If you own rental properties, your business depends on making sure all your properties are providing the maximum potential revenue that your local market will allow.
Even if you have a great piece of rental property, if you don't use intelligent business practices, your rental business won't be very profitable.
The following tips will ensure you are getting the most out of your rental properties.
Keep Units Occupied
In order to avoid losing money from your rental properties, they need to all be occupied by paying tenants. Every month that a unit remains unoccupied is lost income. This is especially true if your property has only a few units. If a property has four or fewer units and one is vacant, then not only will you lose your profit, but the mortgage on the property may be in jeopardy.
There's no avoiding the fact that tenants will sometimes need to move, so in order to mitigate the losses from your rental properties that become vacant, it's vital to fill an empty unit as soon as possible. Obviously, when a tenant has moved out, you need to line up a new occupant right away. In a neighborhood with high demand for rental units, all you need to do is post an ad the minute you find out that a tenant is moving, and you shouldn't incur much loss in revenue --- maybe a month at the most.
But what if your neighborhood doesn't have relatively high demand? Well, the fact is, there are always people looking for a place to move into. In a lower-demand neighborhood the question comes down to what price is right to fill your vacant rental properties quickly. After all, a low rent payment is better than no rent at all. The solution is to find the highest price point that will still fill your units quickly.
In addition to slightly lowering rent prices, you can do relatively inexpensive upgrades to attract tenants to your rental properties. Installing appliances like washers and driers or replacing old kitchen appliances will allow you to advertise superior amenities at an affordable price. Also, doing simple renovations like a new paint job and carpeting will make new tenants more likely to move in when they see it.
Whenever tenants move out there are costs involved, including lost rent, repairs and cleanup, and the cost of advertising to get a new tenant. So, it makes sense to do everything within reason to keep your tenants.
An important factor that is often overlooked in the rental businesses is customer service. One of the main reason tenants move out is rude or inadequate service. If you are not a service-oriented person, or you're too busy to respond promptly to your tenants needs, you might want to hire a property manager or a property management company that will provide quality service to your tenants and rental properties.
If you hire someone for this purpose, make sure they are providing adequate and polite service. It's a good idea to check up on them by either calling the tenants for feedback or sending them a customer satisfaction survey in the mail.
Be Smart When Increasing the Rent
You may find that your rental properties values have gone up or the demand for space has increased in your neighborhood. A small increase in rent of one to three percent shouldn't upset a tenant, at least not to the point where they pack up and relocate. The cost to them to move would be far more than a slight increase in monthly rent.
When making adjustments to the rent, make sure you understand the rental market in your area and price accordingly. You can find out this information by doing research on websites such as Zillow, Craigslist, and Rentometer. When notifying tenants about rent increases, mention some reasons they are needed such as renovations, repairs or increased taxes. Don't make tenants feel you are just trying to squeeze more profit out of them.
Be Prudent With Late Fees
Make sure that tenants rental properties understand the late fee structure before they sign the lease so there are no disputes later on, and don't overcharge. The late fee should reflect the cost to you of not receiving rent on time and the expenses of collecting the late rent.
If the issue ever comes up in court and the late fees seem unreasonable, the judge is more likely to rule in favor of the tenant. It's better to warn the tenant of possible eviction than to charge too much in late fees. Also, you don't want to lose a reliable paying tenant just because there may have been a mistake at the post office.
Find Other Ways to Monetize the Property
Many apartment complexes have other ways of making money in addition to collecting rent. You could install coin-operated laundry machines and vending machines. You could also offer additional services and amenities for an extra monthly charge. Some examples could be cleaning service, cable TV, and internet service. When tenants get locked out, which happens to just about everyone at some point, you could charge a small fee to open their door and replace their lost keys if necessary.
If you are trying to get the most out of your landlord business, before you go out and look for additional properties, make sure you are getting the most profit from the ones you already have. You may find that by following these simple tips to enhance your business operations, your rental properties will be more profitable than you thought possible.
Smartland is Northeast Ohio's largest turnkey real estate investment firm. Our team combines financial savvy with expertise in property management to help clients identify and invest in alternative investment vehicles that have strong growth potential.