It takes hard work to turn a rental property into a profitable investment. Successful rental property owners do more than just invest in rental homes. They also have to constantly work toward maximizing their profitability, and this could mean anything from hiring a property management company to updating rental prices as needed.
Owning a rental property can be one way to bring in the big bucks, and by regularly practicing the eight steps below, you can keep your rental business profitable for years to come.
#1 Take Good Care of the Property
All rental property owners know that keeping a property in good condition will cost money, but that it’s an expense that will pay off in the long run. Property owners need to conduct preventive maintenance to ensure that their property is well-kept throughout its life. This can include changing out the air filter, replacing appliances with energy-efficient home improvements, and fixing plumbing repairs right away.
A well-kept rental sets the example for your tenants to take care of the property. This, in turn, reduces tenant turnover costs for cleaning and repairs. By ensuring that your tenant has a pleasant experience, you will be encouraging them to leave positive reviews, helping your rental business thrive.
Maintaining your property’s condition also minimizes legal risks. It is crucial to remain up to code to reduce the risk of injury and potential lawsuits.
#2 Prepare a Written Rental Agreement
Set the terms of the lease in writing as this helps you avoid expensive lawsuits. Many landlords believe that an oral agreement is acceptable, but this usually carries serious risks. When disputes occur, it becomes one person’s word over the other’s. Proper rental agreements should be written, stating important rental terms like the rent price, payment dates, tenant rules, and more. Be sure to customize the lease agreement according to your situation.
An efficient rental agreement also stipulates the exact financial obligations of the tenant. For example, typical lease agreements state that the tenant should cover costs for gas and electricity. If you don’t explicitly include this in the agreement, you may end up covering additional costs every month.
#3 Update the Rent Price
The rent price today may not be the best rent price a year from now. Since the rent price is largely dependent on the real estate market, it pays to periodically research similar listings in your area. Updating your rent price is an effective way to make the most rental income.
It’s a good idea to rent out your property during the summer months, as this is considered the peak rental season. This is when the demand for rentals skyrockets, letting you lease your property at a much higher price.
In addition, you should update your rent price after renovating your property. Upgrades such as expensive flooring, brand-new appliances, etc. increase the overall value of your property.
#4 Hire a Property Management Company
If you haven’t hired a property management company, this is something you should consider. As you acquire multiple investment properties, it can become increasingly difficult to manage all of them at once. With the help of a premier property management firm, you can sit back and let the professionals do the work.
Your renters can easily relay their concerns to a dedicated property manager. When emergencies arise, your property manager can take care of everything including finding trustworthy vendors. Additionally, property managers stay on top of scheduled maintenance and repairs, keeping your rental in prime shape throughout the year. Working with a property management company is the best way to ensure your success.
#5 Don’t Focus on Rental Rates
When thinking about purchasing a property, look beyond the possible rental income you may be earning. Every real estate investment should be evaluated based on other elements including the local job market, nearby amenities, property taxes, and many more.
It’s also important to research nearby listings and vacancies, as this can indicate the demand for rentals in the area. Reviewing these details can help you decide whether a certain property is a profitable investment. You should also consider working with a real estate broker to help you accurately discover and analyze these details.
#6 Get a Landlord Insurance
In the event of injury, property damage, and lawsuits, having landlord insurance can protect your investment. Many landlords believe that their homeowner’s insurance is sufficient, but it actually won’t cover claims for rental properties simply because it isn’t classified as such.
Without landlord insurance, you risk paying for expensive legal fees and costs of damages — straight from your pocket! Regardless of your efforts to keep your property in a good and safe condition, you will inevitably encounter a problem or two. Protect yourself from liability by acquiring landlord insurance.
#7 Explore Off-Market Listings
There’s nothing like finding a prime piece of real estate listed in a hot market, but landlords should be open to the possibility of finding great, unlisted properties. Your next best rental investment might just be found off-market by getting in touch with the property owners.
Your property management company will be able to help you locate these off-market real estate deals. Since they work with property owners daily, they’re the best people to ask about prime properties that are on sale.
#8 Make Use of Your Tax Deductions
One of the perks of being a property investor is the many tax deductions that are available to you. Many landlords aren’t aware that virtually everything you spend on your property is deductible. Deductible expenses include transportation to and from the property, insurance, lawn maintenance, advertising, tenant placement fees, and even property management fees.
Before it’s time to file your taxes, strategize with your financial advisor or accountant to keep your taxes are little as possible. Just be sure to work with a skilled accountant, or else you may be losing money instead of gaining it.
Luxury Property Care can expertly navigate the constantly evolving nature of the real estate market. With licensed real estate brokers as our property managers, we can help you develop a strategy that works toward increasing your ROI.