ADDING VALUE TO YOUR INVESTMENT …………………………

There are four (4) ways you can create value for your real estate investment:
1. Raising Occupancy
2. Raising Rental Rates
3. Reduce Operating Expenses
4. Make Building Improvements
Today, we’ll focus on raising occupancy – This may seem like an obvious statement, but it’s worth considering this issue to determine what type of investment works best for each investor. For example, if a property has high occupancy (say 95%), I wouldn’t consider purchasing this property, unless you could find another alternative to creating value (i.e. raising rental rates). However, if you are looking for cash flow (instead of creating value) and the occupancy/tenant(s) are very stable, then this could be an attractive investment.
On the flip side, if an investment has very low occupancy (say 25%), there is great opportunity to increase income/value, but the turnaround process is much more involved than a high occupancy (stabilized) investment. An investor would need to set aside sufficient capital to ride out any negative cash flow during the turnaround process. Like any investment, there is a risk-reward relationship and an investor with the right mindset and experience can be very successful in this type of investment; other investors may prefer an investment that has higher occupancy (say 65-75%), where the reward is less, but the turnaround process is less involved and less risky as well. In our next discussion we’ll cover the 2nd way to create value in your investment; raising rental rates…………………………..