Having greater rental profits comes down to a very simple equation: more rent and fewer complications.
The following are a few tips to maximize both parts of the recipe.
Literally, just increase the rent. Exactly how confident would you say you are about the competitiveness of your property for its price? Would it be crazy to increase rent by $30? $100? Do some groundwork, go to open houses; ask around your circle. If you aren’t 100% positive that your rental is listed at the highest, most competitive rate it could be (without dissuading good tenants), you’re throwing money away.
Yeah, it can feel awkward increasing rent out of the blue without waiting to make the change in-between tenants. But, it can be done, as long as you’re still all kosher in the lease agreement.
The bigger, sexier way to increase your rent is to undergo renovations and home improvement projects. Anything goes, but you want to be sure that the renovation will actually increase your potential rent, rather than just make the place prettier. If you want to go big and install hardwood floors, knock out a couple walls for more natural light, and update all the kitchen appliances, go for it. However, even small improvement efforts can result in greater profit potential.
You just have to do them in batches. I mean, no one is going to pay another $10 every month just because you redid the kitchen backsplash. But if you installed a backsplash in the kitchen sink, re-stained the cabinets, boosted the Wi-Fi speed, installed a new shower head, and a new ceiling fan, smart tenants will be happy to pay the increase.
Any restaurant-owner will tell you that they never feel like they are making real money until they opened a second restaurant, and profits doubled. It sounds obvious to say out loud (no way, double the rentals means double the rent?), but sometimes you can feel crazy and reckless for even thinking about expanding your business.
If buying another rental has been hot the brain, it’s worth a genuine consideration. Of course, the commitment is serious, and the investment is costly. However, your work doesn’t necessarily double. It’s just one more place to fix the water heater and occasionally replace the carpets.
I mean stress literally, financially, and as a result your business. The fewer problems you have to solve in relation to your rental properties, the steadier the wind in your sails will be. Mostly because every problem usually needs you to throw money at it—which takes away from your overall profits.
Firstly, everything starts with the tenants. Great tenants will bring you peace and revenue, bad tenants will bring you headaches, constant repairs, and even late or missed rental payments. So, how do you find the great ones? How do you KNOW they’re great? Usually, great credit = great tenant. Run each of your applicants through a TransUnion rental credit report to give you some clarity. Even if they seem wonderful on the surface, if their credit is bad, you probably shouldn’t risk it.
I know I said to avoid renovations that don’t allow you to increase the rent, but the loophole to the rule is, "Unless it’s costing you extra money anyway." If you fix the problem for good and stop funnelling money into it, it's kind of the same as increasing rent since that money will come back every month. When it comes to those repairs and improvements that have been on your list for a while but you never get around to, it's time to roll your sleeves up. You'd be amazed at how much it costs to keep bandages on things for years on end. Just bite the bullet, and fix the darn things!
Whichever part of the simple equation you want to focus on, make the most of it! Or, max out your efforts, and go for gold. Invest in some quality investments to decrease your "stress" in the long run, and make improvements in order to strategically raise the rent in the meantime.