How To Make Money on A Rental Property PART 3

So, your property is tenanted, it’s up and running and maintenance is now your main concern. Here is the third way that you can look forward to seeing a return on investment (ROI) on it.

Property Appreciation

I alluded to this in Part 2 of the How to Make Money on a Rental Property blog where I discussed mortgage paydown. There are two ways we typically see properties appreciate in value.

Forced Appreciation:

is where we take an undervalued or not at highest and best use property and do something to it to increase its value to the world. In essence, whatever we do to it increases the likelihood that a buyer would pay more for the property. Everything from painting, new flooring, windows, roof, and landscaping to severing the property into two or more properties, or adding multiple income sources like secondary suites will increase its value. If you have done your homework you can take advantage of increased equity in a short period of time. Ideally, you are gaining more equity than the cost of whatever transformation you made to the property.

Natural Appreciation

relates to the increase in property values due to the rise in demand for properties in the area. This is simply a factor of supply and demand. The more people wanting to buy properties in the area, puts upward pressure on the property values. If you are choosing areas that are designated growth areas, where jobs are coming in, and it has good transit, then you can reliably predict that you will experience some property appreciation over a specified period. Landlords and homeowners alike, get to enjoy increased value of their properties simply for owning property in certain areas. No work is required to increase that value, hence it is referred to natural appreciation.