Do you own a rental property? Then how do you increase your income and profits? Is it by increasing the value of your property? Or, is it by increasing the rent? What about cash flow? Have you ever thought about ways to make money from your property, apart from rent?
And where does your tenant include the image? As you possibly know, long-term renters increase occupancy, decrease turnover and increase profits. So how do you keep them from leaving while attracting new ones like them quickly? In short, how do you make a profit and earn money on a rental property?
Let’s look at these 5 tips:
1. Reducing Tenant Turnover
Losing long-term renters is appropriate if they move after buying a home or trying to find work in another city. However, what is unacceptable is losing them to other owners. Remember, every lost tenant leaves behind a repair bill. Walls should be painted and floorboards or tiles replaced. And then there are advertising costs and lost revenue.
What does this mean for your bottom line? Simply put: With a high turnover rate, you incur these costs repeatedly and, more importantly, they do not need to. To avoid this, give the tenant a reason to stay. Upgrade kitchens and bathrooms or enlarge rooms. Next, improve customer support. Be polite and experienced, address any issues promptly and ask for feedback. Or, ask your property manager to do the same.
2. Increase Occupancy
Vacant properties cost you money. But do you understand how much? Here’s a surprising answer. Each month of vacancy lowers your annual income by 8 percent. Clear, maintain occupancy near or at 100% is the key to profitability. But how do you do this in the face of stiff competition?
You act while the tenants are away. Advertise about the vacancy, and if the property is in a prime location, tenants will start lining up to get one. If not, offer them an incentive. Lower the first month’s rent by about 5-8 percent. This way you break even. After all, this discounted rate is near the 8 percent annual loss we just looked at.
3. Collecting Late Payment Fees
No landlord likes the inevitable chore of rent collection, which is partly why most turn their properties over to property managers. But let’s assume you do not, that you manage your property yourself. Regarding rent collection, what difficulties did you face? More often than not, these are late payments.
Appealing to your good side, tenants pay later and later every month, all the while providing reasons. And when they finally turn over the rent, they leave behind the costs related to late payments. What should you do?
Be firm, but professional. When a tenant is late paying, explain that you consider the rent to be paid in full only when it includes all expenses. Then, politely refuse money until they comply. In this way, they respect and abide by your boundaries.
4. Raise Rent
After improve property, you can safely increase the rent without refusing tenants. In fact, you do the opposite. The new tenant wanted the property because there was nothing else that would fit him in the neighborhood. Existing tenants, on the other hand, keep them for the same reasons. Also, moving comes with additional costs they may not be prepared to spend.
However, watch out when you do this. Research rents in your area first to see how much rents will increase. If not, you stop being competitive. As a general rule, aim for no more than a 3 percent increase, which adds to your revenue without negatively affecting your competitiveness. And if possible, schedule increases to coincide with lease extensions. This gives tenants the opportunity to choose in or out.
5. Increase Revenue Streams
How much profit should you make on a rental property? As much as you can is the best answer. So look beyond rentals and property appreciation. Also, focus on cash flow. Suppose you have a multi-family apartment, for example. Have you ever thought about installing a vending machine in it? What about coin operated laundry equipment? Both not only increase your income, but also your property value.
And do not stop there. In single-family dwellings, clean the landscaped house and yard for your tenants, but for a fee. Since they’re already renting out these boring tasks to other people, convince them to hire you. And after negotiating the price with them, collect the fee. Then, approach cleaning and landscaping companies and negotiate a lower rate. By keeping the difference, you are making a few hundred extra dollars per single-family home per year.
Increasing rental income is not difficult if you retain tenants and attract new ones quickly. And besides improving your rent and revenue streams, improve how you collect rent as well. But most significantly, treat tenants with dignity and respect, but be firm, particularly in terms of rent collection.
