Turning real estate investments into profit is an art form. While some ascribe to the theory that more is more, the reality is that a few well-managed rentals can turn any property investment into gold. Here are some tips that will help make this source of passive income more lucrative than you ever could have imagined.
- Turn off the Vacancy sign
Empty rentals are an absolute drain on profits. To avoid empty spaces, work hard to encourage (even enforce) a strict 30-day notice to vacate policy. This can and should be written into the lease so that a flighty tenant doesn’t end up costing you a month’s worth of income.
What’s more, it’s important to remember that turnover will happen no matter what, so prioritizing a full space over optimal rent is a difficult but wise choice. Think of empty spaces as an 8.3 percent loss (because that’s what it amounts to in annual revenue) then reduce your rent by 5 percent. By dropping rent instead of waiting for the right price, you’ll be saving yourself 3.5 percent in the long run.
- Reduce turnover
A related issue, reducing turnover to a bare minimum is the best way to keep your out of pocket costs as low as possible for your rentals. Why? Every time a tenant leaves you’re required to advertise the space, revamp and touch-up, clean carpets and freshen paint, and these are only the minor repairs. If you’re lucky, you won’t need to replace appliances, flooring, or anything major like roofing or electricity.
The best way to reduce turnover is to seek quality tenants with a steady rental history and healthy credit, individuals who will treat your space as if it were their own. Once you’ve found these ideal tenants, ensure their needs and requests are tended to in a timely manner. Keeping them happy should be a priority, because they’re making you your maximum profit.
- Find and fix energy leaks
Employ a third party that specializes in energy efficiency. You’ll be shocked at how much leakage you’re paying for every month. It’s more than just a leaky pipe; energy can be lost for a variety of easily remedied reasons.
Unnecessary lighting, heating, cooling, and water costs, add up to enormous profit losses. Locating and remedying these vulnerabilities will provide dramatic results in very short order.
- Exercise tough love
It’s important to work with your tenants, to show them you respect them, and to help them whenever possible, but adhering to your lease doesn’t make you a bully. It makes you a landlord. Late fees enable you, as a landlord, to make up for losses you incur in the event a tenant misses a payment or produces rent late.
They are not meant to be cruel, they are to protect your own financial liquidity, and ensure that you can meet your mortgage payments on time. When you need to enforce a less than popular aspect of the lease agreement, just remind your tenants that you’re running a business, and like any other business, you require income (vis-à-vis their rent check) to stay afloat.
- Create more revenue
When you own properties where multiple families or businesses reside, finding little ways to subsidize their rent (and the income you generate from it) is key to maximizing your revenue. Look for opportunities like storage space, on site coin-operated laundry, vending machines for drinks and snacks, and even pay phones or Internet cafes.
These little add-ons will add up, and they will increase the market value of the space you’re offering. For stand-alone homes and businesses, offer to provide landscaping, an option to have small pets at a fee, or even cleaning services like window washing. Offer the service for slightly more than you can outsource it for, and then hire contracted workers to perform the duties.
