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.
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.