Managing a rental property intelligently should lead you to a recurring profit according to Action Properties. If you have $2,000 a month in property expenses but you’re able to charge $2,400 a month in rent, you’ll end up with a $400 a month profit, ultimately netting you nearly $5,000 a year in extra income.
How can we push those numbers higher? What are the best strategies for increasing profits in your rental property management strategy?
The Fundamentals
Let’s start by looking at the fundamentals. Some of these may seem obvious, but they all play an important role in determining your profitability.
- Choose the right properties. Everything starts with choosing the right properties. Some properties are strictly better for rentals than others; properties that are in high-demand neighborhoods, properties with low maintenance requirements, and properties capable of hosting multiple families simultaneously are ideal. If you find a good neighborhood that supports a profitable rental property, consider purchasing more properties in that neighborhood. Neighborhood dynamics are predictive of property potential, and having access to more properties in a single neighborhood can give you more insights and better control.
- Screen your tenants carefully. The quality of your tenant matters. Many landlords are tempted to fill vacancies as quickly as possible, so they employ thin or lackluster screening methods. It’s usually better to take your time and make sure you find the right tenants: people capable of paying rent on time for many years.
- Minimize vacancies. That said, vacancies can be a problem. Vacancies are probably the biggest obstacle standing between you and higher profitability, so keep them to a minimum. Making your tenants happy and rewarding them for loyalty can make them less likely to move out. And when you do have a vacancy, invest heavily in marketing and advertising to earn more tenant applicants.
- Practice proactive maintenance. You can reduce many property maintenance expenses by practicing proactive maintenance. It’s usually cheaper and more effective to prevent problems rather than responding to them when they spiral out of control.
- Find reliable contractors. Speaking of maintenance, build a network of contractors you can trust. If you always have inexpensive, thoughtful, and experienced workers ready to help you, no maintenance expense will be too high.
- Be ready to scale. Let’s say you have a single property that nets you $400 a month. If you find a similar property to add to your portfolio, that could climb to $800 a month. Another property makes that $1200 a month, and so on. When you feel comfortable and confident in your property management skills, start adding new properties to your portfolio.
Additional Strategies for Increasing Rental Property Profits
There are also some less obvious but potentially powerful strategies you can use to push your rental property profits further.
- Work with a property manager. This may go against your intuitions since property managers are an additional expense, but consider hiring a property manager. They can help you find ways to strategically reduce expenses and help you close vacancies faster. They can even help you find new properties to add to your portfolio – all while saving you the hassles of most landlord responsibilities.
- Push rent increases strategically. There may be legal limitations on when you can raise the rent, so make sure you understand them. You should also raise the rent only when it makes logical sense to do so. With these parameters in mind, be ready to push rent increases strategically to make more money.
- Look for opportunities for secondary income. Rent isn’t the only income opportunity you have at a rental property. You may be able to generate more income by renting parking spaces, offering vending machines, or installing coin-operated laundry machines.
- Scout for properties in new areas. Don’t limit yourself to one area when buying new properties; look in different states or even different countries to find lucrative new opportunities.
- Upgrade your key neighborhoods. You can’t always control the dynamics of a neighborhood, but there are some strategies that anyone can use to beautify and improve their surroundings. Little improvements add up, and even small investments can make a measurable impact on the quality of a neighborhood and, thus, what you’re able to charge for rent.
- Cull your underperformers. As your property portfolio begins to grow, don’t be afraid to cull the underperformers. If one of your properties isn’t nearly as profitable as the rest, consider selling it and using the proceeds to buy something better.
There’s never a guarantee that your rental property management will be profitable – and your attempts to use some of these strategies may backfire. But as long as you practice consistent and effective decision-making and you’re willing to continue adapting, you should end up in a financially favorable position.
Featured Image by F. Muhammad from Pixabay
