9 Tricks To Help You Increase Real Estate Profit Margins
How can you run a leaner real estate company, and enjoy larger profit margins?
We are now in an era of ultra-lean startups and even leaner revenue producing organizations. Those that aren’t lean enough, and are burdened with thin margins, are at a serious disadvantage. Plus, who wants to have the most lackluster real estate and business returns anyway? So whether you are launching a new real estate business, or need to improve the performance of an existing one; what are the best moves to make?
1. Stay Online
Many startups have begun online, and have then begun trending to the real world. Yet, at least since 2005, it was possible to run a very lean 100% online real estate business. Working virtually saves in many ways. It saves on travel, office overhead, equipment, and many liabilities.
2. Use Freelance Workers
Big marketing and advertising agencies can be financially crushing for small and medium businesses. Often times, they may not offer any superior results either. For all of your business needs, there is a freelancer that can handle it. They can work on demand, just when you need them. That means lower costs, less management, lower overhead, and less liability.
3. Guerrilla Marketing
Marketing is, or at least should be, one of the largest investments of a real estate business. Real estate marketing has become more expensive. From direct mail to lead lists, marketing is essential. However, if you want to be lean, consider focusing on blogging, social media, bandit signs, cheap direct mail, phone marketing, in person networking, building strategic referral partnerships, and other ways to hack visibility and deal flow.
4. Cut the Fat
There are a lot of “nice to haves” in real estate, but they can often be viewed as fat that needs to be trimmed. This might include business cards, fancy car leases, brochures, expensive online marketing tools and software you don’t really use, and more. Take stock of what you are really using, and not, what is really producing, or not, and make adjustments.
5. Don’t Borrow
Unless you are financing a property or are 100% sure you will receive quick returns, don’t borrow. Don’t get weighed down with debt, interest payments, cash shortages, or shareholders that can be a drain, and tempt you to make poor business decisions.
6. Invest in Better Branding
Sometimes being cheap is more expensive. A cheap looking website, for example, can really destroy the ROI of all of your other marketing efforts. Elevate your branding and have consumers put a premium on your product. Luxury brands make way more for essentially the same products, all based on their branding.
7. Focus On Per Deal Profit
Focus on per deal profit, not volume. Volume can be seductive. But often more volume comes at the sacrifice of profit margins and real net profit. What do you really want? What do you want out of being in real estate? More volume and busyness, or more money and free time? If you need to; dial back, fatten your profit margins, and then scale up.
8. Set Up & Run with Lean Management
Poor management is a drain. It is a financial burden, major stressor, and big risk. So how can you eliminate more of the time involved in management. Should you actually be outsourcing your property management? Do you need a GM? Should you just be engaging in turnkey real estate investing instead?
9. Be Wary of Personal Spending
Don’t weigh yourself down with high personal spending. It is one of the biggest drains on businesses, and one of the top reasons for business failure. It also notoriously tempts real estate business owners into making poor moves that end up being really expensive. Paying cash for extra cars, homes, and toys, when you need to bury the surplus cash is one thing. Doing it too early to show off, or in an attempt to ‘buy the business’ can not only hurt your operation, but crush it.