You have to spend money to make money.

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Author: Paul Branton

“You have to spend money to make money!”

Spend money to make moneySo, I know this probably isn’t the first time you’ve heard that phrase but let me quickly explain why it is extremely applicable and important when investing in rental property.

For starters, you have the initial purchase which requires a down payment, closing costs, inspections, etc. and those are simply to buy the property. Next, you will generally need to make some capital improvements in the way of new paint, flooring, lighting, countertops, etc. that will require more money. Last but not least, in addition to the capital improvements, there are typically repairs or deferred maintenance that also require your attention and money when you purchase a property.

ROIThe good thing about the capital improvements is that those will bring you a more immediate return in either increased rent, increased property value and/or reduced vacancy. (Hopefully, it gets you all three!)

While addressing the general repairs and deferred maintenance will not necessarily bring you a return, it will certainly help maintain the value of your investment as well as safeguard against potentially greater damages/costs in the future.

Vacancy is the enemy!

No VacancyWhen looking at spending money on improvements, you should not only ask the question “How much will that cost?” but also “How much can this potentially save me?” For example, If your property rents for $1800/month, every week of vacancy is costing you $450 and every day is eating up $60. So wouldn’t it be worth removing the dated wallpaper, and painting that room for $450 bucks, if it will get the home leased a week or two quicker?!

Why am I saying all of this?  Why am I telling you it can require a good deal of money when you invest in real estate?

Because it’s important. Because we want you to be prepared… and successful!

Portfolio growthAs we continue forward in this journey of real estate investing, while some of our secondary objectives may differ slightly, I am certain that the primary is the same: Making Money/Building Wealth. If that’s true, then I highly encourage you to remember this old adage when looking at your current portfolio as well as new opportunities… “You have to spend money to make money.”

Please reach out and let us know if we can provide any guidance on acquisitions or capital improvements for your portfolio.

Have a great week!
Paul

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