How can rental property owners add more value and boost rents to realize higher profit margins?
Rents are relatively high in many parts of America. However, property prices are rising too. In order for deals to make sense, or to simply maximize income and property value, it would help if buy and hold investors could raise their rents. In some cases, rents just haven’t been brought up to par. In others, it is going to take adding value in some way to justify asking for more money. Here are seven ways rental property owners can add more value and boost profitability in virtually any marketplace:
1. Give the Property a makeover: There is one obvious solution to increasing the value of a home: rehabbing. However, there are those that never even think about this option. If your property isn’t renting, or attracting applications, it may need some TLC. Put yourself in the position of your customer: what would they like? Chances are that the answer involves some degree of rehabbing. What may seem like a minor inconvenience to you, can be a big deal to a renter. Remember, it doesn’t have to be overly expensive. In most cases, basic materials and finishes will suffice in providing a new, fresh look. Don’t over think it: paint, new cabinets, new front door, new flooring, and new appliances can go a long way.
2. Add more rooms: Those income property investors needing to make more substantial modifications may consider adding more rooms. It isn’t cheap, but it is one of the best ways to add real value, and could certainly pay off in the long run. Just be careful not to exceed the comps available in the area, or your valuation will be capped.
3. Better marketing: In many cases, extended vacancies or a lack of quality tenants is the result of poor marketing. Are you using the right channels and mediums to attract the right tenants, and more prospective tenants? If Craigslist and bandit signs aren’t cutting it, should you be trying Facebook, or enrolling the help of local Realtors? Are you really maximizing the perception of the property in your ads? Are you highlighting the benefits of the property and location? Are you showing it off with the best possible real estate photography?
4. Changing positioning: Simply shifting the positioning of your rentals could have a significant impact on the amount of rent you can ask. Are there major businesses nearby that could benefit from corporate housing? If the house is on the water; could it have more value as docking for sizable yachts? Is this a vibrant startup area that can rent units for premium rates to entrepreneurs relocating to be near venture capital? It could even simply be advertising a no pet policy that ensures prospects aren’t going to walk into a home that still smells like the last renter’s cats and dogs.
5. Shorter rental terms: One of the biggest positioning changes many landlords have been making recently is to short-term, Airbnb style vacation rentals. Short-term rentals can charge a premium for convenience. It doesn’t have to be daily, weekly, or monthly terms either. In some areas, there is a very high demand for six month, or flexible monthly, extended stay style rentals. Automated well, this doesn’t have to be more work. In fact, it can be a lot less hassle when it comes to turning over tenants.
6. Don’t be too picky: This may be one of the most controversial items on this list, but don’t overlook it. Tenant screening is important, but it shouldn’t be counterproductive or sabotage profit. Too many landlords are letting units languish empty, while they shell out holding costs and burn months on rejecting rental applications, when they could be reeling in rents. If you have a prospective tenant willing to pay six or twelve months’ rent in advance, but who may have some credit challenges, this could still be the sweetest deal you could hope for. Many may also want to revisit their demands for deposits and additional fees. Some aren’t even legal in their local area. Others may not be held or used either. Most renters would be happier to pay more per month for less hassle getting in, and that can deliver more profit.
7. Include more services: When comparing rental units, tenants are often looking at the total cost. Internet, water, electricity, gym membership and travel to and from the gym, TV, and more all add into the total expense today. How can your unit offer more net savings? If you’ve got extra perks or more savings, shout about it, and don’t be afraid to adjust the rent accordingly.