How to Maximize Return on Rental Property
When investing in rental properties, the main goal is to make money. To be specific, to make the most money possible. With this as the intended outcome, it is time to get to work. To create the best return possible from your rental properties, it requires more than simply allowing the property to generate an income. There are additional avenues which must be pursued to create a maximum profit from your investment.
But, what are these avenues? While many investors have their own tricks of the trade that help them to generate a maximum profit, many of these do not work across the board. However, there are a few tips that can help you—regardless of location or tenant demographics—that will aid you in the process of creating a maximum return.
Here’s the deal…
This seems like a no-brainer, but in order to maximize the returns from your investment, you need to minimize the amount of time the property sits vacant. Obviously, an empty property is a cost, not a profit.
Avoiding vacancies comes down to how you select your tenants—and the type of tenants you select. Quality tenants generally tend to stay longer, communicate better, and give notice prior to leaving. When you have a long-term, quality tenant, it is more likely that you will have an open route of communication with them and thus will be aware at least 90 days in advance of the tenant planning to leave the property. This gives you a bigger window of time to replace the tenant with another quality tenant—thus minimizing the time in which the property is vacant.
Getting the Right Tenant
Finding the right tenant is often the hardest part of operating a rental home investment. Poor quality tenants can be damaging to both the property, your finances, and your spirit. However, the right tenant can maximize your profits simply by treating the property with care, paying their rental fees on time, and remaining in the property long-term.
To ensure you select a high-caliber, quality tenant you will need to employ a significant screening process. This involves credit and background checks, asking for and actually calling references, and verifying employment history. Don’t forget to trust your instincts, too. This is someone you will be trusting with your very expensive investment—if something doesn’t feel right, take some time and figure out what.
Offer Incentives to Tenants
Nobody likes to move. It’s a drawn out, confusing, hectic process. If the tenant is happy, they are likely to stay for as long as they can. Sure, they may eventually head off and purchase their own place—but if you can keep them happy, you’re going to see a prolonged tenant instead of a one-year wonder.
Keeping your tenant happy includes offering incentives to stay. Offer a fixed rent for a certain period of time. Tenants that know they have a low locked-in rate for X amount of years are less likely to start shopping around than a tenant that suspects their rent will increase each year. Offer free lawn maintenance for a period of time for resigning a lease, or another service. Give the tenant a reason to stay.
Maintaining Home Appliances
Maximizing your return on rental property by purchasing appliances may sound counter-active but, believe it or not, having up to date appliances in the home will help you to shorten or put off periods of vacancy. When the home is vacant, potential tenants are more likely to move forward with a property featuring newer, easy to use appliances. It is actually one of the determining factors between properties, for some renters.
Newer appliances are not only more visually appealing, but they are generally easier to use, less likely to have any issues, and simpler to clean.
If you have a long-term tenant, try to keep up with regular maintenance on appliances to avoid any costly and last-minute repairs or replacements. Keeping the tenant happy is one of the biggest keys in maximizing your return on rental property and having a broken appliance can put a strain on the tenant’s feelings toward the home. It also limits the ability you have, as a landlord, to price compare as you are working on borrowed time to repair or replace the appliance. Replacing the appliances every 8-10 years will help alleviate any issues with unexpected breakdowns.
When it comes to maximizing the return on your rental property, the biggest thing to remember is your property is only as good as the tenants you are choosing. Poor quality tenants can lead to several expensive repairs and replacements, higher vacancy periods, and an overall miserable experience as a landlord. Vet your tenants, either through your own method or through hiring a property management company, and it will go a long way in minimizing vacancies and stopping excessive damage. High quality tenants stay longer, take better care of your property, and are easier to keep happy. It’s a win-win for you and your bank account.