Maximizing rental income from your property is critical for supporting your real estate investment business and ensuring your capital is positive. You need to constantly be looking for ways to get more value from the investment assets that you own and ensure that they are working for you, not against you.
The most obvious strategy is to continue raising your prices every year, and this is something that the market will usually support. Depending on your area, most landlords raise their rents between 2% and 10% every year, knowing that there will always be demand to fill those spaces. If you simply look at price as the only variable that you have to adjust to increase the return on your investment properties, then you’re making a mistake. There are so many other factors at play that you can use to influence your margins and benefit from more rewards.
That is the topic we explore in this article. We look at all of the ways you can maximise your rental income without simply resorting to charging your tenants more. Here’s what you need to know:
Enforce lease terms
It might sound obvious, but enforcing your lease terms is one of the most effective things that you can do to ensure that you maximise the rental income that you receive from your property. Make sure that you charge late fees if they apply and that you allocate maintenance responsibilities to the individuals or agencies that are responsible for them. Think carefully about pet rules. Sometimes allowing small pets can be financially beneficial, whereas larger pets cause damage to your property and lead to expensive repairs in the future that cost more than the initial security deposit. Timely enforcement and consistency are the best way to avoid disputes. This might seem like you are being tough with your tenants, but remember that they may look to take advantage of you if you do not do this.
Consider flexible or alternative rentals
Sometimes, depending on the area, you are allowed to offer flexible or alternative rentals. For example, instead of receiving a fixed sum from a renter every month for a long-term rental, you could use short-term rentals like Airbnb, which are more lucrative. You could also switch to these during vacancy periods when you are still looking for a new long-term renter. This tactic is allowed in some areas, so check the local rules. This means that you can earn a higher yield per night that you rent out your property. Make sure you check zoning laws and that all of this is allowed ahead of time. You don’t want to be shut down.
Use a management company to take care of admin for you
Another thing you’ll want to do is use a management company that can take care of a lot of the admin for you. Doing all of this yourself is time-consuming and can actually hold you back from expanding your enterprise further, according to experts like Leah Jay.
For example, suppose you own five properties and you’re responsible for maintaining them all. Every week, or even every day, there will be an issue that your tenants want you to deal with. You’ll have to take time out of your schedule, including looking for new investment opportunities, to provide the assistance that they require. When this happens, it drains your energy and prevents you from pursuing the high-level strategic business decisions that really make your life better.
Good news is that you can fix this by simply going and hiring a management company. They can take care of all of this hassle and difficulty for you so you don’t have to think about it.
Price competitively
It should go without saying that pricing competitively is one of the most powerful things you can do to maximize your rental income. If you price too high, then renters will always be looking for a better option that offers more value for money at a lower price. Pricing slightly under the market rate by a couple of percent is often all you need to do to attract long-term renters who think that they’re getting a good deal. When you do this, you can offset the void periods that other rentals have to manage because people are much more late to consider staying at your place.
Reduce operating expenses
Like any other business, you want to look at ways that you can reduce your operating expenses. Managing homes can be expensive, especially if you have a high amount of maintenance and depreciation on these properties, but there are things that you can do to cut bills and ensure that you can prevent big repairs in the future.
The best way to do this is to adopt a preventative maintenance schedule. Professionals can deal with all of your property’s main systems according to manufacturer instructions so that you avoid larger and more expensive repairs in the future. You can also use professional property managers to streamline operations and reduce your administrative headaches. They can provide you with systems that top real estate investors use so that you can emulate business structures.
Offer paid amenities and services
Another thing you can look into doing is offering paid amenities and services. Instead of raising the price of your base rent, for example, you could charge additional pet rent if a renter wants to bring their dog or cat with them. Here, renters have to pay extra to keep the animal, but it gives them more flexibility. You could also use add-on services like cleaning, lawn care, and laundry all included to provide extra value. This gives you more money but also saves your tenants time, which is a great option if they are busy professionals.
Optimize your deductions
Lastly, you may want to optimize your deductions and think about your tax strategy. The more costs you can subtract from your net income, the greater your margins will be. Think about costs as the price of doing business as a landlord. Other businesses can subtract their costs from their net earnings, so why not you?