When you decide to invest in rental real estate, if you play your cards right, you’re definitely looking at great long-term profits. But there’s only one issue – being a landlord is a much more complicated obligation than most people assume. Unfortunately, most people think that managing a rental simply means collecting the rent money, which is far from the truth. There’s a lot of micromanagement involved, especially if you want to improve rental profits. Don’t worry though, we’ve got a few useful tips for aspiring landlords!
Setting the adequate rent to improve rental profits
Setting the right level of rent is always a tricky question for landlords, especially for new ones who don’t have a lot of experience with rental properties. On one hand, you can set a significantly lower amount of rent and try to fill the unit as quickly as possible, but in the long term, you’re missing out on a lot of value over the time of the lease. Obviously, knowing how to calculate the revenue vs cost relationship for your rental property is crucial, which goes double if you’re looking to improve rental profits. But how do you make a good estimate on this?
Well, it’s crucial to know all the factors that influence people’s decision-making when it comes to choosing a new rental. Before people hire a moving company like amplemoving.com and relocate to a different home, they tend to focus on the location a lot. Sure, good conditions in the unit itself are a major boon to your profits as a landlord, but the location of your unit is really the biggest factor. So, the area where your rental property is will mostly dictate the rent you can set and still be competitive.
Maintain minimal vacancy
Obviously, we don’t need to explain why a vacancy is bad for your profits as a landlord. If you’re not collecting rent on a property, you’re not just breaking even – you’re actually losing money. You might as well just relocate to the unit yourself. Because, even if you don’t currently have tenants in there, you still have maintenance expenses. With that in mind, minimal tenant turnover is what you want in your rental property. Ideally, you should try finding a long-term tenant who will give you a guaranteed rental income for the foreseeable future.
Naturally, even when it’s a great property at a good location – losing tenants at some point is inevitable. Simply put – people are bound to move. And this brings us back to the level of rent you’re charging. If your unit is in a neighborhood with high demand, you probably won’t need to wait too long to find new occupants. But if you’re dealing with a vacant rental unit in a low-demand area, you’ll need to be more realistic when it comes to your price point. While lowering prices doesn’t sound like a good way to improve rental profits, for the time being, it might be a necessity.
Know what to save on
Now, obviously, lower rents are something you have to deal with – but only for the time being. We’re not saying that there’s no room to increase rental profits over a longer period of time, even in an area with lower demand. There are many smaller things you can do to improve the competitiveness of your rental unit. But you should realize something – this will definitely mean quite a lot of work, even in the best communities.
Once you start getting into the details of maintenance and improvements, you may have an idea most people do; managing the property on your own. We realize what you’re thinking – if you avoid hiring a property manager, you’ll reduce your overhead significantly, right? Well, at first, yes. But while that may cut imminent costs; in the long run, you may actually be hurting your rental profits. Maintaining the property on your own is quite a lot of work, and something you may not be suited for. That’s why we definitely recommend still hiring someone to manage your property.
Give some value to long-term tenants
But if you’re dealing with a long-term tenant, make sure that you’re subtly giving them the feeling of increased value for their money as well. Don’t underestimate the value of a good tenant-landlord relationship. After all, moving out into a new rental costs money. When you move to a new place, you have costs to deal with – you have to hire some packing assistance for your move, find a new home, hire a moving company, etc. So, when people consider how well they’re getting along with their landlord, and how much it would cost them to move out, they usually opt for staying where they are.
With that in mind – try to time the rent increase to coincide with some minor repairs, or something like window upgrades, painting the exterior, etc. And these kinds of smaller investments will benefit you double. Not only will your current tenant appreciate this, but your rental unit will have bigger value on the market. In addition to this, you may want to mention that the rent increase is there as an offset to your own raising maintenance costs.
Extensive renovations
Once you have enough funds, think about investing to increase your rental unit’s value on the market. This should be a priority for those who are managing rental units in a low-demand area. In that situation, giving your unit a boost will do wonders for its demand on the market. And you don’t have to do it all – choose one area and make it the best you can with your resources. You’d be surprised how many people will disregard the shortcomings of a rental if it has an amazing kitchen area, for example.