Looking for ways to maximize your revenue if you work in commercial real estate is constant. You can do a lot to boost your income, but it’s also possible to make mistakes that hurt your bottom line.
Owning commercial real estate is a great way to make money. You can earn passively and get the tax benefits of depreciation if managed well. But you could face a few challenges if you want to maximize, which is why people hire asset management companies. Hence, consider a commercial property management service for your Toronto-based properties. To know how to maximize the money you make, here are other strategies:
1. Increase Rent Prices
Remember that many factors are involved in maximizing revenue from your commercial real estate investments. For example, suppose you’re raising rent prices by 3-6% per year. In that case, this can positively impact your bottom line because it encourages existing tenants to stay at their current location and discourages competitors from moving into the area.
However, rising rent prices too quickly, or not quickly enough, could risk losing money on a deal or even getting sued for breach of contract. To succeed in your business strategy in commercial real estate, you must not let your situation or feelings hinder good decisions about how much to charge for space rentals. For example, one of your properties is located in an area where several new developments are being built by big companies and competitors. In that case, raising prices makes sense if they’re still below market value.
2. Expand Your Tenants
Begin by looking for tenants who are a good fit for your property. If you have a retail property with heavy foot traffic, look for tenants that’ll benefit from the foot traffic and are willing to pay higher rent. This is one of the proven strategies to thrive in the market. For example, suppose you own a grocery store in an urban area. In that case, it may be worth renting a cafe or deli instead of another grocery store because those businesses will also bring more people into the area (thus more revenue).
3. Expand Your Portfolio
Once you’ve mastered the first strategy, it’s time to look for opportunities to expand your portfolio. If you have several commercial real estate properties in one area, consider buying some property in another so that you are not too concentrated in one location.
Also, buy a larger one instead of several smaller properties and use its revenues to pay off all the small ones if you’ve taken a loan. By leveraging the equity from these bigger assets and using it as leverage against another piece of real estate property, an investor can get two or three times as much return on investment than they would if they had just bought two smaller pieces separately.
4. Explore New Avenues of Income
While it may feel counterintuitive to seek out new avenues of income when you’re struggling to meet your current financial obligations, the reality is that there are many ways in which you can increase your annual revenue without putting yourself at risk. For example, you can explore different leases and charge varying prices based on location and amenities the space being leased offers. This can be as simple as charging more per square foot in areas where the rent cost is higher or offering free parking spaces with certain floor plans or building designs.
5. Raise The Value of Your Properties
The final strategy focuses on the property itself. You can raise the value of your properties by improving them or the surrounding area. For example, if you own a commercial building in a bad part of town, you could improve it by adding amenities and services that might attract more people to the area. Then, add some shops or restaurants nearby.
Doing so would make it seem less of an undesirable place for businesses—and may even encourage companies previously uninterested in moving there. After all, it’s booming with people due to the new cash flow. You can also find ways to reduce utility costs for your tenants to help you make more profits and reduce maintenance costs.
Conclusion
Real estate is a great business; you can maximize your revenue with some strategies. Your property generates money without doing anything more than managing it. You can also use real estate as a diversifier for your portfolio, building wealth over time as other areas of your life are transitioning. This will make you richer with a financially promising future.