How To Make Your Rental Property Portfolio More Profitable

Rental Property Portfolio
The main reason to want to get into the rental property game is so as to enjoy a steady stream of income without the stresses suffered by those involved in other business niches. Not only do you have rent to look forward to, but also the gradual appreciation in value of your property. Just as with any other concern however, there is always the desire to want to see your incomes steadily increase. This should ideally happen, even when you have not added new properties to your portfolio. Here are some of the best ways you can go about ensuring you are getting the maximum possible profit from your investment.

  • Do the math

Before you buy a rental property, be sure to do the math and ensure you are guaranteed a positive cash flow.

Remember to factor in all the expenses involved in such an investment, including the mortgage payments, property management and security, if any. If the property is already profitable when you buy, then chances are you can make it even more so with improvements over time.

  • Keep it occupied

The biggest cost suffered by landlords is the loss of income created by vacancies. Not only is there the loss of income, but also the cost involved in sprucing up the place and advertising it to new prospective tenants. This means you have to work hard at keeping your units fully occupied. To do this you need to look into what may be causing a high turnover for your property. Check on whether you are pricing your rent above market rates, the character of your property manager, and whatever other issues that may be influencing your tenants decisions to move out. Querying your tenants as they leave is a good idea to know what the problem is if not obvious.

  • Increase rents strategically

Low rents will typically help encourage your tenants to stay put, but you cannot sustain this for long and expect a fair return on your investment. Most neighborhoods with time gradually appreciate in value, and so too will the rents in the area. In order to keep your tenants long term, but continue to enjoy an increase in your income, increase your rents slightly each year. Industry figures indicate that a 1-3% increase each year is just enough to keep your profits going up, while not upsetting your tenants. Remember that moving costs money. As long as the increment is below this cost spread over the typical lease period, then you should be fine. Also, keep in mind what other similar properties in the area are charging.

  • Have expertly drafted tenancy agreements

These days, tenants have become increasingly aware of their rights, especially when they are able to band together and have access to legal help. Do not allow yourself to be on the short end of the stick when it comes to protecting your rights as a property owner. Ensure that you get help form a property lawyer on drafting a tenancy agreement. This way you can ensure the clauses included will allow you to legally raise rents when needed and allows you to penalize the tenant for late payments and breaking the agreements. There is much money to be made from collecting late fees and other penalties if you have the will to enforce the agreement. This is not meant to be a punishment for tenants, but rather a way to instill discipline. You can enjoy timely made rent payments and ensure better care of the property.

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