Rental properties can be a great investment, but it’s important to ensure you get the most out of them. To do that, you need to know how to maximize your ROI on rental properties. Here are a few tips to help you get started.
Screen Tenants Carefully
The quality of your tenants will have a direct impact on your bottom line. Conduct a thorough background check, including criminal history, credit report, and employment verification.
Tenant Screening Red Flags
Some red flags to look for when screening tenants include the following:
Criminal History: This is the most important factor when screening tenants. Even if the applicant has a good credit score and steady employment, a criminal history could indicate they’re not likely to be good renters.
Credit Score: A low credit score may not necessarily be a deal-breaker, but it’s something to consider. An applicant with a low credit score may be more likely to miss rent payments or damage your property.
Employment Verification: An applicant must have a steady job to afford the rent. This will also show the gaps in their employment history, which could be a red flag. Verifying their employment status will give you a better idea of whether they’ll be a good tenant.
Although going through each application may take some time, it’s worth examining every candidate closely to avoid any stressful surprises later.
Rent at Market Value
Don’t try to gouge your tenants; they’ll move elsewhere. But don’t undercharge either—you could leave money on the table—Research the going rates for similar properties in your area and price yours accordingly.
Determining Fair Market Value
To determine fair market value for your rental property, start by looking at the following:
Comparable Properties in the Area
Look at properties that are similar in size, location, and amenities. Once you’ve found a few comparables, research their rental rates and use that information to price your property. You can also look at identical properties that have recently been rented or are currently on the market.
Keep tabs on the local economy, as it can impact rental rates. For example, if there’s a recession, people may be more likely to move in with family or roommates instead of renting their place. This could lead to a decrease in demand (and prices) for rental properties.
The Condition of Your Property
Of course, the condition of your property will also affect how much you can charge in rent. If your property is in pristine condition, you’ll be able to charge more than if it needs some work. Keeping your property in good shape is important to maximize your profits.
By pricing your property at market value, you’ll be able to attract quality tenants and get the most out of your investment.
Keep Repair and Maintenance Costs Low
The last thing you want is to have a tenant move out because the property is in disrepair. So be sure to keep up with regular maintenance, like changing air filters and checking smoke detectors, and take care of any repairs promptly.
Checking for Fixtures Needing Repair/Maintenance
Some things you should regularly check for include the following:
- Air filters should be changed every 1-3 months, depending on the type of filter.
- Smoke detectors should be tested monthly and replaced every ten years.
- Water heaters should be flushed every six months to remove sediment buildup.
- A dripping faucet can waste a lot of water and increase your water bill. Be sure to repair any leaks as soon as possible.
- Toilets should be checked for leaks and flushed regularly to prevent clogs.
- Gutters should be cleaned out at least once a year to prevent leaves and debris from clogging them.
Amenities should also be checked. If you have a pool, the pH level should be tested weekly, and the chlorine levels should be checked daily. If the property has a private garage, you should get a garage door repair service to fix any issues since security is one of the tenants’ main concerns. By resolving these issues proactively, you can avoid costly repairs down the line.
Be Proactive About Marketing Your Vacancies
The sooner you can fill a vacancy, the better—so don’t wait until your current tenant moves out to start marketing the unit. Use online listings, word-of-mouth, and signage to reach the widest possible pool of potential tenants.
Use Your Creativity
It would be best if you made your property stand out from the competition to attract quality tenants. One way to do this is by offering amenities that other landlords in your area don’t have. For example, you could offer a discount on rent for tenants who sign a longer lease or include utilities in the rental price. You could also offer a move-in bonus, like a free month of rent or a gift card.
It’s also important to be flexible with prospective tenants. If someone is interested in renting your property but needs a better credit score or rental history, you could require a higher security deposit. This will help protect your investment if the tenant damages the property or doesn’t pay rent on time.
Offer Incentives for Lease Renewals
Tenants are more likely to renew their leases if they feel they’re getting a good deal. Offer incentives such as a rent discount or free months to sign a new lease early.
Other Incentives You Can Offer
You could also offer the following:
- A rent discount for paying on time
- A shorter lease term (6 or 12 months instead of the standard one year) for a higher rent amount
- Flexibility with the move-in date
- The option to pay rent online
- Allowing pets (if you normally wouldn’t allow them)
These are just a few things you can do to attract quality tenants and get the most out of your investment property.
Raise Rents Gradually Over Time
Every year or two, you’ll probably want to raise the rent on your units—but don’t go overboard. Gradually increasing rents will help keep tenants happy and minimize vacancy rates.
How to Raise Rent Fees Without Losing Tenants
There are a few things you can do to make sure your tenants don’t mind paying a higher rent:
Give them advanced notice: Let your tenants know about the rent increase as soon as possible so they can budget for it.
Increase rents gradually: A small rent increase is more likely to be accepted than a large one.
Make sure the unit is still a good value: Even if you raise the rent, your units should still be priced competitively.
Hire a Professional Property Manager
If you’re not interested in the day-to-day management of your rental properties, hire someone who is. A good property manager will help you maximize ROI by keeping tenants happy and taking care of all the details for you.
How to Hire a Professional Property Manager
Hiring a professional makes sense if you own multiple properties or live far away from your rental property. But even if you only have one property, having someone else handle the day-to-day management can still be helpful.
To find a good property manager:
- Ask for referrals from other landlords or real estate agents.
- Check out online reviews.
- Interview several candidates.
- Make sure the property manager is licensed and insured.
- Get everything in writing.
With these seven tips, you can ensure that your rental properties generate the desired income. Proper management of your property is essential to ensuring its longevity and profitability. With just a little effort, you can enjoy the financial rewards from your rental property for years to come.