Finding success as a real estate investor is much more than collecting rent and waiting for long term value appreciation. Finding new ways of cutting costs, utilizing the full extent of your tax advantages, capital improvements and even selecting great tenants all assist with increasing cash flow from your property.
Real estate has some advantageous benefits, but like any investment it needs monitoring and oversight to ensure it is providing the expected return. Below we look at four easy ways to help your rental increase its return.
1. Prepare your rental to be shown
Rentals that sit vacant after two weeks have the highest probability of a rent reduction. Cleaning carpets, painting walls, sweeping and tidying up the yard are very important details. Show the tenant that your rental will be easy to maintain. Checking for loose locks, wobbly cabinet doors or even squeaky floor boards helps show off your rental by avoiding easy complaints. The first impression helps in increasing interest to get your rental occupied as soon as possible. Fewer interested tenants means lower monthly rent and fewer qualifying prospects.
2. Invest in your property
It is hard to get top rent from a property that looks like the last tenant trashed it. It doesn't mean golden fixtures and a helipad, but a basic level of comfort and functioning amenities is a must. Quality air-conditioners, refrigerators, heaters/furnaces and hot water heaters can actually save time and money while seeming like an unneeded expense. However, purchasing durable equipment with a solid warranty and reviews and regular maintenance allows equipment life extension, which saves money. Replacing a refrigerator with a $1,000 refrigerator every 8 years is better than a $400 option every 2 years. It’s an amenity to the renter and a more durable piece of equipment on cash flow. Additionally, tenants with faulty or slow air conditioners and heaters often look to move when the lease is up. Keeping great tenants has a high return on investment as well and replacing equipment adds up.
3. Lower taxable income
Utilizing tax advantages like mileage on your car, internet and cell phone bill as you use a convenient cloud based landlord accounting software like TenantCloud can all help lower taxable income. Things like depreciation provide you with cash flow without an actual annual expense. Maintaining proper records can save you from excluding expenses when it comes tax time, which then saves you money. Find a great software that makes keeping track of your expenses easy.
4. Screen your tenants
Such services as Checkr and RentPrep will help you to know exactly, who is moving in. Knowing if your tenants have trashed a previous rental is very important. Many assume good credit is the most important, but tenants can do a lot more damage than can be compensated from on time rent. Look for traits of the tenant being a long term occupant. An amazing applicant on paper who only rents for 6 months isn’t nearly as great as a third or fourth choice applicant who will stay for the next five years. Average turnover costs are close to $1,800, so a tenant that stays 5 years has a high return on investment.
These are four easy ways to increase the return on your investment and protect its long term value creation. Finding tenants faster, keeping them longer and keeping maintenance requests to a minimum all help in increasing cash flow and provide quick insight into great decision that leads to profits.