If you own real estate, you understand that a volatile market and changing housing trends can result in varying profit levels on an annual basis. If you’re looking to tap into greater profits and put yourself on an upward slope in the rental market, consider these strategies.
Strategic Rent Increases
While it’s important to remain competitive with your rent prices, it’s also important to strategically increase your rent prices as the years go on. The right increase won’t scare off long term tenants, and will keep you competitive with neighboring properties, and sticking to small incremental increase of 2 to 3 percent annually is generally a safe and strategic move. It’s important to remain on top of the rents in your immediate area using a service like Rentometer. To make rent increases easier to swallow for current tenants, be sure to offset the shock and dismay with upgraded amenities or new services. This could be landscaping options or new appliances. This will appeal to existing and new tenants and keep the property competitive and desirable.
Reassess Your Tax Breaks
Landlords and property owners are privy to a great deal of tax breaks. Are you taking advantage of all the IRS has to offer? It’s important to reassess your taxes, especially if your real estate acquisition is relatively new. You can claim any and all repair and maintenance costs, and there are tax break provisions regarding mortgages and upfront costs. If you’re unsure that you’re making the most of your real estate tax credits, be sure to use a financial advisor from a company like Ameriprise.
Take Time to Find Great Tenants
Your profits are only as good as your tenants. Securing a long term, high quality tenant is top priority, as placing a trusted individual in your space can help you avoid costly damages, frequent turnover, and legal troubles that have plagued landlords. Always interview multiple candidates, screen extensively, and draft airtight leases that cover all of the bases needed to protect your personal interests. Be sure to utilize security deposits, always charge late fees, and keep up consistent communication with tenants to ensure any problem is fixed with immediacy.
Finding long-term tenants means avoiding turnovers. As every landlord knows, vacancies can cost a fortune. Keeping tenants happy means fostering a great relationship, and providing the necessities and features that make your property competitive in the local market. It’s important to spend time learning how to keep great tenants. It’s a matter of being respectful, timely, and professional in every interaction. If you can’t avoid vacancies, as is sometimes the case, be sure to give yourself enough turnaround time to fill a space. This can be accomplished through airtight lease provisions that require tenants provide 45 days’ notice before they plan on moving out. Longer than the standard 30, this will give you half a month more to refine your tenant search and find the perfect candidate. If you have a tenant lined up long before your former tenant moves out, you won’t experience a hit in income, and increase your overall profits in the long run.
Become Energy Efficient
Becoming more profitable means looking into areas in which you can save, and most landlords realize that their energy costs have been significantly eating into their profits. Not only will you (and tenants) save on utility costs, but depending on your efforts, you may become eligible for “green” tax incentives and rebates. Whether it’s upgrading all appliances to energy efficient versions, landscaping earth berms into the front yard, or installing solar panels to help power the home, any and every effort will work towards improving your profits.
Staying successful with real estate ventures requires flexibility and a commitment to continuous improvements, both on the property itself and on your landlord practices.