Read this guest post from Mashvisor, an industry-leading source of U.S. residential real estate data and analytics.
Understanding how to make money from your rental properties is key to building wealth and affording the kind of lifestyle you dream of. As a result, many rental property owners today are finding creative ways to maximize their rental income.
The best way to increase your rental income is by providing more value to your tenants without incurring too many additional expenses that eat into your profits.
In this article, we’re going to look at five ideas you can implement to generate more income from your investment properties, whether you’re a seasoned landlord or a first-time real estate investor.
1. Offer more amenities and services
Most of our calendars are filled with work activities and other events. We want to spend our days without interruptions. As such, chores such as housecleaning, laundry, and grocery shopping may end up being neglected. Some tenants, especially those living in high-income areas, are willing to pay for someone else to take care of these tasks.
As a landlord, you can offer these services by partnering with third-party providers — then charging tenants more rent or a fee to cover the cost of each service. You can also ask your tenants if they’d be willing to trade some cabinet space for a dishwasher or a laundry machine. From a tenant’s perspective, such an addition justifies a rent increase.
If your property is located in an apartment community with a high rent estimate, amenities offer another great opportunity to increase rental income. Suppose you have a significant capital improvement budget. In that case, you can consider adding amenities such as a fitness center, an on-site dog park, or a community garden to add more value to your rental property. Just like adding more services, more amenities will add more value to your tenants, therefore, creating an opportunity to charge higher rent.
You can also charge direct fees for some of these services. For instance, many property owners have a no-pet policy due to the potential damage caused by most pets. You can appeal to pet lovers by allowing pets in your units for an additional fee. Most state laws and regulations allow landlords to collect monthly pet rent alongside the base rent. In this case, you can also collect a pet deposit together with the security deposit as a risk mitigation for property damage caused by pets.
2. Minimize tenant turnover
Finding new tenants for your property will cost you time and money. Long vacancy periods lead to significant losses in rental income. Consider the amount of money that goes into advertising your rental unit, showing the unit to potential tenants, running background checks for prospective tenants, and preparing the space for new tenants. You can see how high turnover can increase your operating expenses.
Other than the time and expenses, new tenants come with some level of risk. Will they make on-time rent payments? Will they be rowdy and cause extensive property damage? Will they respect and remain courteous to the neighbors? No landlord wants to replace good tenants with problematic ones.
To avoid high tenant turnover, implement the following strategies:
3. Furnish your apartment
The pandemic period helped change and shift tenant preferences and priorities. While most investors think that only furnished short-term rentals offer a lucrative opportunity, there’s now a specific target market for long-term furnished apartments.
One of the effects of the pandemic era was the popularity of remote work, which initially happened out of necessity, and then subsequently became a choice for many workers looking to explore new parts of the world.
There’s another market segment of people who’re looking for a place to stay for a while as they search for a more permanent property. Most of these people keep their furniture in storage facilities instead of moving with everything. This makes it easier for them to move completely once they’ve found a long-term home.
You can target these market segments by researching what type of furniture suits them and adding it to your property. For example, you can add desks in your extra bedrooms so the rooms can also work as home offices. You can go an extra step and add office chairs to complete the home office setup.
Tenants looking to purchase a home may need extra storage space during their real estate search. For instance, you can ensure that every bedroom has a sizable wardrobe or closet with enough drawers, shelving units, and cabinets.
4. Invest in the right location
Location is a major factor when it comes to maximizing your rental income. The market where you buy a property determines how much rental income you can earn as well as the property expenses you pay.
Consider how much property taxes you’ll have to pay in your location. Some states charge minimum property tax rates, while rates are quite steep in other states. To keep expenses low, you may want to invest in a location with a low cost of living, so that the cost of property maintenance, repairs, and upgrades is affordable. You can use a real estate investment calculator to see how much you can expect to pay in expenses before deciding on a location and purchasing a property.
To help you start your search of the best rental property locations to invest in, here are some top markets according to analysis provided by Mashvisor, a real estate data analytics company:
The top three markets for investing in rental properties this year are ranked by the average cash on cash return, one of the most widely used metrics of return on investment in real estate.
5. Complete touch-ups during vacancies
A rental property’s condition is bound to deteriorate over the course of its lifetime. While the wear and tear may be minimal and not affect the living standards, it’s necessary to implement a few easy touch-ups before a new lease commences. Keep in mind that these touch-ups can also help you get the best possible deal when marketing your property.
Most tenants nowadays view properties online before booking to come to see them in person. A property presented well will attract more interest and offers. Completing touch-ups will also give you an edge over other competitors in a hot rental market. That’s why you must ensure that there are no maintenance issues before putting your property back on the market.
Most busy landlords tend to overlook minor maintenance details which end up blocking them from securing better deals. These maintenance issues include dripping taps, bubbling and peeling paint, defective door handles, cracks in the walls and floors, broken blinds, and many others.
Other touch-ups include replacing all door handles on your property, repainting all walls with a fresh and clean coat, and installing new taps and shower heads. Your goal is to give your property a fresh look that will impress prospective tenants.
One hidden benefit of carrying out touch-ups is that it demonstrates to your prospective tenants that you’re a diligent landlord who cares about the tenants’ experience.
Don’t forget to update your marketing after touching up your property. Hire a professional real estate photographer to take high-quality photos and come up with a captivating property description to boost the demand for your property. The quality of your marketing strategy can also help you secure better offers.
Every rental property owner is looking to increase their rental income. First, offer more amenities and services to justify increasing the rent. Most tenants are willing to pay more for more services. Then, think of how you can target remote workers and temporary tenants by adding a home office setup or storage space. Finally, ensure you add a few touch-ups in between leases to keep your property as attractive as you possibly can.
Above all, ensure you invest in the right location. Your market determines the maximum rental income you can earn and the property expenses you’ll have to pay. Remember to conduct a rental analysis to see how much you can charge.
Mashvisor is an industry-leading source of residential real estate data and analytics in the U.S. market. We help investors find profitable long-term and short-term rental properties quickly and confidently. We’ve turned 3 months of real estate research and analysis into 15 minutes.
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