No matter how many rental properties you own, whether they’re residential or commercial, you’re probably interested in making them more profitable. Since owning real estate comes with many different expenses, your options are limited in terms of what you can do to make an individual property generate more money. However, there are some strategies that will increase your profitability as a whole.
Keep your existing properties rented as much as possible
An empty rental costs you money daily. When you have an empty unit, you still have to pay the mortgage, property tax (if it’s not part of your mortgage payment), potentially some utility bills, property insurance, HOA fees, and maintenance. An empty unit means you aren’t bringing in income to cover these expenses, and it’s coming out of your pocket.
Do everything possible to keep your units rented. There will be times when you’ll have unavoidable vacancies, but you can limit those instances with some effort. If you aren’t sure how to keep your rentals occupied, work with a property management company and they’ll handle everything for you.
Make improvements to your properties
When you perform certain renovations to improve your property, it’s going to cost money. However, in the long run, improvements can increase the value of your property. Should you decide to sell it several years down the road or even a decade later, it will sell for a higher price.
Some improvements you can make to increase your property’s value include:
· New siding, like stone veneer
· A full kitchen remodel
· Refinishing your floors
· A full bathroom remodel
· Finishing the basement
· Beautiful landscaping
· Adding a new living space
· Adding a patio
· Replacing entry doors with steel
· Adding a concrete parking pad in areas where street parking is scarce
These are just some improvements you can make that will generate ROI if you choose to sell your property later. To make it work for you, choose the ones that make the most sense for your property.
Charge market rate rent
You won’t be very profitable unless you’re charging the market rate for your properties. If you’ve been giving tenants a deal for a long time, start gradually raising the rent now before you end up with rental income that won’t even cover the mortgage.
If you’re renting to friends and family and not charging full rent, make some changes as soon as possible. Technically, you can’t write off your expenses for a property if you aren’t renting it for fair market value, so this change will also help you save money on your taxes.
Tenants expect rent hikes periodically, and that’s not going to prevent you from keeping your properties rented. Your current tenants may not like paying higher rent, but they can move out if they don’t like it, and you can rent to someone else. There will always be plenty of people looking for a rental and as long as your rent is fair, you shouldn’t have any problems finding a new tenant.
Make repairs quickly
How quickly you make repairs can have a big impact on your profitability. For example, if you let water damage sit for long periods of time, you’ll be looking at potentially tens of thousands of dollars in repairs. If you tackle the problem when it’s first discovered, it will cost you far less.
For example, if you don’t immediately fix a small leak in the roof that trickles down through the ceiling, later, you can expect to replace all the sheathing, potentially the frame, insulation, and drywall. Then you’ll need to paint.
Plumbing issues also become costly when ignored. Both standard plumbing and septic systems require regular maintenance to prevent clogs and other issues. If your tenants report a plumbing issue that involves the sewage or septic system, make sure to address it promptly to avoid bigger problems.
Get into commercial investments
If you’ve always sought residential investments, try going for a commercial property because they’re a bit more profitable. The mortgage will be higher, but long term they will bring in higher profits. For instance, residential properties yield 1%-4% in profits while commercial properties range from 6%-12%.
Commercial real estate in a good location will be in high demand, which will limit periods of vacancy and maximize your income.
Increase your profitability by acquiring multiple properties
Last, but not least, your best strategy for increasing profits is to acquire as many rental properties as possible. Within reason, of course. If you have the means to acquire additional properties, do it because that’s the only way to build true wealth with real estate.
