What are your goals for your Venice, FL, rental property investments? This is a question that many investors don't take the time to answer!
If you're not sure how to answer this question, then it's time to figure out how your ROIs (return on investment) match your plans for success. Are you looking for more monthly cash flow? Or is appreciation the primary benefit to you long-term? In this blog post, our Venice property management experts discuss how defining these factors helps investors understand ROI related to future goals.
Cash Flow Is Often King in Real Estate
Many real estate investors want it all: excellent cash flow and optimal appreciation values. That's not a bad thing! However, calculating ROI and tracking toward long-term success can't always meet both goals simultaneously.
Achieving high cash flow and excellent appreciation is challenging. Many property management experts see investors target higher cash flow and focus on strategies that boost ROI numbers in that area. Properties with high cash flow often have a slower rate of appreciation, and that's to be expected.
However, if you place a higher priority on property appreciation, your annual ROI numbers (and cash flow) could be lower—and that's okay, too.
Why Can't You Have It All?
We're not saying you can't have it all, but most property managers agree that it's hard to accomplish high cash flow and high appreciation rates at the same time. Prioritizing one over the other is not a bad thing; it's simply a matter of setting your goals, then managing your rentals according to your long-term priorities.
In rapidly appreciating markets, rental rates (and cash flow) don't often increase as quickly as home values. In every market (including Venice), a home purchase price can rise faster than competitive rental rates. When that happens, cash flow can decline while rental property owners see home values skyrocket.
With high home prices (and high mortgage payments on investment properties), raising the monthly rent amount to keep up with increasing operating costs can often work against you. Paying more per month for a mortgage doesn't always mean it's smart to raise the rent in proportion to your expenses.
As rental rates go up, vacancy risks also go up. When the rent becomes too high to keep your rentals competitive in the market, rental income and cash flow suffer from not having a tenant paying the rent! However, while that's not an ideal situation for your cash flow, high appreciation for a rental property can still be a benefit.
Find the Right Balance
While it could be nearly impossible to have both high cash flow and high appreciation, that doesn't mean you have to sacrifice one for the other. Finding the right balance of cash flow when property values rise is a smart way to manage rental properties, but a real estate investor needs the right insights and experience to make that happen.
When reviewing "how much can I rent my house for," consider your goals. If raising the rent to keep up with rising home values could leave you with vacancies, what's the right approach to avoid negative cash flow (and ROIs)? The right property management company helps investors strike a balance between reducing costs, optimizing rental rates, and keeping properties competitive.
Expert Strategies Maximize Returns
Since appreciation is often a long-term priority, making property improvements can help maximize appreciation benefits. Rental upgrades can also help justify higher rental rates while keeping your properties competitive in the Venice and Gulf Coast area markets.
Reducing costs also improves cash flow—even when it's not the right time to increase the monthly rent amount. A proactive approach to rental property inspections and maintenance helps investors avoid significant repairs and costs. A property manager knows that keeping an eye on properties before, during, and after a lease term also helps property owners monitor the condition of rentals and stay ahead of potential maintenance disasters.
The right property management team also knows how to market your rentals to find that "sweet spot" for competitive rental prices that maximize cash flow while keeping up with rising operating costs.
Keep An Eye on Rental Property ROI
Whether your goal is more cash flow, better appreciation, or a working balance between those two priorities, it's critical to keep an eye on ROI. On an annual basis, calculate the return on investment (ROI) for each property in your real estate investment portfolio. When running the numbers, make sure to account for cost considerations between a rental property paid for in cash vs. a financed investment.
A Venice Property Management Company Helps Investors Achieve ROI Goals
If you’re deciding between maximizing cash flow vs. appreciation with your rental properties, it can be difficult to see the forest for the trees and determine what is best for your long-term investment goals. Work with a management company that understands the importance of this decision to meet your real estate investment priorities and expectations.
Gulf Coast Property Management has extensive experience working with investors with different financial objectives when managing their rentals! With our full-service property management expertise, we're here to ensure every aspect of operating a rental meets or exceeds your expectations. Let's talk about how we can help!