Maximizing the Performance of Rental Homes
When you decide to invest in real estate rental properties, you are doing so in order to make a profit. In this case, you are wanting to receive the most return on investment possible for the time, work, and funding put out.
If capitalizing on the profit of your rental home is your target, simply allowing the property to sit on its own isn’t going to do that. Sure, you can still make a profit by allowing the property to basically run itself—but it isn’t going to give you the ROI rates you are seeking.
So, how do you maximize the performance of your rental home?
Here’s the deal…
One of the most important factors in maximizing your rental home’s performance is to be cautious in who you extend a lease to. Nothing is more harmful to a rental home’s operation than a lousy tenant—so fully vetting each potential client prior to offering a lease will go a long way in maximizing your property’s performance.
Take the extra few steps up front, spend the extra money. Call each and every reference, verify their work history, and submit that credit check. A little extra time and money in the beginning is more beneficial than you could ever imagine.
How you manage your property will ultimately affect the performance it displays. If you don’t hire a property management company, particularly if you are out of the immediate area, and you allow the property to basically manage itself, you are opening up the doors for all sorts of issues. Keeping an open line of communication with the tenants and visiting the property on occasion will give the tenant a feeling of support when issues arise, but will also instill a feeling of loose supervision, preventing them from making any choices or alterations to the property without your knowledge. Hiring a property management company will help you in this case, especially if you live outside of the state the property is in.
In some cases, leases can fall under the radar. As a landlord, it can be easy to forget a lease is coming up for renewal. As a tenant, it can also be easy to forget. It is important to make note of an upcoming lease renewal to help avoid any issues arising that you may otherwise not see coming.
Touch base with your tenant at least 90-days prior to the lease’s expiration date. This gives both you and the tenant plenty of time to sort out any affairs. If there is a stipulation that needs to be renegotiated or if the rental costs are rising, this gives everyone time to be prepared. If the tenant has decided they are leaving, it also provides you plenty of forewarning to begin the search for a new tenant—shorting the time in which the property could stand vacant.
Long-term tenants are the best scenario for any landlord. Tenants that reside in the house for a long duration are more likely to treat the house as their own than tenants who know they will be leaving shortly. For your own benefit, it is best to get the tenant to re-sign before the lease runs out.
Offering tenants incentives to re-sign is the best way to secure a long-term tenant. Whether these incentives are monetary or service-based, giving the tenants a reason to stay will help ensure your rental home continues to profit at its maximum level. Throw in a month’s free rent or a 10% discount or consider covering their lawn maintenance services for six months. It could even be something as silly as a free coffee pot. Something to show the tenant that you appreciate their business and want to keep them in the home.
Having an open line of communication with your tenant and touching base within 90-days of the lease expiration period will help you have a clear understanding of your tenant’s intentions long before you find yourself sitting on a vacant property. While you can’t guarantee every tenant will be upfront with you regarding moving out, building and developing a trust with the tenant ahead of time will significantly decrease the chance that you’ll be stuck without any notice.
Once you are aware that your tenant will not be re-signing a lease, you have the ability to begin planning. Planning in these situations is key—as it will help reduce the amount of time the property will remain vacant.
When it comes to maximizing both the profitability and the performance of a rental home property, following these few simple steps will help ensure you have a pleasant, lucrative experience. In simple terms, the best to way to increase your property’s performance all comes down to the tenant. With proper screening, management, and communication, you will be well on your way to securing a efficient and profitable rental property.