Maximizing returns on your investment portfolio

If you've been following our Investment 101 series, you've already learned how to research economically strong areas, select cash-flow- positive properties and secure financing that increases not only your monthly income but also your ability to obtain additional mortgages.

Now, it's time to take a look at ways you can manage your property, or properties, to maximize cash flow and minimize expenses, so you have enough time to scout out new deals and focus on building your portfolio.

First off, envision yourself not as a passive investor, but as the chief executive officer (CEO) of your own real estate company.

This isn't a mental exercise, but is a simple acknowledgement of reality. Real estate investing is much more similar to running a business than typical stocks and bonds investing, says Real Estate Investment Network President Don Campbell.

If you're buying securities, you have no way to cut expenses and increase revenue. Either they do well, or they don't. In real estate, however, you have plenty of ways to ensure your portfolio is consistently generating cash flow, Campbell says.

Making steady returns

First and foremost, look for opportunities to maximize your revenue, Campbell says.

Sometimes this requires getting a little creative and finding new ways to generate income, such as renting out a detached garage or parking spot.

Or it can be as simple as having your rents priced properly in order to attract "good, quality tenants," Campbell says, adding that many novices forget this fundamental principle of real estate investing.

A lot of landlords lower their rents below the current market value just to get tenants into their properties more quickly.

"But by doing this, people moving into that house solely focus on the money, instead of focusing on building a life in that home," Campbell says. "If they've moved in based on price, they're going to move away based on price."

For this reason, these same landlords must scramble to find tenants more often and incur more vacancies than those landlords who wait for better tenants.

So do some comparisons, find a competitive but sufficient level of rent and hold out for higher-paying tenants.

A dollar saved is a dollar earned

Remember "every dollar of expense that you save is a dollar in your pocket," Campbell says. Like any successful businessperson, your job as a real estate investor is to slash expenses.

Now, this obviously doesn't mean just cutting anywhere, as has been pointed out above with rent.

Rather it means cutting where appropriate and making further investments that will either increase your property's marketability or reduce its operating costs.

For instance, savvy investors wouldn't just stick with the same snow removal company without shopping around. They would find the best deal in order to reduce that expenditure and thereby increase their cash flow, so long as the service was still sufficient.

Another example is finding ways to make your properties more energy efficient. Though there are initial costs, the savings tend to pay off fairly soon.

For instance, sealing up cracks along baseboards and plumbing stacks, or adding insulation to the basement and attic of one of your properties could save you hundreds of dollars a year. But the most important expense to monitor, Campbell says, is your mortgage.

While many investors like to see the Bank of Canada lower its key interest rate, many novices forget to call their banks to have their mortgage rate adjusted to the current level, Campbell says, adding that most banks don't adjust mortgage rates automatically.

"You just don't sign a mortgage and then forget about it. The mortgage industry is continually morphing and changing. And, as an investor, you need to be aware of that," he adds.

For the rest of Campbell's advice, pick up a copy of our March issue, on newsstands now.

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