Profitable Real Estate Investing Tip 2: Budget for Expenses!

Successful Real Estate Investor’s #1 goal is to make a profit. Last week we shared that one of the successful ways to make a profit off your real estate investments is to revisit your leasing contracts annually. Never ever leave money on the table! This week we will discuss the practicability of setting a budget for property needs. This will ensure your profitability and help you preserve your reputation as a top notch investor.  Check out our five point series that will help you maintain profits and be a successful real estate investor.

Tip 2: Budget for Expenses

Understand that you will have to spend money to maintain your rental property, it is a business! Don’t be an investor that does not project or prepare for expenses that could and will pop up for the current year. Having a budget will not only help you to project how much money to spend but how much money you are going to make.

  • Create a budget: Review how much money you spent on the property over the past year. Minus any major one-time expense, you can easily project what you will pay in expenses this year will be similar to last year. You can run a simple report if you use accounting software or place all of your expenses in a spreadsheet to track your expenses.  If a lease is expiring and the tenant is not renewing, you know you will have to budget for turn/make-ready move in expenses. i.e. painting, re-keying locks, professional cleaning, etc.
  • Understand Profitability: Take it a step forward; treat your investments like a real business that would attract other investors.  Being able to project your profits should span 1-5 years. This will help you map your progress and help you see where you need to focus your efforts. i.e. How old is the roof? Appliances? Average lease term? Exterior Maintenance? Interior Maintenance? Is it time to sell and trade?

If this is too taxing you can always allow your Property Manager to handle this for you. Feel free to contact  Sovereign Property Management to help you build a budget for your properties and handle those pesky problems that will arise with your properties leaving you with time to focus on other business endeavors. Remember there’s proven power in property management!

Next week we will discuss the importance of setting aside capital for property improvements.

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