Renter Base
Make sure you’re marketing to all the best potential tenants. By expanding your renter base, you can be sure that your home is always occupied and earning you money. Develop relationships with local businesses and relocation companies. When they have new staff members moving into town, you can offer the high quality housing you have available. Consider renting to college students and people from out of state. Bellevue has a strong local tenant pool, but if you are willing to cast a wider net, you can keep your investment property occupied and creating positive cash on cash returns.
We love working with investors to increase their earnings and set goals for the future. If you’d like to talk more about your cash on cash returns or the potential your property has to earn you more, contact us at Real Estate Gladiators.