So, you’re the proud owner of one or two long term rental properties. You’re even pocketing a nice amount from rental income each month thanks to positive cash flow. Yet, deep down inside, you can’t help but feel like you’re missing out on something as a real estate investor.
When you got your start in real estate investing, there was a kind of “promise” that you’d be making money in real estate, so much money, that you could retire early, right? And that just isn’t happening. Well, it’s not because the real estate investing community lied to you. It’s likely because you aren’t aware of all the ways you can be making more money with your long term rental properties. Follow this guide and check off everything on our list of ways you can maximize rental income and achieve a greater overall return on investment in real estate with this rental strategy.
Suffering from negative cash flow with long term rental properties? Then you need this guide: How to Deal with Negative Cash Flow Properties
Keep in mind that if the real estate market is working against you, all of your effort to maximize rental income will go to waste. This means it is your responsibility as a real estate investor to choose the best place to invest in real estate from the get-go. Click here to learn just how to do that!
How Much Profit Should You Make on a Rental Property?
Before we can list all the ways a real estate investor can maximize rental income on long term rental properties, we must first analyze the situation. How much profit should you make on a rental property in your real estate market? Answering this question will help you determine a realistic goal for increasing revenue and return on investment on your rental property. We don’t want you to follow all of our best real estate investing tips and then be disappointed when you’re not a millionaire immediately after the changes to your real estate investment!
In order to figure this out, we suggest reading: How Much Profit Should You Make on a Rental Property?
Prefer the real estate investing cliff notes, huh? Well, here are the key takeaways to help you determine how much profit you should be making with your long term rental properties:
- Determine your investment property’s current value through comparative market analysis
- Find out the average rental income in your real estate market (use Mashvisor’s real estate investment calculator to do so!)
- Figure out your current rental property expenses
- Finally, calculate the return on investment by looking at the cash flow, cash on cash return, and cap rate
And you will know just how much profit you should make on a rental property! Compare that to what you’re making now with your long term rental properties and you can move forward with a realistic goal in mind when applying our real estate investing tips.
Take These Steps to Make More Money with Long Term Rental Properties
Setting the Right Rental Rate for Your Traditional Rental Property
How much should I charge for rent? This is obviously a real estate investing question you’ve asked and already answered. But if you are unhappy with how much rental income your long term rental properties are bringing in, then you need to reevaluate your rental rate.
If you followed our first piece of advice and found out how much profit you should make on a rental property, then you already have an idea of how much rent you should charge. That’s because performing comparative market analysis and looking at real estate comps helps you determine how much to charge for rent.
Not sure where to start? You’re not the only real estate investor. That’s why Mashvisor has a real estate investment calculator that can find real estate comps for you! With this real estate investment tool, you can take a look at the rental income for the local real estate market as the first indicator of how much rent you should charge.
To learn more about our real estate investment calculator, click here.
Next, the real estate investment calculator will identify real estate comps for current investment property listings similar to your traditional rental property. Use them to perform comparative market analysis and determine the best rental rate for your investment property. If what you or your professional property management is charging now is too high or too low in comparison, that is the likely culprit for your “lag” in return on investment.
Charge too high, and occupancy rate goes down along with rental income. Charge too low for your long term rental properties, occupancy rate may go up but it won’t help you maximize rental income and cover expenses for a greater profit.
Related: How Much Should I Charge for Rent?
Choosing the Right Tenants for Your Investment Properties
Traditional rental property relies on the right tenants when it comes to making money in real estate. Whether the cause is extreme damages outside of rental property insurance coverage, late rent payments, or simply constant turnover, a bad tenant can hinder rental income and even cause the loss of it.
Be diligent when choosing tenants for your investment properties. Not everyone who shows up to the investment property thanks to a “for rent” ad is the perfect candidate. Thorough tenant screening including background checks, credit score review, and landlord referrals are all necessary on top of a personal interview. If you do this the next time you are looking for a tenant, we can pretty much guarantee you will maximize rental income.
Dealing with a bad tenant right now? Learn What to Do with a Tenant Not Paying Rent.
Decrease Vacancy and Tenant Turnover
As mentioned, finding the right tenants for your rental properties is step #1 for decreasing vacancy and tenant turnover. The right tenant is someone who is looking to rent for long into the foreseeable future. Additionally, decreasing vacancy comes down to setting that right price we discussed earlier. So, what else can a real estate investor and landlord do to decrease vacancy and tenant turnover?
Once a landlord catches wind that a tenant is moving out, he/she should not sit on that information. Proper and instant marketing and advertising is a must in order to quickly secure a tenant for your traditional rental property and cut down on vacancy costs and loss of rental income. These are a major culprit as to why landlords may not be making as much money as the neighboring real estate investors are.
Great advertising relies on just how great the long term rental properties are. You need something to set you apart which, at the same time, can maximize rental income. For example, allowing pets (with pet fees, of course) as well as having a paid parking space can make your rental property attractive. Some landlords allow tenants to rent out a room on Airbnb for a small fee as well. You might even want to consider some upgrades like a new kitchen or bathroom, as long as these upgrades don’t rack up rental property expenses that can’t be covered by the rental income.
A landlord can’t always control tenant turnover; that’s just a fact. But in many cases, the power is in the hands of landlords of long term rental properties. That’s because a tenant is less likely to leave if a great landlord-tenant relationship has been built. That, along with the great rental rate and amenities you provide with our tips, will limit tenant turnover and the ugly costs that come with it like advertising and cleaning services.
Cutting Down on Rental Property Expenses
Speaking of cutting down on vacancy and tenant turnover costs, you need to sit down and seriously review your rental property expenses right now. In fact, the rental property expenses you took into account when determining how much profit you should be making may be way too high, lowering the return on investment!
- Knowing all about rental property tax deductions and applying them
- Keeping up with maintenance and performing regular checkups to avoid serious damage and issues
- Making improvements that you can guarantee will maximize rental income (or that are necessary for living conditions, of course)
Consistently review your expenses and see where you can cut down. This will help you in making money in real estate for a maximum return on investment.
Increase Rental Rates the Smart Way
Once you set the perfect rental rate with Mashvisor’s real estate investment calculator, that number isn’t and shouldn’t be set in stone. While landlords fear vacancy and tenant turnover if they increase the rent, it’s something most tenants are used to and expect when living in long term rental properties.
Make sure the possibility is always outlined in the lease agreement. Any increases should be reasonable compared to the real estate market and in accordance with local laws and regulations. That’s why you’ll have to perform comparative market analysis once a year when increasing rental rates for your long term rental properties.
Another great strategy landlords have applied is to provide something in return for increasing the rent. For example, painting the exterior of the house or making small upgrades in the window frames or door frames (around the same time of the increase) may make the tenant feel more at ease with the rent hike. Be smart about any increase. While the final goal is to maximize rental income and make a greater return on investment, you don’t want to chase away your tenants!
Maximize Rental Income through Extra Services
A clever way to increase your profit from owning long term rental properties is to offer extra services. With a multi family home, for example, coin-operated laundry machines or vending machines can increase annual rental income by a couple hundred dollars. With single family homes, you may consider striking a deal with a cleaning service and charging the tenant for a profit (if they agree) or offering the paid parking space we mentioned before.
Be a creative landlord. What services do you think your tenants can benefit from? Work from that point and offer a few to get started and help you in making money in real estate.
Buying Multiple Investment Properties
The final of our real estate investing tips: buy more long term rental properties. This is the last one you should apply once you have achieved maximum rental income with your current investment properties. Try investing in real estate in a different real estate market with a higher potential for rental income and return on investment. The best way to do this is with Mashvisor’s real estate investment calculator!
To start looking for and analyzing the best investment properties in your city and neighborhood of choice, click here.
More investment properties=more rental income=greater return on investment!
Just be sure you know what you’re doing! Read “5 Tips for Buying Multiple Investment Properties.”
You can and should be making more money with your long term rental properties. Review your current investment strategy and rental strategy and figure out what is hindering your profits and what you can do to make more money.
Don’t forget to use Mashvisor to figure out how much you should be making with a rental property! To start your 14-day free trial with Mashvisor and subscribe to our services with a 20% discount after, click here.
What creative ways have you used to maximize rental income? Share in the comments below.