How do landlords and property managers make money when they constantly need to invest in something? The secret to making a profit out of your rental properties is to start with wisely distributing your budget and understanding the current rental market. In addition, there are also subtle nuances of the trade you need to be aware of.
The key to making a fortune out of your rental properties is to follow these four easy rules:
1. Analyze the rental market.
If you're focused on ongoing passive income, then analyzing the current rental market is a must, including the latest trends in the property management industry. A money-oriented mindset is exactly what you need. To perform a thorough rental analysis, review the average rent level in your area and compare your rental to those of the same size and similar conditions.
Pay attention to what your target renters are looking for. While Millennials are concerned about a safe neighborhood, tech-savvy Gen Zers are more attracted to digital solutions. To stay competitive, establish up-to-date marketing strategies that will not only make your rental appealing, but will also contribute to the development of your property management business. For many renters, the process of finding a new home isn't associated with just Google searching and scrolling through listing sites. It's a responsible financial decision they are serious about.
By performing a comprehensive market analysis and rent comparison, you're likely to set the most reasonable price for your rental property. Keep in mind that the amount of rent charged should be a percentage of your home's value. According to Devon Thorsby, in 2017 renters with an average income could afford almost 50 percent of all rentals. With that in mind, landlords and property managers have a chance to expand their property management business and maximize profit from their rentals.
2. Get along with your renters.
Successful landlords are those who can get along with even the most difficult of tenants. The best way to prevent arguments with your tenants and ensure you've chosen the right residents is to run background checks and get references from previous landlords. In addition, keeping records of every transaction and maintenance issue will help you to stay organized.
Another idea is to perform move-in and move-out inspections to check the condition of the rental property before and after tenancy. You can also conduct inspections in the middle of the lease by specifying it in the lease agreement and notifying the tenant beforehand.
To better interact with your tenants, try to build a healthy tenant-landlord relationship and show respect. Communication is key, so encourage your tenants to share suggestions and complaints, if they have any. This will highlight weak spots in your business model and help you to move in the right direction.
3. Pay attention to location.
You're mistaken if you think the location of rentals doesn't matter. To increase the value of your rental property, take a look at its location. Is it in a safe neighborhood? Does it have good infrastructure and communications? How far is it from downtown? Are there good schools nearby? These questions are bound to arise when people are searching for a house to rent. So if you want to make more money on your rentals, choose a good location to invest in.
4. Consider raising rent.
Tenants don't like rent increases, but sometimes this step is inevitable. Provide a rent increase notice to notify your tenants of any upcoming rent increase. You don't have to explain your financial situation or provide the reasons for raising the rent. But before you do so, learn about your state laws on rent increases and try to add a clause regarding possible rent increases in the lease agreement prior to signing it.
What are your ideas for making a profit on rental properties? Share your advice in the comments section. We'd love to hear your thoughts on this. :)