7 Tips for Dramatically Increasing Rental Spreads

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How can rental property landlords continue to increase their cash flow and profit spreads?

What are some of the smart ways to create more cash flow in a new deal and to counter inflation in order to maintain great profit margins on rental homes and apartments?

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7 Tips for Dramatically Increasing Rental Spreads

Get property taxes reduced.

It’s great to see more investors using this tool, but more still should be. There frequently continues to be significant disparity between the property tax bills sent out and what owners owe. The majority of property owners probably still pay the bill without questioning it. That’s what the city is counting on. Depending on where you own property, as much as 50 percent of the tax bills sent out each year can be overinflated. You could save thousands, if not at least hundreds, of dollars every year by challenging those bills and getting them reduced. Work towards getting that appeal!

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Select tenants who are willing to pay more.

Some tenants are going to be willing to pay more than others for the same units. Perhaps they just really love the location, or maybe the wife must have that extra bathroom to keep her sanity. Possibly they don’t qualify for other local rentals due to some quirks with their application. Some may even be challenged on the move-in money, but may perform very well with less deposit upfront and a higher monthly rate.

Related: 10 Screening Tips to Help Avoid Profit-Tanking, Time-Consuming Tenants

Makeover the property to appeal to high paying tenants.

I find the kitchen and bathrooms are especially important in this respect. However, depending on where you live, the key may be curb appeal, positioning the property as a vacation rental with everything provided, or upscale interior design touches to attract the best paid professionals.

Never go over the top with your rehab.

I can’t stress this point enough. Spending too much on your rehab can also mean cramping your profits. Go too expensive, and you may never find a tenant who is willing to pay as much as you want. That means bleeding money every month — or years without positive cash flow. Please don’t fall victim to this.

Improve your rent collection methods.

The data shows that landlords can face massive time waste and financial losses from the old school methods of knocking on doors to collect rent. This is due to labor costs, physical dangers, counterfeit bills, and check fraud. Go online and put those dollars in the bank instead. Simply moving to online payment options for rents can dramatically lower costs and the risk of loss due to fraud.

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Related: How to Successfully (& Legally) Raise the Rent as a Landlord

Practice proactive maintenance.

Proactive maintenance versus waiting for repair and wear and tear issues to become emergencies can save a lot of money. That’s profit that should be going into your bank account, not funds you’re paying out to vendors when it could have been avoided. For example, my team conducts frequent inspections and looks out for additional issues when going to the property for routine maintenance, like furnace filter changes.

Buy right.

Be sure to always buy right so you aren’t forcing yourself to push for a rent that’s too much for the area in order to cover your costs. Make sure you dig deep into the data to learn what realistic rents are. Sites like Rentometer, Zillow and Trulia can help when doing due diligence. 

Investors: How do you increase rental profits? What would you add to this list?

Leave a comment and let me know!

About Author

Sterling White

Sterling White started in the real estate industry at a early age back in 2009. The company he co-founded Holdfolio is a real estate crowdfunding platform based in the Indianapolis market. Before founding Holdfolio Sterling and partner Jacob Blackett were involved in the purchasing and selling of 100+ single family homes nationwide. In his free-time he trains for a World Record

18 Comments

  1. Jerry W.

    Thanks for the tips Sterling. It also helps to check out the competition every so often to see what they are charging. If others have been steadily raising rents and you have not you may be substantially under market prices.

  2. Shiloh Lundahl

    Great article Sterling. I would just like to say that my wife and I met with Sterling and his business partner Jacob when we went out to Indiana to look at investing in some cash flow properties there. We had a great experience with them. They outlined their investing program and it looked really solid. They also gave us some tips on areas that are more preferable to invest in and some that we may want to steer clear of. They spent over an hour with us. So I just want to to thank them and to let everyone know they are the real deal and that I wish them a ton of success.

  3. Al Williamson

    Nice round up Sterling! Your points are spot on. Let me add that owners should:
    1 – push back on annual insurance premium increases
    2 – insure for actual replacement cost if you don’t plan to rebuild in the event of a fire/loss.

  4. Rodney Kuhl

    Sterling,

    Do you find it risky to try to reduce the taxes one on property while owning several properties? For example, we own a property where the taxes are extremely low for not only what we paid for the house but what it’s worth. But on the other hand, we have a couple where I’d argue the taxes are too high. If I try to reduce the ones that are too high, will that throw a red flag at the assessor’s office to raise the ones that are too low?

    • Rodney Kuhl

      Cool. So you just called the assessor’s office and only mentioned the one property and had supporting evidence of why that property should have lower taxes, like purchase price and/or comps, etc? That’s about it?

      • Sterling White

        Mainly just the purchase price as proof. I am in the stages of getting a property appealed that I purchased in 2014 for 25k put 15k into it and the assessed value is 98,000.

        The city is not incentivized to low them anytime soon, but still fighting it.

  5. Hey Sterling White,You have shared a wonderful article with great tips.I really liked it.You can also add “Scrubbed Your Home:Before showing the home you should properly scrubbed it,as first impression is the last impression”.

  6. This is some really good information about renting a home for more money. I like that you talked about how you should think about repairing a home and making it look amazing so people would be more willing to pay higher prices for it. That way, you are getting the most money for your property.

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