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!
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.
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.
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.
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!