Categories
Homeowners

8 Ways to Improve Your Rental Property ROI

As a property owner, you want to ensure that you receive the highest returns possible. Here are 8 ways to improve your rental property ROI.

Your rental property is an investment. You did your research and bought the property intending to earn money. After all, it is no secret that owning rental property is a great way to earn passive income. With the average return on investment falling between 6% and 10% per annum, it is a great investment opportunity. 

To calculate your current rate of return, you will divide your net profit by your incurred costs. The formula will look something like this: 

 

ROI = Investment Gain – Cost of Investment
                            Cost of Investment

 

If you are not satisfied with your calculation and would like to make your rental property ROI more appealing, you can. That is one of the perks of rental property investment – you can take steps to increase your ROI and earn higher returns. This involves making the rental property more enticing, offering additional services or conveniences, and making wise decisions. Here are eight ways you can improve your rental property ROI.

1. Always Evaluate Rental Rates 

The market is constantly changing, so it is important to keep tabs on it, always evaluating current rental rates. Make sure you are not shorting yourself – keep your rental rates within the market average. Don’t make the mistake of going too high outside the margin, or you will likely have a high turnover rate resulting in vacancy and even a damaged ROI.

2. Advertise a Home Office

Today, more people are working from home than ever before. If your rental has a small bedroom, why not refer to it as a home office? It will make your property seem more appealing – and more beneficial to the renters’ needs. Help the potential tenant see the value (a home office) in that tiny bedroom or extra space. 

3. Go Green

As a society, we are becoming more and more aware that our earth is the only one we will ever get. Taking steps to go green is two-fold. Not only does it show that you are a landlord who cares, but it also gives future renters the ability to save money. 

Going green doesn’t mean engaging in huge renovations. Rather, replace your bulbs with LED light bulbs, use only energy-efficient appliances, and consider investing in plumbing fixtures that minimize water usage.

Another way to increase rental property ROI while maintaining energy efficiency is to include solar in your property. Say you are a landlord that includes electric costs in your rent price, which allows you to increase rent by $200 per month, but most of the year there is no electric bill for your tenant. It allows you as the homeowner to increase your recurring revenue.

These small investments can win over new tenants big time – thus helping your increase your rental property ROI.

4. New Flooring, Fresh Paint, and New Hardware

Tenants want their home to look good, even if it is a rental. Having worn flooring or stained carpet is not going to spark interest at all. If you add new flooring that will look good and last a long time, you will increase its marketability. 

Just like new flooring, a fresh coat of paint can make a huge difference, too. It can make some of the oldest places look brand new. Adding small upgrades, like replacing knobs and pulls on cabinets in the kitchen and the bathroom, can give the space a makeover. 

These are relatively cheap ways to freshen up the rental, bring more money into your pocket, and, in turn, up your rental property ROI. 

5. Vamp Up Your Tenant Screening

You want high-quality tenants that you can keep long-term. Having to put out money to clean and repair the place every year or ending up with tenants who cause damage or do not pay can really do some damage to your rate of return. 

Put time and effort into developing a thorough and effective tenant screening so that you get the prime tenants every time. 

6. Landscaping

Pulling up to a rental that has curb appeal is already going to be more marketable than one that does not. Make it look good. Then, if you would like, add a landscaping service to your rent so that you can charge a bit more. Knowing their rental home will look good without effort on their part is always a win-win for a tenant. 

The extra money the landscaped yard will bring in throughout the year can increase your ROI.

7. Include Home Warranties

Home warranties are a great way to improve ROI as they can cover large replacement costs like air conditioning and water heaters. As a landlord, it is up to you to ensure these major appliances work well, and when they need repair, well that falls on you too. With a warranty, appliance breakdowns will be met swiftly, keeping your tenants happy, while allowing you to increase your ROI.

8. Hire a Property Manager 

One of the best decisions you can make when it comes to increasing your rate of return is to hire a property manager. They do more than just manage your property – they work to nurture your investment and increase your rental property ROI.

See, as a regular part of their process, they handle repairs, landscaping, charge pet fees, perform thorough tenant screening to gain the best tenants, offer innovative and automated solutions, and so much more.

At Real Property Management Evolve, we are Phoenix’s best of the best when it comes to caring for your property. We know that you are an investor and that your rental property is a means of income. That is why we do everything we can to ensure that you maximize those profits.   

Do not risk losing money while trying to figure out how to gain money. Instead, leave it to the professionals – and hire a property manager.

Categories
Uncategorized

Using the BRRRR Method to Diversify Your Rental Property Portfolio

The BRRRR method is a proven strategy to help you diversify your rental property portfolio within the Phoenix area; here’s what you should know.

As an investor in rental properties – whether you have one or an entire portfolio – you know how important it is to finds strategies and methods that work well for you. If you stood in a room of 100 investors, there is a good chance that each individual would have a different strategy or method when it comes to finding the best properties and the soundest investments.

The critical thing to remember is that the goal of one investor may differ from another. And, truth be told, what one may think is a great strategy may be flawed.

If you truly want to diversify your rental property portfolio with an established investment strategy that has been proven to work, then you need to consider the BRRRR method.

 

The BRRRR Method: An Overview

Investing in rental property means that you need to find something valuable and create a lot of cash flow. After all, that is the end goal here, right? Thinking of traditional investments, most rental properties are purchased using financing. You apply for a loan through your bank, give a down payment (often at least 20%), fix up the property, and rent it out. It works, yes. But is it efficient? Not so much.

Using the BRRRR method, you cut out the financing and down payment. There is no need to waste time-saving up money on the side so you can make things look good for the bank. Instead, you find yourself moving the process quickly, rehabbing, renting, and refinancing so you can do it all again. It is, honestly, one of the best ways to keep a well-stocked, diversified portfolio – while maintaining a healthy cash flow.

The acronym BRRRR, stands for Buy, Rehab, Rent, Refinance, Repeat. Let’s take a look at each one of these steps.

 

Buy

You want to buy property as an investment because you are looking to make money. Before you can even think of buying, though, you have to find the property that works for you – meaning type, location, price range, and so on. Once you find what you are looking for, you could look to traditional bank financing, but you must know it is not your only choice.

Consider looking at other options for buying your new rental property:

  • Cash: Not everyone has a stack of cash in the bank, but if you do, you may want to consider moving forward with a cash investment in the rental property.
  • Private funding: If you know someone who wants to financially back your purchase or you have a friend or family who can loan you the money, this could be an option for you.
  • A home equity loan: Borrow against a property you already have.
  • Hard money loan: For those who don’t have the best credit or financial history but still want to diversify your portfolio in hopes of turning your financial situation around, hard money loans using tangible collateral could be an option.
  • Cash-out refinance: Again, if you currently own a property, you can always refinance and use the cash to put it towards your new investment.

As we stated, there are many different options for buying new rental properties, so you can find what works for you.

 

Rehab

The idea behind the BRRRR method of property investment is to look for a promising rental that needs some work – and then purchase it below market value. This allows you to go forward and renovate it and, in turn, increase its value.

Rehabs will vary in cost but can be upwards of $40,000.00 on average. You may encounter simple renovations, such as a leak, new carpet, or new coats of paint. Or you may find yourself having to do some significant renovations with the roof, appliances, remodeling of the kitchen or bathroom, and so on. This is when costs can increase significantly.

Remember that you do not always have to do major repairs to see a great increase in value. Sometimes, just small changes, such as bringing curb appeal to the property, can increase its value to your portfolio.

 

Rent

If you want a sound investment, you cannot skimp when it comes to finding tenants. You need to rent your property to suitable tenants so that they not only care for your property but pay monthly rent regularly and on time.

The tenant screening process requires a bit of time and skill. Sometimes leaving this to the experts may prove to be a wise choice. Property managers have a deep understanding of the local market and know the proper way to screen tenants. This means they also know how to find high-quality tenants while avoiding scammers.

Think about it this way – you are investing in a rental to gain quality tenants – and keep them happy – so you can maintain an income from this property. You need to place value in the entire process – and a property manager can help. 

 

Refinance

The next step in the BRRRR method is to refinance the rental property. Timing is crucial with this step as you want to wait approximately 6 to 12 months after you gain renters before you reach out to the lender. Be sure you have a clear understanding of your guidelines – and have a backup plan – before you rely too heavily on the cash from this refinance. 

 

Repeat

If you are like most investors, you are always looking for the next property. With the money you receive from the refinance we just talked about above, you can purchase your next property – and repeat the whole process.

That’s how you diversify that rental portfolio of yours!

Having professionals by your side always makes the process run a bit more smoothly. While you network with lenders, real estate agents, and other investors, don’t forget to find a property management team, too.

At Real Property Management Evolve, our seasoned team works to keep the Rent portion of the BRRRR method under control for all of your rental properties. That’s what makes us the best property management company in the greater Phoenix area.

Categories
Landlord Tips

The Importance of Rental Property Inspections for Homeowners

As a homeowner, rental property inspections are an important aspect of renting out your home to tenants; here is why.

To keep your rental property healthy, you must perform regular inspections. Think about this: most dentists recommend a cleaning and dental exam every 6-months. This not only gets you to stay on top of your brushing, flossing, and other routine care, but it allows your dentist to make sure your teeth are healthy. Should a small cavity appear, it can be addressed quickly and painlessly. Otherwise, that small cavity could become larger and more painful in time, requiring oral surgery like a root canal.

Inspecting and monitoring your rental property will help you avoid major issues down the road. They not only help you maintain your property but also spark the tenant to show care for the property, as well.

Types of Rental Property Inspections

Several different types of inspections occur at various times throughout the term of the lease. During each of the inspections, you will want to document everything with dates, clear notes, and pictures. This will help you maintain a condition report of the property and, if needed, could be used during a legal proceeding.

Here are the four main types of rental property inspections.

1. Move-In Inspection

This inspection is done at the beginning of a tenancy and often involves a walkthrough by the property management company (or owner) and the new tenant. Everything is documented so that the tenant will not be held liable at the end of the lease.

2. Move-Out Inspection

This inspection occurs immediately after the tenant has vacated the property. Cross checking the move-in inspection report with move-out report, you can see what damage, if any, has been caused that goes beyond normal wear and tear.

3. Seasonal Inspection

Certain types of proactive maintenance occur on a scheduled time frame. These rental property inspections allow you to check up on your tenant’s care of the property while also addressing issues that require maintenance in the upcoming season.

4. Drive-By Inspection

Sometimes taking a drive-by your property allows you to assess its condition. You don’t invade your tenant’s space, but you can still gather an idea of the level of care and overall condition.

Some property managers hold pre-move-out inspections to give the tenant time to cure anything that may be violating the lease term or affect their deposit return. Pre-management inspections are another type of inspection that is common when a management company takes over a new rental property. They inspect all aspects of the property and document it so that everything has already been reported and addressed when the first tenant moves in. Of course, this also ensures that the property itself is in healthy condition for a tenant – and that it is up to code.

Make Sure Your Tenants Expect It

Many tenants feel that rental property inspections are a violation of privacy and may be hesitant to allow someone to come through the property. It is crucial that your lease clearly states the details of the inspections.

At the lease signing, be sure to review each term of the lease – and discuss the inspections. This allows for transparency and stresses the importance of following the terms stated within the lease. After all, during the inspections, you will be making sure the tenant is holding up his/her end of the agreement, too.

Why You Need Inspections

While there are many reasons you will need to inspect your rental property regularly, we have listed a few of the most important here.

Be proactive with maintenance. As we have already discussed, not addressing some maintenance concerns, such as a minor roof leak, can leave you facing significant repairs down the road.

Pay attention to lease violations. When you are inspecting your property, you are doing so beyond the scope of maintenance. You want to make sure that the tenant is abiding by the lease terms so that your property is in good hands. Because they know you will be inspecting, they have more incentive to follow the terms of the lease.

Increase communication. Again, transparency is essential. If your tenant knows you are monitoring their care of your rental home, then when some issues arise, they are likely to report it. Having a good landlord-tenant relationship is imperative for maintaining quality clients.

How a Property Manager Can Help

Hiring a property manager can take the burden of rental property inspections off of your shoulders. They will take the time to review the property, document the inspection, and often store this info electronically to easily access it in the future. They are familiar with the lease and know what to look for in terms of violations. Also, their experienced team knows preventative maintenance and what needs to be inspected and addressed. Any issues that arise can be handled accordingly to keep your rental property healthy.

It is important to note, however, that not all property managers are the same. When you hire someone to take care of your rental portfolio, you want to make sure you clearly understand the agreement you sign – as well as any fees. Unfortunately, many property managers hide their inspection fees, giving you the impression that it’s a routine service until it happens.

RPM Evolve Sets the Bar High

Real Property Management Evolve thrives on providing the best property management service with an honest approach. We know the practices of other property management companies, and that’s why we set the bar high. At RPM Evolve, we stay away from shady practices and only have the best interest of your rental property in mind.

We list the fees for our inspections right on the pricing page of our website! And, depending on your membership, your property inspections may be included.

We believe that regular inspections throughout the length of the lease will help us manage your property the best. By monitoring the health and condition of your property, we are better able to keep it healthy for years to come without leaving you any hefty repair costs. RPM Evolve has a team of experts in their field who know what to look for and how to address it.

Conclusion

Rental property inspections are a necessary part of managing your properties. Avoid significant issues down the road and keep your tenants adhering to the lease terms with these regular inspections. If you want to leave it to the professionals, hire a top property management team – Real Property Management Evolve!

Categories
Landlord Tips

Fair Housing Act Arizona: How to Protect Yourself and Your Property

As a landlord, it is imperative that you understand the Fair Housing Act in Arizona and how you can protect yourself and your property with the help of a property manager.

We live in a world with laws that are put into place for all sorts of reasons. These laws keep our roadways safe, help keep our children safe, and even help with our job security. Regardless of how good or bad you feel a law is, it was put into place to keep balance within our society – and ensure that everyone has an equal right to an opportunity.

As a landlord or rental property owner, there are specific laws that you must follow to allow everyone a fair chance at renting your property. You cannot pick and choose who you want to allow to rent your property, just as a business owner can’t pick and choose who he will let shop in his store.

Does this mean you have to rent to anyone? No.

Does this mean you have to give everyone a fair chance? Yes.

Let’s take a look at the Fair Housing Act and how the State of Arizona uses it to protect you and your property.

History of the Fair Housing Act

The federal Fair Housing Act was enacted with the 1968 Civil Rights Act. It was done so to eliminate discrimination. Before this act, discrimination was running rampant in Arizona and around the country. Kids learned in schools that were segregated by color, and minorities found it nearly impossible to advance in an economic world. Neighborhoods remained separated by racial divide due to the unfair Arizona housing laws.

The Fair Housing Act did not happen overnight. Nobody came up with this grand idea and decided to run with it. Many people fought long and hard for these equal rights. Shelley v. Kraemer is a court case from 1948 that was filed due to minorities being excluded from certain neighborhoods and sections of cities. This was a fight against the housing patterns that were based on race – and popular at the time.

During the civil rights era of our country, many aspects of discrimination were found in legislation. Title VIII of the Civil Rights Act became known on its own as the Fair Housing Act. Its purpose was to make it illegal for individuals to be discriminated against based on things such as race, religion, sex, and national origin.

The Fair Housing Act would later be amended to include protection for additional groups, including those who are disabled or based on family status. Currently, the federal law prohibits housing discrimination against anyone based on:

  • Race
  • Color
  • Religion
  • Sex
  • National Origin
  • Familial Status
  • Physical or mental disability

The Importance of the Fair Housing Act in Arizona

Housing discrimination laws protect all people, regardless of who they are. As a landlord, these laws are to help guide you so that you do not give unfair treatment to one potential tenant over another. For instance, your tenant screening process should be the same for everyone who applies. And the qualifications that your tenant is required to meet should also be the same. Being consistent, requiring the same documents and fees, and holding each to the same standards is critical.

It should be noted that you cannot:

  • Deny someone the opportunity to rent your property.
  • Advertise to a specific group.
  • Be inconsistent with your qualification standards.
  • Harass a tenant.
  • Refuse to accommodate someone with disabilities.
  • Have an unfair screening process.

Regardless of your personal feelings, you have a property for rent – and everyone must have an equal opportunity to rent it.

Protecting Yourself and Your Property

Whatever you do, you do not want to find yourself in hot water. You do not want to discriminate or insinuate anything – from the first moment of marketing your property until you are moving in a new tenant and beyond. You need to be cognizant of your actions while speaking and behaving in an unbiased manner, no matter who you encounter.

Sometimes, landlords act without looking at the whole picture. It’s easy to do. For instance, if you receive a tenant application for a property from someone who is disabled and in a wheelchair. Would you deny it because it has stairs? After all, how would he or she get upstairs? This is an example of what not to do.

Or what about turning down someone with a service animal because of your no pet policy? This is discrimination, too. If you have someone who helps you with maintenance and he or she picks and chooses whose repairs to do first – this could also be a type of discrimination.

Any time someone feels as though they are being discriminated against, a claim can be filed against you. And each complaint will be reviewed by the Arizona Attorney General Civil Rights Division. Do not find yourself here. By being mindful and knowledgeable of the Fair Housing Act in Arizona, you can avoid these consequences.

A Property Management Company Can Help

Whether you are new to the rental game or are a seasoned landlord, filling a vacancy or working closely with new tenants is always going to make you cautious. You want to do the right thing (hopefully), but one wrong move and you can find yourself under review. It is a lot of stress that most landlords just do not want to deal with.

Leave it to the professionals – property managers who make it their job to know the law and follow it. Inevitably, human error happens. This means if you have a property management team handling your rentals when this poor judgment happens, you are not going to be the one held liable.

The best choice you can make is to hire a property manager with an excellent reputation and a long history of solid, fair housing practice. At Real Property Management Evolve, our team of professionals is well-versed in the Fair Housing Laws in Arizona and makes it a point to follow them. We make sure that your vacancies are filled with the best tenants imaginable – the ones who surpass all qualifications of our non-discriminatory tenant screening.

Final Thought

The Fair Housing Act in Arizona was put in place to ensure that everyone has equal access to the housing available in the market. As a landlord in Arizona, you are required to abide by these laws or face the consequences. Reduce your chance of incidence with a professional property manager.