One of the most important components to owning investment property is pricing your rental appropriately so that you maximize revenue while minimizing vacancy. Determining what to rent a property for can be somewhat of a science when trying to optimize your ROI. You will want to employ several different techniques and strategies when determining the right amount to charge for rent:
One of the most accurate and easiest ways to figure out what the market will bear in rents is by checking out the area.
This requires a little leg work on your part, but is going to give you the most realistic look at what you are facing. You can often find rental signs in the area posted with rental amounts, number of bedrooms and other details about the property. Calling these landlords and getting info on what they have for rent and what they are charging is a great way to get a feel for market.
The newspaper or online classifieds is another excellent way to check out what is available for rent in that area, Not only do you want to see what others are charging, you want to see how long it stays listed at that price. If properties are renting quickly at certain prices, you know that there may be room to price slightly higher.
Let’s talk about the common tasks you might perform as a landlord. This will give you just a sample of the kind of tasks a landlord is responsible for.
64 Tasks Landlords Are Responsible For
- Preparing a property to rent
- Collecting forms needed for the businesses
- Placing ads in the newspaper and/or online
- Placing signs in the yard
- Determining fair market rent
- Determining the security deposit amount
- Setting minimum qualification standards
- Taking phone calls from prospective tenants
- Pre-screening tenants
- Scheduling appointments to show properties
Are you maximizing revenue from your real estate investments? If you have rental property, there are literally hundreds of ways to make extra money. I often thought if I had 20 properties to take care of that it would be a full-time job for someone, possibly me. In addition to the rental income, at a time I was running a small lawn care company, trying to generate enough money to live on. That mowing, plowing and miscellaneous maintenance generated capital to kick-start my seed money for real estate investing. Now that I have my rentals, I always look to save money or generate new revenue streams from my tenants. I am not looking to gouge them, but for ways to leverage my skills and their money.
14 Clever Ways to Maximize Revenue From Your Rental Property
1. Manage your own property.
If you can manage your property at all, this is a huge savings. A property manager will get up to 10% of the rents just to take and make calls. You can do that from anywhere in the world as long as you have cell service. You need to be able to take a call and make a call. Save this 10% of gross rents and increase your total profit by as much as 20%+.
When you purchase a new rental or commercial property with investment intent, you must allocate a portion of the purchase price to improvements and the remaining amount to land. The reason for this practice is that you cannot depreciate land, only improvements. This makes sense because dirt lasts forever.
Depreciation is the reduction in value of a property over time due to the particular wear and tear on the asset. Residential properties are depreciated over 27.5 years, while commercial properties are depreciated over 39 years.
This reduction in value is a current expense, yet no money comes out of your pocket. Sounds like a pretty awesome deal, right? You get to reduce your reported income by your annual depreciation expense without actually paying for anything!
But what is depreciation really? Do you think the IRS, our favorite government agency, would let you have it that easy? I’ll give you a hint: the answer starts with the letter “N” and ends with “O.”
Low income properties may seem like the worst meal on the table, but that doesn’t have to be the case. If you know how to invest successfully in these types of properties, you can actually make a good profit out of it. You may ask me how I can say this so confidently. I’d like to tell you my own experience with this. I picked up not one, but two of the cheapest houses in America. They weren’t in great locations, but I got an amazing can’t-be-missed deal for the both of them. And what’s that deal, you may ask? Well, you may have heard of properties that get sold for $1,000 or even as little as a $100. Here’s the thing: I spent even less on these properties.
Managing one or more rental properties means you will naturally have to handle a variety of tenant concerns and complaints. Below are some of the most commonly stated tenant complaints, with tips on how to avoid or deal with each. From disagreements about the return of a security deposit to property access, and even commonplace repairs and maintenance, here’s what tenants gripe about most:
Security Deposit Refund Disputes
According to Zillow.com, refund of the initial security deposit is one of the biggest complaints tenants file against landlords. Since this sum is generally a significant amount, it is essential that you detail how security deposits are handled in your lease and that you clearly outline how items or repairs will be deducted from the tenant’s deposit. Charging for general wear and tear, building a profit into repairs, or not specifying exactly what the charges are could lead to complaints and even legal action.
There are four basic kinds of rental property inspections that a property manager or investor should perform regularly: move-in, move-out, drive-by, and in-home. If you’re not doing all four (or having them done by someone you trust), you’re putting yourself into a large amount of unnecessary risk. Here’s why:
When a tenant moves into a property, it’s important that the two of you create a list of every issue with the space that could, potentially, cause you to withhold any part of their security deposit when they move out. This is for their benefit, so that they aren’t held accountable for something that wasn’t their fault, but it’s also for your benefit, so that you have proof when they move out that any deductions you do make from their deposit are legitimate.|
You want this inspection to be performed by the tenant, so they feel satisfied that they are being as thorough as they want to be — but at the same time, you need to be present as well. That’s because you need to make a complete record of every issue they find, including written notes, pictures taken of each item, and even a final video walk-through at the end that visits each issue, showing the context of each problem. For example, you might not be able to tell after seven years that a particular picture of a crack in the drywall was taken in the front bedroom as opposed to the kitchen — so having a video (with the tenant in it!) to refer back to can be a godsend. Be certain to have the tenant sign off on all of their notes at the end so you have evidence that they approved the list of acknowledged issues.
John F. Kennedy said, “The time to repair the roof is when the sun is shining.”Sometimes it’s easy to forget about the areas of your home you don’t see everyday, but that’s exactly when problems arise. Stay ahead of repairs by regularly inspecting them to avoid worse problems later.The roof and gutters on your rental property can be easily neglected, but with a little proactive maintenance you can protect your rental and avoid costly repairs.
Maintenance Tips for Roof and Gutters
- Replace curling, buckling or cracking shingles
As a rental property owner, you must have a solid understanding of your liability in regards to maintenance. You can be named as liable for negligence if you failed to keep the environment safe, if you knew of a hazard and didn’t take reasonable actions to prevent injury, or if that hazard caused damage due to your inaction. As such, approach your maintenance liability decisions as though you might present your decisions before a judge if a lawsuit developed.
Another factor to consider is that statutes may overlap or conflict with civil or criminal laws, and so it is always better to be safe than sorry. Even if the problem is caused by your tenant and they are responsible for the “damages”, you should be proactive and take care of the repair, then bill the tenant for their responsibility. This could cost you some money, but in the long run, the risk is not worth a possible lawsuit.
Five Simple Steps to a Rent Ready Home
Many property managers and landlords believe that a quick sweep through the home prepares it for a new resident, but this is not enough as they are missing some crucial steps. Here are five simple steps to ensure that your home is in tip-top shape and ready for a new occupant.
Step One: Re-key the Locks
Yes, you collected the keys from the resident, but did they make spares? All outside locking doors should be rekeyed between each resident. Additionally, rotate the codes on any garage doors, access gates, exterior property gates, and mailboxes.