Owning investment property is a great way to build long-term wealth. On top of providing monthly rental income, it can appreciate in value over time.
But as with any investment, owning rental property comes with some risk. In particular, if your property expenses exceed your rental income, you could lose money.
One way to ensure you maintain a positive cash flow is to maximize the amount of rent your property or properties generate. Here are ten ways how:
- Keep up with fair market rent (FMR)
Fair market rent (FMR) is the amount you can reasonably expect to charge for rent based on a rental property’s location, size, condition, and other factors.
As a landlord, you should make sure you at least charge FMR to avoid underselling your asset. You may also consider renovating the property and adding upgrades so you can justify increasing the rent.
If you’re not sure how much the FMR is, consider working with a local property manager. They have a deep understanding of the market and how much rent you can reasonably expect to charge.
- Keep properties in good condition
Another way to justify increasing rent is to keep your properties in good condition. Well-maintained rentals generally lead to happier tenants who may then stay longer and write positive reviews of the rental.
Preventative maintenance can also limit potential costly repairs and legal risks. For example, failing to keep your rentals up to code could motivate a tenant to sue you, costing you legal fees.
- Offer additional services and amenities
Other ways to justify increasing rent include offering additional services and amenities. Get creative. For example, you could offer laundry or cleaning services. Don’t mind tenants bringing their pets? Then charge pet rent.
You could also offer additional storage space. People tend to accumulate lots of stuff, so storage space will always be in high demand. You can even use a peer-to-peer platform like Neighbor to rent out storage space separately.
In addition, you could provide extra amenities like a clubhouse, community garden, arcade games, or a fitness center—all of which could justify charging higher rent.
- Rent out furnished rooms
Furnished apartments and rooms are becoming increasingly popular in the age of remote work. More people are leading transient lifestyles, and in some professions, it’s customary to move every few months (think traveling nurses and auditors).
As a result, you may want to consider furnishing your rental properties to charge a premium for them. This is standard with short-term rentals (STRs), but you can apply this strategy to long-term rentals as well.
- Have a robust rental contract
No matter how much rent you charge, a robust rental contract can help ensure tenants actually pay it.
For example, a good rental contract will establish how much rent is, when it is due each month, what the late and missed payment policies are, who covers utilities (you or the tenant), and how these rules will be enforced.
If you don’t make the rental terms crystal clear via a written contract, you’re more likely to be taken advantage of and you may need to process costly evictions and legal action as a result.
- Screen tenants thoroughly
Part of securing a regular rental income has to do with who you rent to. A thorough tenant screening process will help ensure you get responsible tenants who will pay you consistently and on time.
To screen tenants, run background and credit checks, contact their previous landlord and current employer, verify their income to make sure they can afford the rent, and meet them in person. All of this will help you avoid unreliable problem tenants.
- Minimize tenant turnover
On top of avoiding bad tenants, try to keep good ones. This can help you avoid costly vacancies and the need to invest time and money into marketing the rental property and screening tenants again.
Try to keep your current tenants happy so they’re less inclined to move. You can do this by providing excellent customer service and building a sense of community among your rental properties.
- Get landlord insurance
Though it may seem counterintuitive, getting landlord insurance can help increase your rental income by protecting it.
For example, many landlord insurances cover property damage, lost rental income due to temporary vacancies, and liability—all of which are not typically covered by regular homeowners’ insurance.
- Take advantage of tax breaks
Savvy landlords know that owning real estate comes with many tax advantages. Knowing what these are can help stretch your rental income further.
For example, rental property owners can write off property expenses such as maintenance and repairs, property taxes, home insurance, rental depreciation, mortgage interest, and more. Plus, they can defer capital gains taxes through 1031 exchanges.
Consult a tax professional to see how you can minimize your tax liability as a landlord.
- Treat your rental property like a business
Finally, to maximize your rental income, you need to treat your rental property like a business. This means keeping up with rental laws, responding to maintenance requests, answering tenant calls and emails, sticking to a budget, reinvesting income into additional rental properties, and more.
Consistent effort over time is the secret to building long-term wealth through rental property. So try out some of these tips today and see what difference they make!