Whether you are an established real estate investor or someone who has started recently, you realize the fact that this is a highly lucrative opportunity and a very exciting business/investment. The thing is that people are not interested in real estate for the excitement as much as they are in it for the money. No matter how much you might tell yourself otherwise, that is a fact and it is a good thing to come to terms with it. With real estate investment, you know by now that the most profitable manner in which you can earn an income is through rental properties.
Rental income basically involves your purchasing a property, fixing it up, and then renting it out to tenants who will be paying you a monthly amount, i.e. your rental income. Now, if you really are looking to make a lot of money in the business, there is an approach that you have to take on the whole matter. Here are the 5 ways to make sure you make more money through your rental property.
Try To Eliminate Turnover
One of the ways to make sure you make more money through your rental property is that you minimize the turnover as much as you can. Whenever there is a turnover, it means there will be a lot of costs for you to endure. From the costs that come with advertising the property, to the costs of fixing the place back up after the previous tenants leave – the list can go on and on and on, folks. While it might seem like a slightly counterproductive idea, having a relatively lower rent might just come in handy to increase the revenue in the long run. Your goal should be to have the rent on your property for good quality tenants very reasonable. It is understandable if you lose your tenants because they are moving to another part of the country, but if you lose them because of another landlord down the same street, willing to take less rent from them, that will be more painful.
Of course, the rent is not the only factor which you have to keep in mind when you are trying to keep a low turnover. There is the aspect of customer service. In the case of your rental property, you are either managing the place and the logistics yourself, or you have hired the services of a property manager, right? In both of the cases, you have to make sure that the tenants are treated with the utmost respect and a high level of professionalism. A good relationship between landlord and tenant will mean the tenants are less likely to think about moving. Make sure your tenants are looked after in the best manner possible in the professional capacity of your relationship with them. Decreasing turnover is one of the best ways to make sure you make more money through your rental property.
Whenever the tenants do in fact leave, the time duration that your rental property is vacant will mean lost revenue. One of the ways to make sure you make more money through your rental property is to decrease the vacancy as much as you possibly can. What is the best way to do that? Find tenants that are going to rent out your rental property on a long term basis. This pertains to the previous point about trying to eliminate turnover.
If the point comes that your tenant absolutely has to move, you should decrease the vacancy by minimizing the turnaround time. For instance if you have an apartment that you have rented out to two separate individuals and if either one of them is planning to move to another place, you can still reduce the vacancy period to zero by making sure that you post ads about the space being available as soon as you learn about the move.
While you might be thinking that this concept might only apply to areas with high demand in terms of property, you might find it a good thing to realize that every property that offers a solid rent can make your rental property in demand as well. If we’re talking about percentages, every month that your rental property is vacant will mean you’re losing 8 percent of your potential annual rental income. If you offer rent at 5 percent less than the usual price of the neighborhood, you’ll be increasing the time of revenue generation. Decreasing the rent to make sure you decrease vacancy time is a great way to make sure you make more money through your rental property.
Due Diligence For Late Fees Is Paramount
When you make the landlord-tenant relationship agreement and you sign a contract, your tenant will have agreed to give you a certain amount every month, right? You will still find that the aspect of collecting the rent is one of the least enjoyable part of the whole matter but is a necessary thing if you really want to run a profitable business.
Making sure that your tenant does not think you are a pushover when it comes to rent collection and collecting late fees if they are past the due date on their rent is one of the ways to make sure that you make more money through your rental property. This is in no way to say that you should be less courteous. It is just a matter of establishing the fact that the relationship which you have with the tenant is a professional one and while you will be showing them kindness and looking after their needs where you can, they cannot take advantage of it.
Make sure that when you and your tenant sign the contract, everybody understands the terms of the contracts and that everything which has been agreed upon in the contract is going to happen right down to every single clause. Both of you have to honor the transactions defined on the legal document. You have to uphold every duty that you are supposed to do and do more if possible but when it comes to collecting any late fees from the tenant, you go through with it.
If your tenants send you a late check without having added the late fees, very politely tell them that the rent cannot be considered fully paid unless the late fees is added as well. You will have to be adamant about the matter so that you establish the ground rules about the matter early on. It is an important part of running a successful business and one of the most important ways to make sure you make more money through your rental property.
The Matter Of Increasing Rent
Strategically increasing the rent of your property is one of the best ways to make sure you make more money through your rental property. While there was a lot of talk about how having a lower rent can lead to a higher income on the long run, the matter of long term tenants is a bit different.
When you have long term tenants, increasing the rent over time is not at all a contradiction to the statements about lower rent made before. Increasing the rent of your rental property is a matter of recognizing the value of your rental property while keeping in mind the competitors.
Having a lower rent than other places in the near vicinity will mean that your tenants are going to be more loyal to you but that does not at all mean you should never increase the rent when you have reason to. In a long term agreement, it only makes sense that the rent increases after a while. Tenants will not exactly mind that either because for them, moving out will also mean a lot of costs for them.
Make sure that you are aware of the rents in the area your rental property is in. You will find that according to the others, you will still have room to increase the rent of your property while making sure that you are still offering a very competitive price in comparison to other landlords.
One of the ways to go about increasing the rent strategically is to communicate with the tenants and make them aware of the new costs of the rental property (like increased Home Owners’ Association fees) that relate to the amenities and facilities that the tenants enjoy. You can also use the approach of coinciding the lease renewal with any upgrades that need to be made to the property like a fresh coat of paint on the exterior or better windows. This makes the tenants feel that they are actually getting something out of the deal. This is one very pragmatic way to make sure that you make more money through your rental property.
Making Additional Revenue Generation Opportunities
One of the ways to make sure you make more money through your rental property is adding more opportunities to make money. This is something you can do especially if your rental property is housing multiple families in the same building. You can look for a number of different opportunities to create more revenue generating streams. Consider installing a vending machine or two in the building. That will increase the revenue by a considerable percentage.
One of the most popular ways to add an additional revenue generation stream on your rental property is by adding the facility of a coin operated laundry machine system in the basement of the building. Everybody enjoys the fact that doing their laundry can be made easier. A lot of people go to the commercial Laundromats to get their laundry sorted. If you add it as an amenity in your building, you will be creating an additional revenue generation stream that is incredibly lucrative and adds to the value of your rental property at the same time.
If your rental property houses a single family, there are opportunities there as well. Offer them services of house cleaning and landscaping if they want to avail them. New tenants to the property will be hesitant when it comes to the matter of hiring someone for these services themselves if they are new to the area. Even if tenants are familiar with the area, they might go for it just because of the fact that it will relieve them of the responsibilities about the matter since you are offering to take them on.
If a contractor for the jobs is requesting you $80 per month, you can offer the services for $100 per month. This means you’ve automatically added $240 to the annual revenue you will be making from your rental property. It is an ingenious way to make sure you make more money though your rental property.
The real estate market is an especially booming market right now. If you are in the business yourself, applying the ways to make sure you make more money through your rental property is the only real way you will be capitalizing on the potential that this lucrative prospect has to offer.
As the landlord managing the property yourself or if you have hired the services of property managers, there is one thing that needs to be ensured: The tenants are satisfied. Decreasing the turnover rate, minimizing the vacancy period, strategically increasing the rent and collection of late fees are basics that you need to follow as a tenant. They are all good ways to make sure you make more money through your rental property. The real bonus is the addition of more revenue generation streams. It’s all a matter of being completely professional yet courteous – a delicate balance – that can ensure a higher profitability for you in the long run in the business of real estate investment.