5 Ways to Make More Money Off Your Rental Property
Investing in real estate is an inspired choice, according to Investopedia. It’s especially so if you are planning to rent out this property and turn it into one of the best possible sources of passive income. Today, you don’t even need to purchase the real estate completely as you can take out a mortgage your tenants will essentially be paying for. However, you’ll need to use a variety of tricks to maximize the returns on this investment. The good news is that the majority of those tricks only need to be set up once. Therefore, your property should be turning in profit like a well-oiled machine with very little effort on your part.
Here are 5 ways to make more money off your rental real estate:
1. Rent out additional storage
Storage space is something that’s always in demand among people who live in rental properties, especially if those don’t have a lot of it to offer. Therefore, the simplest way to boost your profit as well as win more loyalty points from your tenants is to offer them such space.
You can convert the basement or attic space at some of your properties into storage units and rent them out for a small fee.
2. Get a home warranty to cut your expenses
One of the ways of maximizing your return from a rental property is reducing the amount of money you spend on its maintenance and repair. A home warranty will be able to help with that. Note that because it’s considered an operating expense, it will be tax deductible.
The warranty will pay, at least in part, for scheduled maintenance and repair costs for major home systems and appliances. But you need to understand that such policies are geared toward homeowners instead of landlords. When you buy a warranty for a rental property, you will find that the plans available aren’t comprehensive and some are downright useless. This means that to get the best option, you need to choose the warranty provider. Comprehensive reviews are crucial in order to determine how trustworthy the home warranty company is and how well it works with landlords. After studying the reviews, you also need to read the contract carefully to see if there are any loopholes the provider might be able to exploit.
3. Be selective when raising the rent
It might seem that raising the rent is the fastest and easiest way to increase your profit as a landlord. But reality isn’t quite as simple. As a rental property owner, you should already know that this business is all about strategy. And this means that sometimes you need to pass up an immediate reward to get a long-term benefit.
Raising the rent will boost your income for the next month or two, but you might also see a rise in vacancies right away. The most common reason for renters to leave is increased rent, so you will definitely lose some people.
Even if you manage to fill those vacancies fast, the cost of tenant turnover will eat up all the extra money you made from raising rent and then some.
This doesn’t mean that you shouldn’t raise the rent at all. You’ll have to do this to meet the requirements of the changing market. However, be selective when you do this and only raise for tenants who haven’t been living at your property for a long time and caused few problems. Show your loyal tenants, who are your main source of income how much you value them.
4. Add Airbnb to the mix
Did you know that the average Airbnb guest spends $1,045 during their 5.5-days stay in San Francisco? And New York City is one of the most popular destinations for Airbnb booking in the world. If you invest in a rental property in America, take those things into account and buy property in the area where Airbnb will provide you with a constant influx of business.
However, even the busiest tourist destinations can’t guarantee that your property will be occupied at all times. But you can minimize the risk of vacancies yourself by renting out the property long-term instead of making it an Airbnb-exclusive rental.
Then, take it a step further and allow your tenants to take in those Airbnb guests, who can stay in a specially prepared room. Split the profit and you’ll not only make more money but will also get more loyal tenants because who would want to lose a chance to make extra cash with no effort at all?
5. Add extra fees when applicable
Raising rent is the usual method of increasing your profit, but it might not be the best decision if you want to use lower prices to make your property more competitive. However, this doesn’t mean that you can’t charge extra. You simply need to present those charges as fees for additional services (which they are, so you are being honest with your tenants).
Those fees can vary greatly, so take your time researching and deciding what will work best for every specific property. Some examples to consider are pet fees, extra occupant fees, holding fees, and lease termination fees.
Be careful not to go overboard as your tenants definitely won’t react well to being charged extra for every little thing. It’s also very important how you present this to the public. Make sure your marketing campaign includes information on how those lucky ones who rent your property get access to multiple additional services that will increase their comfort for a rather small price.
Note that all fees you charge must be clearly listed in the contract you sign with your tenant. You don’t want to be accused of hidden fees and scams.
Conclusion: Should You Invest in Rental Real Estate Today?
You definitely should make this investment if you want to have a reliable source of passive income as well as some security for your future. The best thing about owning rental real estate today in particular is that the society as a whole seems to be moving to the “rent, not buy” policy. It’s cheaper and generally offers more advantages to everyone, especially the owner of said rental property.
Of course, there are some risks and expenses involved and you need to ensure the property is maintained to a high standard and marketed well to attract tenants. However, considering the possible returns, the effort you need to expedite in order to get them seems small. And don’t forget that you can increase those returns further using a few clever tactics.