Who doesn’t want to make more money? By using some simple methods to keep your property in shape and appealing to renters, you too can increase value. As COVID continues to leave uncertainties within the rental market, maximizing profit has never been more critical. Read on as we discuss ways you can get the most out of your investment and maximize rental property profit.
How to Maximize Profit in Your Investment Property
Maintain Your Home
An essential rule of thumb is upkeep is always more cost-effective than large emergency repair bills. Additionally, performing basic maintenance tasks yourself can save hundreds over hiring outside vendors. Take time to do preventative maintenance:
- Replace air filters quarterly
- Refinish or replace worn flooring
- Service appliances or replace as needed
- Promptly respond to maintenance requests
Monitor Market Conditions
Rental markets fluctuate, and so does pricing. To be sure you are competitive, periodically evaluate other vacancies on the market with similar amenities. Depending on what you find, adjust your price as needed. Also, your set rental rate should reflect seasonal demand, as well as any upgrades you have made.
Establish Rules and Stick to Them
A well-written legally binding lease is the foundation of any successful tenant/landlord relationship. This lays out clear expectations and consequences, such as late fees. Once you have established these guidelines, you must stick to them or risk losing out on added income. Also, remember the rules must be the same for every tenant, every time, to avoid any financially crippling fair housing disputes.
Prioritize Tenant Screening
Nothing can eat up profits quicker than court costs and eviction fees, not to mention lost rent for someone who doesn’t pay. That said, seek to minimize that risk by thoroughly screening tenants. Basic tenant screening qualifications include:
- Credit Worthiness Check
- Criminal Background Check
- Rental History Verification
- Income Guidelines (typically 3x monthly rent)
Your Bottom Line is #1
Your investment is a business and therefore, must be handled as such. Protect yourself from unexpected fines, fees, or expenses by understanding state and local laws. Also, keep detailed digital records of financials and tenant communications as these could prove invaluable in a dispute. Respond to tenant requests promptly; a happy tenant is a long-term tenant. Keeping your business as the top focus will help you maximize rental property profit.
Invest in Full Coverage Insurance
You may wonder if it’s needed? Won’t my homeowner’s insurance be enough? Landlord insurance has you covered for damages as well as potential legal battles. While it may cost you to have it, the risks of not having it far outweigh the costs. If you opt to go with just your standard homeowner’s policy, you may find your claim denied if you are classified as a landlord. Discuss your coverage options with a licensed and trusted professional.
Think Long Term
Turnover expenses, marketing costs, and vacancy time all can add up quickly and diminish your profit. If you are lucky enough to have stable tenants that care for the home and pay on time, keep them! Negotiating and renewing the lease for good tenants is a great way to save on costs.
Make Technology Work for You
Time is money, and modern technology can be a landlord’s best friend. Consider adding some tech upgrades to your everyday processes to make life more convenient for you and your tenants. Consider a useful full-service app like Cozy, which allows landlords to:
- Collect online rent payments
- Set up automatic late fees
- Complete online tenant screening
- Online maintenance request submission
- Convenient rental applications
- Tenant dashboard
- Landlord expense tracking
- Low monthly service fees
How to Increase Value of a Rental Property
Maximizing your profits goes hand-in-hand with maximizing your property’s appeal. Even small and simple upgrades can boost your home’s rental value and, in turn, your profit. That said, an essential factor to understand as a landlord is known as rental yield.
What is Rental Yield?
Rental yield determines how much cash an income property produces annually as a percentage of the property’s value. Simply put, it is the rental income as a percentage of the property’s value. That said, there are two kinds of yields: gross and net.
How to Calculate Gross Rental Yield?
- Multiply the total annual rent that you would charge a tenant by 52.
- Divide the annual rent by the property value.
- Multiply that amount by 100.
- The result will be the percentage of your gross rental yield.
How to Calculate Net Rental Yield?
- Subtract the annual expenses from the yearly rental income.
- Divide this result by the property value.
- Multiply the result by 100.
- The result will be the percentage of net rental yield.
How to Add Value and Increase Profit in Your Rental Property
If you are looking to increase value to your property, it does not have to be complicated or stressful. Follow along with these simple steps below:
- First Impressions: The exterior of the property is your first best chance of attracting renters. Therefore, keep the grass mowed, landscaping tidy, and highlight outdoor areas; however small they may be. An outside area appeals to a wide range of potential renters, especially those with pets.
- Don’t Skimp on the Basics: Never underestimate the importance of regular inspections, thorough cleaning, and maintenance. Take advantage of the time between tenants to polish or swap out old fixtures and steam-clean carpeting. This simple focus on cosmetics appeals to renters and also can add value.
- Kitchens and Baths Rent Homes: The kitchen is the heart of any home, and the baths get a lot of use as well. Besides, renters expect these areas to be functional, stylish and equipped with modern convenience. So, deep clean appliances between tenants, consider an upgraded spa showerhead and add some simple shelving for added storage.
- Neutrals are Best: You may have impeccable style but, a potential tenant wants to imagine their lives in your home. That said, keep the color scheme and decor simple to provide a blank slate for your tenants. Avoid harsh or bright colors that may not appeal to a wide range of tenants.
- Add Some Perks: If you are in a competitive market, the extras may be a deciding factor that sets your property apart. That said, a modest investment in a security system or patio furniture might pay off in the end. However, do not forget to add these items to the lease.
When considering ways to maximize rental property profit, there are some simple and budget-friendly options out there. Keeping your property in tip-top shape and understanding how to calculate value are keys to your success. Follow these tips above to rack up the savings! Are you a Kennett Square landlord who is overwhelmed by the daily tasks of being your own property manager? Why not consider full-service professional property management for a low monthly cost? Contact Bay Property Management Group Chester County to see what our experts can do for you!