Investing in real estate often requires a substantial initial outlay but can be a lucrative source of passive income. For some investors, this translates into the ability to expand their portfolios with additional properties. However, not every investment mirrors the success stories of industry giants like Barbara Corcoran. Several factors can lead to underperforming real estate ventures, but experts offer practical strategies to address and rectify these issues.
Assess Market Conditions
When a property fails to appreciate as expected, the first step is to re-evaluate the market conditions. Dutch Mendenhall, a real estate investor and co-founder of RADD Companies, advises investors to scrutinize recent sales data and housing supply-demand metrics in their area. Tools such as USNews, NAR, ATTOMData, Zillow, and Redfin provide valuable insights.
Mendenhall emphasizes the importance of monitoring broader economic indicators, including employment rates, interest rates, and population growth. Positive job growth and favorable interest rates often correlate with rising property values. Comparing your property’s performance with similar local properties can also help determine whether the issue is isolated or indicative of a wider market trend.
Enhance Property Value
Strategic renovations can play a significant role in boosting property value. Mendenhall recommends high-impact upgrades like kitchen and bathroom remodels. Paul Gabrail, real estate investor and host of “Everything Money,” suggests that even small improvements, such as opting for higher-quality fixtures or meticulous landscaping, can make a substantial difference.
Enhancements in curb appeal and the addition of energy-efficient features can attract more potential buyers or tenants, thereby increasing the property’s market value, according to Rene Lacad, real estate investor and entrepreneur.
Seek Professional Guidance
Engaging with real estate professionals—such as agents, appraisers, or property managers—can provide valuable advice on improving property value. Mendenhall also highlights the importance of understanding the tax implications of your investment. Consulting with a tax advisor can help you navigate how property performance affects your tax situation and optimize your returns.
Explore Innovative Solutions
If traditional methods are falling short, consider alternative approaches to enhance your investment’s performance. Alex Blackwood, CEO and co-founder of fractional real estate investing platform Mogul Club, suggests exploring commercial uses for the property, renting it out, or adding an accessory dwelling unit (ADU). Pricing the property slightly below market value could also trigger a bidding war and potentially drive up the final sale price.
Short-term rental opportunities might offer interim income while you wait for market conditions to improve, as recommended by Omer Reiner, licensed Realtor and president of Florida Cash Home Buyers.
Adopt a Long-Term Perspective
Mason Whitehead, branch manager at Churchill Mortgage, underscores the importance of a long-term mindset in real estate investing. He advises new investors to adopt a 10-year horizon, emphasizing that real estate typically appreciates over time. “You don’t actually lose money on an investment until you sell it; and, if you don’t have to sell it, you’ll probably be just fine in the long run,” Whitehead concludes.
By applying these strategies and maintaining a patient, long-term perspective, investors can navigate periods of stagnation and potentially realize the full value of their real estate investments.
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