The primary goal of purchasing rental properties is to earn money from it. But, with increased taxes on rental properties, it has become difficult for rental property owners to earn much profit if they do not know what to do. Many opportunities can be explored to boost profits from rental properties.
Earn More Profits from Rental Properties
There are about 43 million housing units being used as rental properties in the United States alone. If you own one of those units and would like to increase your profits from rentals, consider the following ways:
1. Keep Up With Maintenance
While it may seem counterintuitive to spend money on maintenance, making sure your property stays in good shape can actually maximize profits from rentals. Maintenance is an inevitable part of property care. You will need to carry out all sorts of maintenance work to ensure your property remains in excellent condition. This will allow you to attract more potential tenants.
Apart from that, preventive maintenance can earn you significant profits in the long-term by helping you save on future repairs. To do this, you must conduct thorough inspections every once in a while. See if anything needs a touch-up or a fresh coat of paint. Replace older appliances that are set to break down any time soon. Check your flooring every few years to see if it still holds up well.
Of course, property care is a two-way street. That means your tenant must also look after the property as if it was their own. Make sure to include this stipulation in your rental agreement to encourage your tenant to follow it. You can also charge a security deposit on the promise that, if no damages occur, they can have it back once they move out.
2. Raise the Rent
Some rental property owners feel strange about increasing the rent on the basis that it seems ill-mannered. However, raising the rent is a normal and often necessary part of rental property management. Furthermore, it can help increase profits from rental properties.
The challenge for owners, though, is figuring out when exactly to increase rent and by how much. After all, you must ensure the rent you charge is apt for the rental market. When other property owners around you start marking up the rent, that is a good sign to follow suit. That only means the property values in the neighborhood are increasing as well. You can also raise the rent when you update your appliances or replace old flooring and lighting.
Another option is to gradually increase the rent in increments. This is the best way if you want to minimize pushback from your tenants. Consider incorporating rent escalation language in your lease agreement. Tenants will find it easier to pay an extra $40 on their monthly rent every year than a sudden $200 increase every five years.
3. Impose Late Fees
Many property owners charge late fees if their tenants fail to pay the rent on time. It is a good way to increase rental property income without increasing the rent itself.
As a landlord, you rely on rental income to pay for various expenses and maintenance work. When tenants fail to pay on time, this consistent stream of income is cut off, leaving you short. While it may seem uncouth to charge a late fee, the truth is late fees are necessary to encourage tenants to pay on or before the deadline. If you let tenants get away with late rent payments all the time, then there is nothing stopping them from breaching other lease terms, too.
As always, make sure your rental agreement covers this as well. It should specifically outline when rent is due and the amount of the late fee you will charge when payments are late. You should also clearly define what you consider as a late payment, e.g. five days after the due date.
4. Allow Pets (for a Fee)
Some landlords balk at the idea of allowing pets on their property out of fear of damage. However, tenants, especially younger ones, value their pets and treat them like family. To some potential tenants, a no pets policy is even a dealbreaker.
If you want to maximize revenue from rental property, consider allowing pets but for a price. This way, you can widen your net of prospective tenants and earn extra income, to boot. Tenants also do not have to sneak around with their pets and break the rules.
5. Avoid Vacancies
While this may seem like it is easier said than done, avoiding vacancies is one of the best ways to maximize profits from rental properties. Technology has changed the way people hunt for homes, and landlords find it easier to land tenants than before. Additionally, with the rental market growing every year, you are almost guaranteed occupancy.
Take advantage of social media marketing. Most platforms allow you to post listings for free with an added cost for ads that reach a broader audience. Show your property to potential applicants as often as you can.
Of course, it goes without saying that you should screen your tenants first. This will let you find high-quality tenants who pay rent on time and take care of the property. You can get to know your applicants when you show your property in person. It also helps to speak to their past landlords to learn about their behaviors.
6. Add Extra Services
Another surefire way to grow rental income is to add extra services. If tenants do not have a washer-dryer in their units, consider installing coin-operated laundry machines. Tenants do not want to lug around bags of laundry all the way down to the laundromat. This will not only add to your revenue but also increase the convenience factor for your tenants.
Apart from coin-operated laundry, you can also install vending machines. This is particularly effective in a multi-family property where there are a lot of children. Kids love snacks and fruity beverages, so they will likely spend their extra allowance on your vending machine.
7. Think Like a Businessperson
You should consider your rental property as your business and not a hobby so that you can protect it. Keep digital copies of all correspondence with the tenants. You should also ensure that you answer every call, email, and maintenance request from your tenants promptly and in written form. By treating your property as a business, you should be able to get maximum profits to a great extent. You will also be able to avoid all legal battles so that you can properly keep your finances.
8. Charge Lease Termination Fees
Although most tenants will stay for the duration of their lease, some will break it for a variety of reasons. It is a good idea to include a lease termination clause in your contract. This should specify how much you will charge the tenant in case they choose to terminate their lease. The amount will depend on you, but two months’ worth of rent will usually suffice.
9. Build a Trusted Network
While you can try to perform all the maintenance work yourself, some situations will call for professional help. When this happens, you naturally want a trusted party taking care of the job. As such, it is in your best interest to establish a good working relationship with a sundry of vendors and contractors. This includes electricians, plumbers, carpenters, and handyman services. That way, when an emergency comes up, you immediately have someone you trust you can call. Plus, building a strong network can also lead to possible discounts.
Get the Most Out of Your Rental Property
As you can see, there are many ways to increase profits from rental properties. You just need to know where to start. Go through these points and see which option works best for you. Alternatively, you can try them all out to really maximize your earning potential.
A rental property business can be profitable if you can manage it properly. If you have a full-time job or other priorities, though, it can be difficult to pour all your focus into your rental property. Hiring a rental management company can greatly help. Begin your search for the best property management company, HOA management company, or real estate company in your area using Florida Property Management’s directory.
RELATED ARTICLES: