Investing in real estate can be a hobby or a business. No matter what, you can make lots of money if you do it right – whether it be by increasing your cash flow, increasing your equity, or just getting creative.
When considering how you can benefit from real estate, keep in mind that you may not have the same flexibility with rental property as you would with owning a home. However, that doesn’t mean that changes and additions cannot be implemented to increase your cash flow.
Increasing profits for rental properties
As a landlord, you want to earn as much money as possible with your property. Sure, increasing the rent is one option. But here are five more ways you can increase your rental income.
1. Reduce vacancies
To maximize the profit from your rental properties, you must first minimize the vacancy rate. The best way to do this is to find a long-term renter so you don’t have to deal with fluctuations. But if someone has to move out, you can also reduce turnaround times to a minimum by lowering the rent. This is especially important if you only rent a single-family home, where vacancy months can put even more strain on your wallet.
Each free month costs you 8.3% of your potential annual sales. Better to rent one month faster for 5% less rent and two months faster for 10% less rent, and so on.
2. Minimize sales
Sales cost money in several ways. There are advertising and repair costs, as every tenant wears out an apartment while living.
Some people will inevitably leave because they are moving across the country or buying a home nearby. The last thing you want is to lose your best tenant to the landlord down the street. Then you have to deal with the costs of acquiring a new tenant and the loss of income due to the vacancy.
Remember to offer good customer service. Whether you manage your properties personally or have a property manager, make sure that your tenants are treated with respect and professionalism, that their concerns are valued, and that matters are dealt with quickly and to their satisfaction. A good tenant-landlord relationship prevents tenants from considering moving.
3. Increase rent strategically
When you learn how to profit from real estate, you will understand the delicate nature of renting. Renters can be more loyal if they can’t find lower rents elsewhere, but that doesn’t mean you should never increase rents if you have a good reason to do so.
As soon as you have won a tenant, there are costs for moving out. If the value of the current rent is significantly higher than the new value plus the moving costs, you have the upper hand.
Remember that you should only increase rents when it is appropriate and with good information. Make sure you know about rents in the area by researching sites like Zillow, rentometer, Craigslist, and the MLS if you have access.
4. Be careful about late fees
Showing kindness and respect towards your tenants doesn’t mean being a pushover when it comes to rent collection and late payment interest.
Debt collection isn’t the most pleasant part of being a landlord, but it’s essential to running a profitable business. Make sure your tenants understand that this is a deal and that they have signed a contract. It is your responsibility to complete this transaction in accordance with the contract and all applicable laws (including eviction procedures if required).
This is your business and you will lose money if you loosely respect the contract, e.g.
5. Add sources of income
The real estate profit does not end with the rent. Look for ways to add services and assets, such as:
If you are particularly entrepreneurial, you may even find additional sources of income in your single family homes. One idea I had was to offer house cleaning and landscaping services to my tenants at the time the lease was signed. These are responsibilities they have under the rental agreement but may not be happy to be assumed.
Increase Your Investment
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Of course, renting from long-term renters is a way of getting paid, but now that services like Airbnb have popularized independent short-term rentals, the old-fashioned rent may not be the most profitable model.
If you have an empty apartment, consider renting it out on the short term. You can only charge a few thousand dollars a month when renting long term, but you could make hundreds of dollars in a few days. Keep this tip in mind when preparing your device and making it a vacation rental.
1. Make the property ready for a vacation
A vacation home is not an annual rental agreement. Since a person’s length of stay at your vacation home is much shorter, guests tend to have higher expectations of the look and feel of things. When preparing your space, think of a hotel-like experience. Tenants want to flee their homes and not trade them for another version of the same thing.
To make the renter’s experience even better, consider modern luxuries such as high-speed internet access, flat screen televisions, and cable. And if you are using this property for long-term renters, consider adding quality furniture to really make it stand out from other locations.
2. Create the type of listing that attracts renters
The work that you put into preparing your short term rental is of no use if you don’t advertise it effectively. Add the following to make it stand out and get more deals.
- A detailed description. Use a detailed and realistic description that highlights the best features of your property.
- A full list of amenities. Make a list of everything your property has to offer to keep even more people interested.
- High quality photos. People will want to see what the property looks like before making a final decision. A portfolio of pictures makes this a lot easier. It’s clear why listings with poor quality photos don’t do well.
Get more return on real estate flipping
When it comes to real estate flips, there are different costs to navigate from the start. The cost of buying the property, hiring contractors, buying building materials, and more can easily add up. Fortunately, there are ways to minimize costs without sacrificing quality.
- Use the same materials on every deal. That means everything including lighting, tiles, toilets and so on. This not only saves time in decision-making, but also money because nobody accidentally buys the wrong thing and all the materials purchased are used.
- Use data to your advantage. That means you need to do a lot of research before buying a property … but buying the right property can save you so much money at the end of the process. Find out about the area the property is in, price changes over time, etc. This will save you time in the actual buying process. Once you’ve found the right property, you will know how much it is really worth and how much you should be asking for the rent with the right renovation.
How to make higher profits through appreciation
One of the most unfortunate aspects of rental property is the cost of maintenance. They are impossible to avoid. At some point something breaks and you have to fix it. There will also be fixes for big ticket items known as CapEx or Capital Spending.
Investments are used to maintain or upgrade the larger physical aspects of a property. Sharing things like water heaters and roofs are good examples of this. When buying real estate investments, these should be factored into your total costs. There is one important way to gain real estate appreciation and avoid capital expenditures: buy a new or fully renovated property. These won’t require much work, if any, in the near future. The important part is when you buy the property.
Pay close attention to the property market for the property you are interested in. Buy the property ASAP if you notice an increase in market prices. If you can secure the property just before a boom, you will benefit from that increase in value. Then hold that property throughout the boom or until it is no longer of any use to you. During this time, try to keep repairs as small as possible.
Experienced sellers know that it is time to give up the property: when their profits level off or go into the red. You can then buy another newly renovated property and start the cycle over.
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Creative real estate investment strategies
Because investing is such a creative field, a real estate investor can take a number of steps to maximize the profits they make from their properties. Not every option works for everyone, but even implementing some of these things can make a huge difference to your wallet.
1. Real estate investment trust
Also known as REIT, are trust companies that own and operate real estate that generate rental income. While cash flow is usually constant, they don’t offer much appreciation in value like other options. However, REITs own all types of real estate and many of them are publicly traded like stocks.
2. Private lending
This option is pretty self explanatory. Here people lend their own funds to their investors to buy real estate. This can range from loans from family and friends to a private institution. It is an alternative to a loan from a major bank.
In this type of agreement, there is usually an agreement between the lender and the investor about how the money will be paid back and what type of interest rate will be applied. This option is especially helpful for new buyers or those who would not qualify for a traditional loan.
Pay attention to the little things
Not every part of owning a property is expensive, but there are things that people overlook or fail to realize that they cost money. Here are just a few to consider for bigger profits:
- Manage your own property
- Do as much of your own maintenance as you can
- Add a coin laundry
- Introduction of pet fees
- Get a real estate license
- Make your own keys
- Introduce lease termination fees
- Levy holding fees
- Collect application fees
- Eliminate additional inmate fees
- Insert the machine