Rental properties can bring in extra money for you and your family, but you can really maximize your rental income by taking a few steps. Some of the actions you can take will improve the unit itself and others are about making you a better property manager.
Here are five ways to maximize the return of your rental.
In this article:
1. Know When To Increase The Rent
The most obvious way to increase rental income is to increase how much rent one of your tenants pays. There are two big things you must consider as a landlord when it comes to increasing rent:
You need to know how much notice you are required to give tenants
You also need to know how much you can release rent by – it is common to have rent increases capped, sometimes at 2.5 or three percent
You also need to know that rent increases can chase away good tenants if you aren’t careful – you need to walk a very fine line. If you want to increase the rent without losing a good tenant, simply explain that your costs are rising and you need to make sure that you keep up. If you explain it well and your price is equivalent to similar quality rentals in your area, you likely won’t lose a good tenant over a rent increase.
The single most important thing you need to do as a landlord is to make sure you property looks inviting and livable.
David Williams, over at Landlordology, says it well, “When a potential tenant tours the property, they are asking themselves a very important question: ‘Can I see myself living here?’”
Williams has some great advice for landlords looking to renovate:
Repair or clean things before you replace them because it may end up costing you much more in the end
Kitchens and bathrooms are the easiest way to “Wow!” your potential tenants
Paint every five years
Invest in minor landscaping
It all comes down to creating bright, open and livable spaces – some simple rules to create spaces people will enjoy.
3. Reduce Vacancy Rates And Durations
You aren’t making any money from vacant properties. Both the frequency and duration of vacancies are problematic because they drive down your revenue.
Reducing vacancy rates and duration is a responsibility that falls squarely on your shoulders as a landlord. To reduce the number of vacancies you have, you need to:
Properly screening your tenants – it will help spot potential problem tenants before they ever sign a lease.
Keep your properties well maintained
Respond to tenant complaints quickly and completely
Make sure that rent increases are handled properly
Reducing the length of vacancies depends on being able to show, screen, and negotiate effectively and efficiently. This is where many people have trouble because many landlords have full time jobs. If your rental is a side business or an extra stream of income, putting the effort into renting out a vacant unit can be very demanding. The easiest way to deal with this problem is to turn to professional landlord services for help.
4. Reduce Overhead
Reducing your overhead costs can be a very effective way to increase the return your rental generates. It’s so effective because its impact is felt from month-to-month or quarter-to-quarter – it continually adds up.
Refinancing at a better rate is possibly the best way for you to reduce your costs because it is the shortest path to reducing your monthly payments.
You can also make sure your rental more efficiently consumes resources – like electricity or water. If you pay for electricity and heat, making your unit more energy efficient avoids costs now, but also makes it easier to handle future electric and gas increases. If you cover water, install toilets and showerheads that use less water.
Decreasing your overhead will really help you in the long run as the savings continue to add up.
5. Maximize Tax Benefits
As a landlord, the tax system is really stacked in your favor.
Douglas Hsiao writing for the Washington Post said, “Tenants get virtually no tax benefit from renting, while landlords benefit more than virtually any other taxpayer, because they have feet planted in two tax-favored worlds — business and real estate. As a result, over many years of renting, I have paid little if any additional income taxes for my Dupont Circle apartment.”
I can’t guarantee you’ll be this successful, but hiring a professional accountant can help you identify all of the possible tax benefits and consequences of your decision to become a landlord.
Maximizing the return provided to you by your rental property is the ultimate goal. These are some steps we know work, please steal our ideas.