Building a profitable real estate investment portfolio is not harder, but it IS more strategic than it looks.
Far too many rental property real estate investors struggle to grow their business because they make common mistakes.
This starts a downward spiral of the care of the property diminishing and the care of tenants waning.
There are not many real estate investors that want to be slumlords. Most want to serve tenants well and be considered excellent landlords. More profits give you the ability to better serve your tenants, care for your properties AND enjoy a better personal lifestyle.
That’s why we put together this roundup of some of the best strategies to bigger profits from some of the web’s top authorities.
Best Profit Strategies for Rental Property Owners
Please note that these are not ordered in order of significance – they’re equally valuable to your business success!
Nathan Miller wrote an article called, “Top Three Ways To Maximize Your Real Estate Investment Profits” on Forbes.com where he shared a great secret. He suggested…
#7: Automate Renter Payments Online
Have your tenants pay rent online and stop wasting time depositing checks, tracking down rent checks, and dealing with the “lost in the mail” excuse.
A smart investor values their time as much as their other assets. You can streamline your rental management by taking advantage of software solutions designed for renters. One of the newest and greatest technologies hitting the rental market is the ability to make online rent payments.
Online rent payments make rent collection easier for you and are beneficial for your renters too. Often, your tenants’ rent check is the biggest bill they pay each month and physically writing out a check can be an emotional experience. Paying bills online, especially via automatic payment systems, can significantly lower the emotional stress associated with paying big bills. Plus, anyone who pays a bill with auto pay is less likely to pay late, incur late fees or miss a payment.
Regarding auto payments, make sure all your bills are set up for auto pay as well. Sometimes you can negotiate a discount for paying your bills via online services, which will cut down on your operating expenses and increase your bottom line.
In the article, “5 Ways Landlords can Maximize Profit from Rentals,” written by Ella Jameson, on Landlordology.com, she recommends that you…
#6: Increase the Rent, but be Competitive
If you price your unit too low, you’ll fill it quickly, but might miss out on thousands of dollars in rent. You need to ensure that you’re correctly calculating the cost vs. revenue on each property.
Location is the greatest influencer of price, but an excellent condition and updated decor also helps to maximize rental income.
In summary, start advertising 4-6 weeks out from lease end, and try to get the most you can for the rental. Check Craigslist and Zillow for current market rent rates.
In an article written on BiggerPockets.com, called, “14 Clever Ways to Maximize Revenue From Your Rental Property,” one profit strategy the author, Eric D. shared is to…
#5: Avoid Vacancies
Filling rentals is one of the most difficult parts of being a landlord. It is much easier than it used to be. The rental market is very strong, and the free online marketing tools are plentiful. Paying $200+ for an ad that runs only a few days is obsolete marketing. Any quality renter will have a way to view online ads.
No one cares more about filling a property than you do. If you live close enough to your rentals, consolidate the effort by showing your place just three times a week. If you live farther, align all the showings about 20 minutes apart, and get your place rented in a day. Make sure all applicants are pre-screened and that they confirm before arriving.
Hiring a property manager to get a tenant will cost you a month’s worth of rent, which is 8.3% of revenues. Then add another 10% a month for their ongoing services.
If you are concerned about finding enough renters, you can always increase demand by lowering price (or increasing marketing). Likely, you will still make more money than using a property manager.
Next up, in a great article called, “9 Ways To Maximize Profit On Your Rental Property,” shared on MySmartMove.com, Rentalutions shared this great tip…
#4: Keep the Property in Good Condition
Initially, taking good care of your property might cost you money, but it pays off in the long run. Landlords should be doing preventative maintenance to keep the property in good condition. Here are three ways to maintain your property:
- Change the air filter frequently to extend the life of the HVAC unit, lower energy bills, and have fewer repairs.
- Replace old flooring and appliances with new ones to make the property more valuable and increase rent price.
- Fix repairs right away (especially leaks) because waiting makes the problem spread and increases the cost of repair.
Keeping the unit and building in good shape also encourages your tenants to do the same, which reduces expensive tenant-turnover costs for cleaning and damage. In a recent survey of our landlords, we determined that the number one reason why landlords keep part of a tenant’s security deposit is due to property damage. If you encourage your tenant to avoid damage, then you can return your tenant’s security deposit in full. After all, happy tenants write positive reviews that help your rental business prosper.
The last reason to keep your property in good condition is to minimize risk. Making sure your building is up to code and that there are no dangers in the property will reduce the risk of injury and lawsuits, which cost you money.
Kelly Gurnett, on ThePennyHoarder.com, shared, “15 Tips to Maximize Your Income.” One great tip Kelly listed is…
#3: Thoroughly Screen Tenants
One of the biggest hassles we heard landlords mention was the cost (in money, time and stress) of evicting troublesome tenants. An eviction can take three to six months and can cost upward of $5,000, so do some preventative work by putting new tenants through a thorough screening process.
Run a credit check to give you a sense of their financial responsibility, along with a criminal and eviction investigation. Also, do a little reconnaissance.
“Drive by their current residence,” says Denise Supplee, a real estate agent, investor and former property manager, as well as co-founder of SparkRental. “Is it messy? Are there trash cans thrown all over — or worse, is the trash just piling up? Is there an old broken-down car with expired tags just sitting? Big warning flags!”
Blake Hilgemann wrote an article on Money.com called “The Top 5 Ways to Make More Money on Your Rental Properties.” In it, he shared a winning strategy. He said…
#2: Minimize Turnover
Turnover costs money in multiple ways. There are advertising costs, the cost of patching and painting walls and replacing flooring that your previous tenant would have lived with, and, of course, vacancy. It’s a little counterintuitive, but this is another area where relatively lower rent may have the tendency to increase revenue.
One of your goals should be to find quality tenants that take care of your property and pay consistently. When you find these people, do what you can to keep them!
Some people will inevitably leave because they are moving across the country or buying a home, but the last thing that you want is to lose your best tenants to the landlord down the street, dealing with the expense of acquiring a new tenant and lost revenue in the vacancy.
The price of rent is not the only factor involved in tenant retention. The other key is customer service. Whether you personally manage your properties or have a property manager, make sure your tenants are treated with respect and professionalism, their concerns are valued, and matters are dealt with urgently and to their satisfaction. A good tenant/landlord relationship keeps tenants from thinking about moving.
To assess whether your property manager is performing in a way that fosters good tenant/landlord relationships, send a postcard soliciting feedback from your tenants, letting them know their opinion is valued and they can contact you directly if they are dissatisfied with their manager.
Ethan Roberts, shared an article called, “How to Maximize Your Returns on Rental Properties” on Auction.com, where he revealed a great tip:
#1: Determinig ROI
For me, successful landlording is all about maximizing my ROI. Simply defined, ROI measures the efficiency of an investment. It’s calculated by dividing the return you realize from the investment by its cost. The result is expressed as a percentage. Here’s the formula:
(Gain from investment − Cost of investment) ÷ Cost of investment = ROI
For example, say you buy a house with cash for $120,000. You spend another $10,000 on repairs and improvements. Your total investment cost is $130,000. You rent the house for $1,400 a month, or $16,800 gross annually, and have no more repairs over the following year.
Your gross ROI would be: $16,800 ÷ $130,000 = 12.9%. You can also figure out the net ROI by subtracting any additional costs, like insurance and taxes, from the gross rent. Many of my properties have double-digit gross annual returns, and yours should too.
Mistakes that Lower ROI
But maximizing ROI isn’t just about buying a house and collecting rent. You might experience a number of variables throughout the year that will increase or decrease your ROI. For example, landlords can increase ROI by charging a one-time pet fee of $300 or charging a late rent fee of $10 per day. Tenants can decrease ROI by not paying their rent, moving out prematurely, or damaging your property.
Apply just 1 of these strategies and improve your real estate rental business fast.
If you want to truly maximize your sales success, you need to schedule a PROPERTY PROFITS STRATEGY SESSION.
In this session, an expert real estate investment coach from our team will work personally with you to…
- Examine your current real estate investment portfolio/plans to see what’s working and what’s hurting. Discover where you’re making money and losing it.
- Search for the diamonds in your backyard, the low-hanging profit opportunities that can be made with minor tweaks.
- Diagnose the biggest roadblock to scaling your business fast and profitably.
- Present the best path for tweaking your investment game-plan so you can build wealth faster, with more predictability and stability.