Real estate remains one of the best investments for both active and passive investors today. If you decide to rent out your property—which is one of the best ways to make your real estate investments profitable—you effectively add a significant amount of income to every unit you lease.
However, not every property or unit can provide a significant level of rental income. Furthermore, vacancy can also affect your cash flow in more ways than one. With that in mind, how can you maximize the income from your rental properties? And in doing so, how can you ensure a good cash flow even with vacancy?
Here are some strategies that you can apply.
- Leverage cost segregation
If you are a real estate investor, you either know about cost segregation, or you don’t. In simple terms, cost segregation is a strategic tax planning tool that helps real estate owners and investors accelerate deprecation deductions and defer federal and state income taxes. If you leverage this tax planning tool for your real estate business, you have the potential of saving thousands or even hundreds of thousands of dollars in income taxes.
Thus, cost segregation helps you keep more of the money you make. If you haven’t already, hire services for cost segregation to help you take advantage of this tax strategy.
- Upgrade your units
While the condition is not the sole factor determining the rental price, it is definitely one of the most significant. Therefore, the higher the quality of your units, the higher—in general—you can charge for them.
There are several ways you can upgrade your rental units. Here are some examples that can bring you the most ROI:
Fresh paint. A fresh layer of paint is perhaps the most inexpensive upgrade you can make to a property, yet it makes a big difference. Between tenants, it is a good idea to apply a fresh coat of paint to hide blemishes on the walls, such as scuff marks and stains.
Major repairs. Tenants won’t be as keen to pay a good price for a property that needs any major repairs. Tackle these repairs before anything else so that you can charge accordingly and avoid frequent calls for repair in the future.
Furnishings. A furnished or semi-furnished rental generally costs more than an unfurnished one. Consider furnishing your rentals with the most basic pieces of furniture. If you have more than a few rentals to furnish, you can also take advantage of bulk prices to save more money.
Faux flooring. Replacing the original flooring in your rental can be expensive. A great alternative is to lay down faux flooring that sticks on top of the original floors and removes just as easily. Aside from covering up flaws in the old floors, this tactic can also help you update the look of the apartment without making a huge investment in new flooring.
Laundry facilities. An on-site laundry facility is another way to add value to your rentals. You can also charge a minimum amount for tenants to use the facility, the proceeds from which you can use for maintenance of the machines.
- Minimize vacancy
Another excellent way to maximize your rental income is to minimize vacancy. To do this, here are some strategies that you can apply:
Start advertising near the end of a tenant’s lease. If a tenant’s lease is about to end, and they do not wish to extend it (or you do not want to offer them another lease), start advertising the unit as soon as possible, be it through social media, online listings, or rental agencies.
Offer incentives. To attract potential tenants to your property, consider offering small incentives like paid utilities for the first month or free appliances if they move in right away. You can also offer incentives to existing tenants to stay, such as a reduction in rent or free rent for a month.
- Consider changing your lease terms
If you allow pets, short-term rentals, and other lease agreements that some tenants are looking for, you may be able to fill out vacancies faster and increase the value of your rental properties. You can also consider increasing the rate for tenants with pets (pet rent) or who are only staying for a few months.
If you want to maximize your rental income, you have to make your units more valuable. Try applying these strategies to your real estate business and, at the same time, actively seek out ways on how to increase your profit with a corresponding return to your tenants.