Investing in a rental property can be rewarding but also challenging. Quite often you will find rental properties vacant, but the costs of preserving a vacant property are quite high and burdening on the landlord’s finances. A landlord needs to think out of the box to exploit any substantial potential that his rental property can have and thus increase his rental income.
Finding the right rental strategy that best suits your needs as a real estate investor as well as your specific investment property and the location where it is placed can be quite the task. The key is to find a rental strategy that can boost your rental income. Opting for a long-term rental strategy (traditional rentals) might be the best in many scenarios, while going for short-term rentals (Airbnb rentals) (though more challenging due to the high turnover) can be more rewarding in other cases.
Related: The Top 6 Strategies to Boost Your Rental Income as a Real Estate Investor
Determining the best rental strategy for your investment property requires taking into consideration many indicators and metrics which any smart landlord must analyze and calculate prior to making any real estate investment decisions.
So, renting out your investment property through the right strategy is the most secure way to assure maximum rental income to learn how to make money from real estate.
Determining the optimal rental strategy
Evaluating your rental property’s potential is crucial. If you own an investment property such as an apartment situated in a more central location in a metropolitan city, you might go for renting it out on Airbnb, as tourists and business visitors in cities are constantly looking for short-term rentals. Meanwhile, a house on a lake in Ohio might not be best suited for an Airbnb rental and might bring a much higher return on investment as a traditional rental.
Real estate investing, as other businesses, requires an investment strategy. Choosing the optimal rental strategy should rely on solid analysis and data, and thus you should make use of real estate analytics to help you make a sophisticated decision as a real estate investor looking for options to start making money in real estate. There are key metrics you need to study carefully prior to making any investment decisions.
Cash flow, for example, gives you an estimate of the incoming cash generated by the investment property (including the rental income and the rental expenses) factoring in the vacancy periods for Airbnb rentals and traditional rentals. In addition to the cash flow figure, cash on cash return measures the return on the cash invested at the time of the purchase. Another important metric is the occupancy rate in the area which indicates the average proportion of the month or the year in which rental properties are occupied as opposed to vacant. These real estate investment metrics are a powerful weapon all landlords need to behold to boost their rental income as they are directly affected by the rental income. In simple words, the higher the rental income, the higher your cash flow and cash on cash return. Meanwhile, having high rental rates which boosts up your rental income can result in lower occupancy rates, which would in turn affect your rental income negatively.
Related: Airbnb vs Traditional Renting: Which Rental Strategy Yields Higher Rental Income?
If you are looking for an easy, straightforward, and accurate way to always find the optimal rental strategy for your real estate investing business, make sure to use Mashvisor’s rental property calculator. Based on predictive analytics, it will show you the right rental strategy as well as the expected return on investment for any neighborhood and any investment property in the US housing market.
After performing an adequate research and real estate market analysis to decide upon the optimal rental approach in your specific case as a real estate investor, you can take advantage of the following tips to generate more rental income from your rental properties.
Improving your investment property’s amenities (within reason)
There are endless ways to make an income property better. A landlord should never forget the purpose of his investment property which is to generate revenue and make money from real estate. By improving your real estate asset, you could simply raise the rent accordingly to increase your rental income. Here are a few pointers in making your rental property better:
- Paint the walls: A fresh coat of paint changes the vibe of every property and can make a place feel unlived in. Spending a few hundred bucks on paint job can do miracles for your investment property.
- Improve the kitchen: Giving minor touches to a kitchen, such as changing the cabinet handles, can help add a modern look to a place. Changing the countertops to more modern ones or even painting the kitchen in a more contemporary color can add a sophisticated touch to any rental property.
- Give focus to the bathroom(s): Your tenants are going to use the bathrooms daily, and they would certainly like a clean bathroom look.
- Give floors a professional cleaning: Future tenants would enjoy the look of freshly cleaned and vacuumed carpets and shiny floors.
Taking advantage of tax deductions
Tax deductions can help a landlord increase his rental income. How, you might ask? You can deduct many of your rental investment property’s expenses, and these deductions decrease your costs and ultimately up your revenue. Any landlord can claim maintenance costs for his income property in addition to deductions for insurance, mortgage payments, and any travel costs related to the real estate investing business.
Finding good tenants
The entire purpose of renting out income properties is to generate a sizeable rental income that’s derived from your tenants’ pockets. As a landlord , you will need to have a screening process to make sure your rental property is getting a tenant who will be on time with payments and treat the property well. Having a good tenant will make you money as it lowers the cost of repairs and maintenance after each tenant vacates. The location can play a significant role in the type of tenants that you will have. A person renting an apartment in San Francisco is going to have different needs compared to someone renting a single-family home in Key West. Keeping a focused rental strategy can help in choosing the perfect tenants for your rental property.
Related: 8 Things That Make a Good Tenant
Keeping your rental property occupied
When a rental property is vacant, you are missing out on money the property can be generating for you. If you’re a real estate investor with a vacant unit, it’s always best to lower the rent by a small percentage to attract a tenant. A 5-10 % decrease in the rent can help you find a temporary tenant as an empty investment property will actually cost you and will lower your annual rental income. You must always keep in mind that a vacant property is a financial burden as it will cost you to advertise it, maintain it, and cover any mortgage payments you have standing.
Related: The Best Tips to Boost Your Occupancy Rate for Better Tenant Retention
Talking to your current tenants
It’s always a great idea to keep an open dialogue with your tenants. Make them feel comfortable enough to inform you about their needs and what they think your income property is missing. This could increase your rental income by offering what your rental property is lacking and increasing the rent by a small percentage. This will ensure that your tenants feel comfortable and know that their needs come first while you are improving the value of your property.
These tips work wonders on increasing your rental income. Giving the impression that your property is worth the money you ask for is essential to making your tenants feel satisfied. Did you try any of the tips mentioned above? Tell us more about it in the comments section.
If you’d like to keep learning about all aspects of being a landlord, continue reading our blog!