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
Homeowners

8 Benefits of Owning Rental Property

There are many benefits of buying and owning rental property, especially if you choose to work with a property management company. 

As with anything in life, there are both pros and cons when it comes to purchasing and owning rental property. Some have done very well in the business and others who have not. Each one of these individuals could give you a list of pros and cons – and they may not all look the same.

When it comes to determining the benefits of owning rental property, it comes down to the investment. If you do your research and invest in a property that is going to be marketable, then you are going to reap the benefits – benefits that far outweigh the negatives.

So, what are the benefits of owning rental property? We have got eight to spark your interest.

1. Rental Property is a Source of Passive Income

What if you could continue to make money while you and your family head out on a three-week vacation? What if you opened a bank account that just gathered money on the side while you continue to push forward in your full-time career? What if you spent your days doing what you love while money still comes in?

Passive income is money that you consistently make without putting in much effort at all. Who would not like the sound of that? That is why it is one of the biggest benefits of owning rental property. Whether you are wanting to use this money to make a living or to save for your future, it is a great way to earn without having to put in the time.

2. It is Not Hurt by Inflation

The word inflation can leave some people in a panic when they hear it. Inflation is a sign that prices are rising – and the world around us is getting more expensive. But for those who own rental property, inflation can be a perk.

See, as prices rise, so does the cost of living – and that means the rental rates. Landlords can increase the rent for their rental annually, never feeling overwhelmed by inflation. But are you ready for the best part? The mortgage payment on your rental property is fixed. As your rental price increases, so will your cash flow.

3. Properties Allow for Investment Diversification

You never want to invest all your money in one type of investment. Why? Because investing, in general, can be risky. One sharp turn in the stock market, for instance, and you could lose everything. It is best to diversify your portfolio to include various types of investments – include property rentals.

4. Rental Property Helps You Plan Your Retirement

When you retire, do you intend to simply sit back and live off your social security payment? Do you intend to live comfortably that way? You may want to think again. The way of the world today is not incredibly supportive of those who intend to live solely off of their social security income. While it may be possible, it is not always a very enjoyable retirement.

Rental property can help you save for your retirement. Not only can you put money aside in savings that you’ve earned throughout the years off of your rental properties, but you can also continue earning money from them even while actively living in retirement.

Gone is the fear of running out of money before you die.

5. It Means Always Having a Place to Live

Many people invest in real estate for the sole purpose of purchasing and owning rental property. Others decide they are going to rent out their home for a few years while they relocate, whether it is for a job or family reasons or even just to seek out an adventure. Sometimes it is hard to let go of a home you love.

Choosing to offer it as a rental property means being able to still have your property for your use in the future without having to worry about getting the mortgage payment paid.

You can always go home. In the meantime, though, open it up to renters.

6. Rental Property Appreciation is Good for Your ROI

Appreciation plays a big role in determining your final ROI. You cannot buy property, fix it up, and flip it – expecting a huge ROI. Sure, you may get one, but you also may not. Instead, allow your property to build up its appreciation. Buy it and turn it into a rental, holding on to it for at least ten years. Annually, appreciation has been increasing consistently for the last five decades.

In 2020, the Phoenix single family market experienced an average appreciation of 12% even during COVID. Imagine how much equity you would have if you had already purchased a rental property in Phoenix AZ.

This is definitely something to consider when choosing your investments. Take advantage of property appreciation.

7. Properties Creates Tax Benefits

There are many tax benefits of owning rental property, and they come in the form of potential tax deductions. If you are paying a mortgage on your rental property, you can deduct the mortgage interest from your tax return. Most landlords find this is their largest deductible expense.

In addition, you can deduct property taxes and licensing requirements. Other deductions include operating expenses, depreciation, repairs, and maintenance. Rental properties provide more tax benefits than almost any other investment and partaking in all the potential tax write-offs can improve your financial stability.

8. Rental Property Can Be Managed By Professionals

Perhaps the best benefit to come with owning rental property is the fact that property managers are available to handle it. Once you purchase your investment and are ready to rent it out, a property manager can handle everything else. From marketing the property, screening potential tenants, handling routine – and emergency – maintenance, preparing documents and leases, scheduling walkthroughs, and so much more.

Property managers allow you more time to invest, work your full-time career, or play golf. You do whatever you need to do, and they handle the rest. Sounds good, doesn’t it? Sometimes, the idea of investing in rental property sounds great, but the reality of all the work that comes with it can be a deterrent. Knowing that you have someone to handle that for you is a huge benefit.

Final Thought

While all these benefits are wonderful reasons to invest in owning rental property, it should be noted that you have to make sound investments for this to work. Talk with a property manager, get to know the area and the market, and do your due diligence before you invest. Do not miss out on what rental property can bring you.