You own rental properties to make money, but many landlords take this very simple fact for granted. With years of experience in this industry, The Hard Money Co has learned some lessons on how to make your rental business successful and maximize profit. Keep reading to see how you can maximize profits for your properties and keep generating income.
Run Your Property Like a Business to Maximize Profit
Run your property like a business, because that's what it is. Be well aware of your bottom line at all times and keep detailed financial records. This will help you on a daily basis but is also an important aspect for tax, resale, or rental purposes. Also, keep your interactions with tenants professional. Getting angry or emotional is a disservice to your bottom line. Similarly, being overly friendly or lenient may give the wrong impression about your role. It's best to be straightforward and respectful while setting clear expectations.
Finally, be sure to answer emails, calls, and maintenance requests as expeditiously as possible. If your tenant needs something in a timely manner, it serves you to acknowledge their issues quickly. This maintains a strong relationship and reduces the risk involved in the property.
Perform all Necessary Maintenance
It's easy to see maintenance expenses piling up on a property and think that money is better spent elsewhere. We're here to tell you that is not the case. Taking care of your rental properties is going to pay off in the long run and landlords should be involved in preventive maintenance on a regular basis.
- Update appliances to keep them in line with rental rates and your desired property value
- Make repairs right away and stop them from becoming bigger problems down the road.
- Make investments that will save you on monthly energy costs. This includes changing air filters on your HVAC unit or updating to higher efficiency units
In addition to saving costs on bigger failures down the road, keeping up with maintenance is one of the biggest factors in attracting/retaining tenants. It signals that you value the property and that they should do the same. It also demonstrates that you care about your tenants and encourages them to match your care for the property. Even the most diligent landlords only see a fraction of the property while it's occupied. It's essential that your tenants feel as if they have a degree of ownership in taking care of the property as well.
Formalize Your Rental Agreements
Most landlords utilize some type of boilerplate rental agreement for their property, but it's worth investing more effort into drafting specific documents for each property. You should also avoid oral agreements wherever possible, even for issues that may seem trivial to you. In instances where it's one person's word against another, the outcome rarely is resolved to either party's satisfaction. Formalizing any agreement should be viewed as a benefit to all involved.
Its also important to set expectations for your tenants, and to give them the opportunity to set expectations for you. Knowing who is responsible for what costs will save time, effort, and money in the long run. In addition to mitigating legal risks, contracts have the added benefit of increasing communication and setting the tone for a strong professional relationship between landlord and tenant.
Stay Up to Date on Market Rent Prices
Rent rates can change frequently, and if you're renting your property at below market value you're doing yourself a disservice. Regularly check market rates to ensure that your prices are competitive, while still delivering you a return on your investment. Keeping your property in the best condition possible will allow you to charge these market rates.
You should also be aware of the cyclical nature of trental and try to lock in annual prices during peak rental seasons where demand is high. We typically observe the summer months as the ideal rental time, but other factors may impact the demand in your area.
Finally, ensure that your rental price is increasing alongside the value of your property. Each dollar you invest in the property can be reflected in your monthly rate.
Eliminate Barriers to Rental Payments
The easier it is for a tenant to pay their rent, the more likely they are to do so. This solution may be different for different groups of people, but be flexible with whatever they prefer. Some would prefer to hand you a check at the beginning of each month. Others might want to send you an online payment via Venmo or PayPal. Whatever they choose, make it easy for them to pay you your money.
Enforce Your Contracts
Once you have a written contract signed by both parties, it's important to enforce the contents. While it may seem like being lenient is no big deal, it sets a standard that can snowball out of control. The rules that are put into place are there for a reason. Forgoing even the small ones will discredit the rest of the contract and give tenants the belief that they can be selective in their observance of it.
This is especially true surrounding issues of rent, timely payments, and late fees. Your rental property is a business and, in order to maximize profit, needs to be treated as such. Late fees aren't there to squeeze extra dollars from your investment; they're there to ensure you have a timely cash flow so you can pay the remainder of your obligations.
Screen your Tenants
While it's important to protect yourself with well-written contracts, it's equally important to find tenants who are honest, trustworthy, and capable of fulfilling their end of an agreement. Consider showing the property to potential tenants yourself so you can get to know them on a personal basis. Have them fill out rental applications, income verification forms, and authorize credit reports. All of these help ensure that they can pay their monthly obligations. Finally, consider leaning on references of previous landlords to see if there is any cause for concern. These are all basic functions that help get you the right tenant into your property.
Be aware that housing is a highly regulated market with protected classes. Ensure that you are compliant with all federal and local regulations when selected from a pool of tenants.
Market Your Property
You've already done the hard work; identifying a property worthy of investment, putting together financing, acquiring the property, and performing any necessary maintenance. Don't let it all go to waste by letting it sit vacant. Tenants don't know that a property is available for rent unless you tell them. They're not just going to walk through the door and hand you the first month's rent. There are a number of steps that you can take to cast a wide net of interested parties and ultimately land your ideal tenant.
These steps may seem obvious, but too many landlords take them for granted.
- Get the unit show-ready
- Take high-quality photos and videos
- Publish the listing online and offline
- Replay quickly to interested parties.
Additionally, landlords can consider incentives to get the perfect tenant in the door. These include discounts or free months on an extended contract. Be diligent on how these affect your financials, but know that they can make or break a decision for high-quality renters.
The list of things you can do to truly maximize profit on your unit can go on and on. If you put these items into action, though, we can guarantee that you will find success in your investment.