There are many ways to increase the yields of a rental property. Whatever method you choose, it most likely gives your properties a competitive edge in the rental market. Some may suggest renting the property below market value as an advantage, claiming that it will garner higher occupancies over time. Turns out, this is completely counterproductive, because by renting below market value a property is no longer considered a rental property.
So, what are some ways that will actually help your property compete in a rental market?
Survey the area, think of ways that would make the property unique
Ask anyone informed about real estate what are the most important factors in real estate and you will get three answers: location, location, and location. Being very familiar with a property’s location and rental market is an absolute must. It will also help you understand what you could do to give your property a competitive edge.
Let’s say, for example, that your property is in a suburban area, and that neighboring properties in the area do not have any swimming pools. Well there you have it, that’s what you should add to compete with the other properties. It doesn’t just have to be a swimming pool, anything that makes your property stand out (in a good way, of course) will help your property compete with others and earn higher yields as a result. Things like balconies, fireplaces, extra storage space, and nice views are great examples of this.
Still though, before you consider adding some new amenities, think about whether or not that new feature would make sense for your location. Would adding an outdoor pool in Alaska be a good idea? Of course not! You could also ask tenants in the property or the area what kind of features they would like to see added to the property.
Even if you are renting through Airbnb, making the property stand out will give it a boost. You’ve probably heard of some weird, yet profitable Airbnb rentals, like the jailhouse in Tampa. Sure, making a property that bizarre is not a possibility for most. But different alterations, like the ones previously mentioned, will still keep your property high up on the rental market.
Upgrade the property
Never underestimate the power of a good upgrade. Once you purchase a property, upgrade it by adding new furnishes and amenities before you put it available on the rental market. Even after the property has been rented out, be sure to renovate it from time to time.
Upgrading the property, whether through renovations or new additions, is a constant way to be ahead of your competition. By upgrading, a property’s value increases. The rental income of that property will then increase as well. And by adding new items, like a refrigerator or TV, you can charge more rental income. The rental market is always changing, make sure your property is keeping up with those changes.
Focus on specific groups of tenants
You could decide on gearing your properties towards specific groups of tenants in the rental market. There are a lot of different groups out there, but we’ll focus our discussion towards the three most common.
By taking part in corporate housing, you could be in for very high returns. You can expect two or even three times the profit of traditional renting. And since the company is paying the rent and not a single tenant, monthly payments are almost always guaranteed. Also, vacancies tend to not be as detrimental with corporate housing, mainly due to the extra rent you could earn. Still, the property needs to be in premium condition, and maintaining that condition could be tiresome to some degree. Overall, investing in corporate housing is a great way to help you compete with others in the rental market.
Like corporate housing, renting to Section 8 tenants will result in guaranteed income payments. This is because the government will pay large sums of the rent. This renting strategy can be controversial to some, and some may argue that it puts an investor at a disadvantage rather than a competitive edge. However, by screening tenants meticulously, you’ll be able to find suitable tenants. From there, everything should be fine. In fact, renting to Section 8 tenants can oftentimes serve as a competitive advantage. A lot of non-Section 8 tenants will pay rent late, resulting in losses over time. This isn’t the case with renting to Section 8 tenants.
You could also choose to target tourists through renting in vacation homes or short-term rentals. One of the best ways to do this is through Airbnb. Becoming an Airbnb host can give you a great advantage over other investors, especially since monthly Airbnb rental income is often two to three times more than that of traditional income properties.
Use analytics when searching
To get a competitive edge right from the get-go, use analytics when scouring for properties on the rental market. Mashvisor offers you that opportunity, allowing you to search traditional and Airbnb properties all over the U.S. Plus, by using rental comps, you will get an idea of what nearby properties are earning and what kind of properties they are. This is great especially for Airbnb. It gives you an idea of what an investor is doing right and what they are doing wrong. Then you can one-up them by improving what needs to be improved.
Analytics also tells you which rental strategy will be more profitable for your property in the rental market. From there, you can find out the cash on cash return, cash flow, cap rate, and so much more about the property.