If you’ve decided to invest in a residential rental property, it’s probably because you want to make money. And although real estate can be a lucrative business (the average investor earns around $124,000 every year), you’ve got to apply the right property management strategies to guarantee a great return on investment (ROI). Fortunately, you don’t have to be a real estate professional to know how to make the most out of your rental property. In this post, you will find a handful of expert tips to maximize your ROI in 2022.
What is the ROI in real estate?
In simple terms, the return on investment (ROI) is the amount of money that an investment earns in comparison to the initial cost of the investment. By calculating the ROI, you or your property management agent will be able to tell if a property is profitable. Ideally, the ROI should be calculated prior to investing in a given piece of real estate, as it gives the investor insight into a particular property. In other words, it is one way to find out if it would be wise to put money into a property or not.
If you have a real estate investment, you’ve likely done the calculations to determine if it can make you money. Therefore, your task is to manage it so that it generates the ROI that you were looking forward to from the get-go. Ultimately, the property’s profitability will be based on what you do, not on what the numbers show.
What are the ways to maximize your rental property’s ROI?
Whether you’ve invested in a single-family home or a condominium unit, there are several ways you can make more money from your property. Let’s take a look at how you can guarantee that your real estate investments will generate a great ROI in 2022:
#1 Stay on top of maintenance
A lot goes into keeping your property in tip-top shape. You’ll have to be both proactive and reactive when it comes to maintenance. To do this, you need to perform routine property inspections to spot potential issues. Furthermore, if a tenant informs you about a problem, you’ve got to address issues immediately, otherwise, they may turn into costly repairs that’ll lower your ROI. Of course, this can be a challenge if you’re a part-time property owner – in that case, you may benefit from partnering with a property management firm.
Failing to stay on top of regular maintenance will cost you a significant amount of money in the long term. If the property’s structure, appliances, etc. aren’t maintained, they’ll break down, and you won’t be able to make the profit that you wanted.
#2 Get your marketing strategy right
“Sell” your property properly, otherwise, you won’t be able to secure tenants, and you’ll have to deal with a vacancy, which is every real estate investor’s nightmare! Fortunately, you don’t have to spend thousands of dollars to show off your rental property to potential tenants. You can use social media to engage with your target tenants or partner with a property management company that has access to popular listing sites including the MLS.
Keep in mind that you need to know who your tenants are. That way, you’ll know where you should market your property – for instance, if you want to rent to travelers, then it would be best to list it on Airbnb. Make sure to study the market to know who your tenants are, what they’re looking for, and where they’re looking for properties, among others.
#3 Price your rent properly
It’s may be tempting to raise your rent to make more money, but keep in mind that your tenants likely won’t pay a premium for a property that they know they can rent for a lower rate. Don’t be greedy, but instead, get the opinion of a professional property management agent that can price your property accurately.
Over time, you will be able to raise your rent, but you need to wait for now. You should strive to set a rental rate that’s close to the price of comparable properties (or “comps” in real estate). In short, you need to keep pace with other residential rental properties that are like yours. Although there’re some tricks to elevate the value of your property. For instance, If your potential tenants found a well-maintained lawn they will be willing to pay you more. Try some of these low-cost landscaping ideas to elevate the value of your property.
#4 Get insurance
Properties that aren’t insured are at risk. In case of an accident, you will have to cover the costs of repairs, and you’ll likely have to pay out of pocket. With that said, it is crucial to have insurance as a real estate investor.
Ask your property management company if they can suggest an insurer that can provide the coverage that you need for your investment. Once you’re insured, revisit your insurance every year to determine if you need to add more coverage, or if there’s any way to lower your premiums.
Pro Tip: Make sure your rental property is safe, as insurance companies are more likely to lower your premiums if your property isn’t “risky”. Not only will keeping your property safe lower your premiums, but it’ll also make your tenants feel a lot safer.
#5 Screen your tenants strictly
Tenants can make or break your rental business. Rent to the wrong tenant, and you’ll end up with a damaged property that’ll take time to repair and set your milestones back. Meanwhile, if you rent to the right tenant, you’ll have an impressive ROI for years.
It’s important to know the details of every tenant, like their criminal record, employment, rental history, and more. Consider partnering with a property management company that can look into their background for you in a legal way. Tenant screening is governed by rules and regulations, so be sure to abide by them, or else you will be in legal trouble!
Want to maximize your rental property?
Luxury Property Care’s experts are here to help you maximize your rental property. We provide full-spectrum property management services to property investors who have real estate investments in South Florida. Our task is to make sure your property is as profitable as possible. We do this by implementing the right property management strategies, which have been tried and tested over our years of experience in the industry.