As investors, we are in it to make a return right? Absolutely, now what is a realistic return? In some areas good returns are 5-7%. In others returns are 10, 15, maybe even 20+% return. How do you get these returns?
First, there is a very important thing to understand, risk. There is risk in investing and as investors our goals must not be to just maximize expected return, but to minimize risk as well. This is done by doing due diligence and making smart informed decisions. Multiple exit strategies are key and can be achieved by buying at 30%+ discount and also ensure tremendous cash flow. Understanding worst case scenarios and eliminating surprises will also help eliminate risk.
Now, back to returns and what seems to excite investors. Here are 4 ways to skyrocket your return.
1. Target high return areas – Are you in an overpriced area with little to no cash flow? Do some research and find areas with improved returns. We did this and the result was incredible. Our first 2 markets where among the lowest returns and the highest risk, now the opposite is true and the returns are near the highest and risk near the lowest. That rarely happens but all the research and justification supports our markets as the best markets to invest in the US. Our research shows that the returns are low and risk is high in the high priced over hyped markets such as CA, FL, Vegas, AZ. The smaller, less hyped markets with less competition are much more desirable as the returns are great and risk is minimal. Find these great markets as we did and become experts.
2. Fast Flips – Annualized return is where it’s at. If you can make 10% in 4 months that is a 30% annualized return. What if you can do even better and faster? I have seen annualized returns over 100%. Be careful though, flips require more expertise, are harder to find, have more competition and have more risk.
3. Use leverage – Using leverage is one of the biggest benefits of real estate investing. Bank loans are hard to find these days but if you can get financing then you can turn a 10% return into a 30% annualized cash on cash return on your rentals. That is just fantastic!
4. Take calculated risks – Cash flow is usually not as high in the nice suburbs. Expected cash flow is really high in the warzones but that is a bunch of problems waiting to happen. Same is true with rent condition properties that are not distressed as the returns are lower. Distressed properties that require repairs have more upside potential. So find distressed properties that need repairs and in areas that are great for rentals and also have very high returns. Do your due diligence and justify your decisions so you are taking calculated risks. Savvy investors become experts and master taking calculated risks in there markets.