A rental property is a smart investment that can generate significant revenue year after year. Traditionally, individuals who invest strategically in rental properties increase their chances of bringing in higher profits. Factors like the surrounding neighborhood, proximity to schools or amenities, crime rates, the job market, and property tax levels can all positively influence your profit stream. Although some of these elements are out of your control, there are still plenty of other decisions you can make to increase your chances of earning a higher profit margin.
Many rental companies can make dramatic improvements while following a strict and responsible budget to minimize expenses for rental properties. The ways to increase revenue in apartments range from simple adjustments to rental policies to hands-on DIY projects within the units themselves. We've gathered a list of tips for rental property improvements you can implement quickly and conveniently. These ideas can provide maximum benefits for landlords, property companies and potential renters alike. They can also significantly increase the satisfaction of your current and future tenants while growing your profits.
How Much Profit Should You Make on a Rental?
So many factors influence your ability to generate revenue from your rental units. The current real estate market, competitive rental rates in the area and the commercial, residential and industrial development of the area are elements you have no control over. Within your property or complex, you can choose to include certain amenities or remodel to increase your revenue. There is no single definitive way to achieve a specific profit margin. However, there are a variety of successful ideas you can implement almost immediately.
As a rental property owner, you have a unique opportunity to make strategic decisions that directly cater to the needs of your tenants. An apartment complex in the Southeast, for instance, may increase their revenue by installing a pool for the residents to use, enabling them to raise the monthly rental rate for this amenity. A rental apartment in the Northeast may provide laundry services like dry cleaning for tenants that may desire a convenient way to care for their clothing that comes in contact with rain, sleet, slush and snow.
How much profit should you make on a rental? Ideally, enough to support yourself in a way that's equivalent to a salary. Apartments with stable rents may make between 4 and 8% of profit, whereas an apartment at a slightly higher vacancy can go as high as 16%. Apartments with higher vacancy potential may even yield as much as 20 to 50% profit. What are some resourceful ways you can generate revenue in your rental units to increase profit? We suggest trying the following ideas.
Implement Pet Fees, Pet Deposits or Pet Rent
Approximately 85 million families in the United States own a pet. With nearly 70% of households caring for a small animal, your apartment complex has an instant opportunity to increase revenue with pet fees. If you have yet to allow pets in your units, you may want to consider adding a landlord pet policy to your list of rental property ideas. This document can set limits on the type, size and number of pets allowed to live in each unit. You can also specify which fees to associate with this policy.
How you choose to define your pet policy is up to you, but keep in mind that a pet fee, pet rent and pet deposits are different. You could include a general pet rental fee in each contract, which will be a set price per pet per month. You can also choose to institute pet costs based on the type or size of pet. For instance, you can charge a different rate for cats and dogs, or charge the fee based on the weight of each dog.
A pet fee is a one-time charge that allows the pet to live in the unit and is nonrefundable. A pet deposit is a refundable amount requested when the tenant moves in that will cover pet-related damages. These might include stained or ripped carpet, removal of odors or hair and scratch marks on the walls and floor. Keep in mind that if you charge a pet deposit, you can only use that money for repairs your tenants' pets cause.
Choosing whether or not to institute a pet rent, pet fee or pet deposit is up to you. Consider how pet-inclusive you want your complex to be. If you plan to install amenities such as a dog park or pet waste receptacle, you may encourage more tenants with pets to move in, which increases your chance of increasing revenue via pet rent or pet fees. However, if your units are smaller and don't accommodate large animals, you may consider only requesting a pet deposit.
Technology is integral in nearly every aspect of our lives, so it should come as no surprise that there are new technologies available for landlords who want to manage their rental properties as efficiently and effectively as possible. New apps and software are changing the way landlords conduct their business, saving them time, money and unnecessary hassle. Thankfully, many of these resources are easy for both the landlord and the tenants to use, helping users transition naturally from previous methods.
Some tools are designed to facilitate communication between landlords and tenants in paying the rent. These web-based applications enable renters to pay their fees online, set up automatic payments and receive reminders when rent is due. Imagine never having to wait for a rental check to clear. There are also communication services that help landlords and tenants discuss potential eviction notices, giving the tenant a swift and easy way to describe their current financial struggles and work with the landlord on a solution.
Other types of software you can use for your rental properties include resources that help you manage all aspects of your business. Artificial intelligence can help you generate and manage online traffic, automatically replying to interested parties and scheduling viewing times. Installing smart apartment technology like thermostats or lighting in your units can also help manage expenses by reducing energy expenditure in vacant properties.
Property management trends cite that tech amenities are a revenue-builder for landlords. Surveys show residents are becoming increasingly connected with tech, both socially as well as in their interaction and engagement with their daily lifestyle. Tenants are getting more comfortable surrounded by smart tech, and they consider these resources desirable. By integrating tech into the way you manage each unit, you can streamline your work while attracting new renters.
Don't Forget About Taxes
As a rental property owner, you probably juggle a myriad of responsibilities. Whenever you switch from your maintenance hat to your accountant hat, you're going to want to focus on every line item to see where you can cut costs and maximize profit. Is a rental income taxable? Depending on the context of your rental property, there are certain expenses you can deduct. These include scenarios like renting a condo, changing a residential property to rental use or renting out part of your property.
What can you potentially deduct from your taxes?
- Mortgage interest payments made on any loans used to purchase or improve your properties
- Any legal or professional services or third parties you use to help you operate the property, including employees and independent contractors
- The depreciation your property experiences from year to year
- Insurance premiums you pay for things like workers' compensation, flooding, theft and landlord liability insurance
- Home office and travel expenses, including car expenses and any personal property used in your professional rental activities
- Any major or minor repairs made on your properties during that taxable year
Make sure to stay abreast of all legal ways to earn tax breaks before you commit to a decision. For instance, if you would like to open your property to those in financial need, landlords can also opt to welcome Section 8 voucher holders to their properties. This provision guarantees partial rental payment from the government. However, remember that it does not include a tax break. Never try to avoid paying taxes or engage in fraudulent activities.
Offer Laundry Services
Nearly 90% of renters claim having access to on-site apartment laundry facilities is an essential amenity. You can cater to this demand in two different ways. First, you can include a washing machine and dryer within each unit — or include hookups for those who wish to bring their own. Alternatively, you can offer a dedicated communal laundry room for all residents to use. These rooms are often self-service, allowing tenants to get their laundry taken care of when it's convenient for their schedules.
Typically, coin-operated machines are best for larger complexes in which most renters will use the service. As part of your landlord washing machine responsibility, you can lease or purchase these commercial-grade machines and price them competitively with other laundromat services in your area. You can also choose to include additional moneymaking resources such as detergent, bleach or fabric softener dispensers for user convenience. Save money by investing in energy-efficient models that will decrease water and electricity usage while still catering to the needs of your renters.
If each of your units already has a washing machine and dryer included, you can still offer an alternative solution to increase your revenue. Locate a reliable dry cleaning service close to your complex and talk to them about a potential partnership. For example, it's reasonable to ask for a small kickback for every referral you send the garment service. You can also offer expedited service right from your office, providing your tenants with a central location to drop off their soiled clothing and pick it up when it's clean.
Attract Quality Tenants
Here's a tip that may slip the mind of many landlords — you can maximize your rental profits by attracting quality tenants. All your renters may pay the same monthly rental fee. However, not all tenants will treat your property the same. That's not to say great tenants won't have an accident on occasion, but individuals who take pride in their space and respect the property are less likely to act negligently. Attracting quality tenants is just as crucial as retaining reliable renters.
How can you attract quality tenants? Look to your existing tenants first. Encourage them to let friends and colleagues know about any upcoming vacancies. You can even offer a special move-in incentive such as waiving the security deposit or giving your current tenant a small discount on their next month's rent. An estimated 84% of consumers trust recommendations from those they know. For increased assurance that these candidates will be trustworthy renters, you should always thoroughly screen all potential tenants before signing a contract.
When you perform background, credit or rental history checks on your potential tenants, you're essentially making a judgment call based on how these results present them as renters. Keep in mind potential renters will also judge your property based on its appearance and presentation. Attract quality renters by displaying a well-kept property. Here are a few ways you can ensure your presentation is up to par:
- Keep all area amenities like pools, tennis courts and communal laundry machines in quality condition.
- Maintain all areas of the property a tenant may view, including each vacant unit and your office.
- Use professional photography on all of your advertising initiatives, especially those online.
- Understand which local amenities, like schools and shopping, make your area attractive to a potential renter, and try to cater to their expectations.
- Stay on top of communication with potential tenants and make their fact-finding process as easy and convenient as possible.
- Create a set of client criteria before you consider potential renters. Doing so will help you objectively identify elements like credit scores or bad rental histories that you do not want to pursue further.
Sell Advertisement Space
Believe it or not, you can generate increased revenue without increasing the rent of your tenants or making significant repairs and improvements to your property. Advertising works wonders in the real estate market, and chances are, you've already had experience marketing your properties online or throughout the area. Getting as many eyes as possible on your listing is crucial. Don't forget, however, you can leverage your current resources to generate revenue through the marketing of other businesses. You already have dozens of ready-made opportunities to sell advertising space.
By charging monthly or annual advertising rates, you can increase your profit with limited effort. For example, if the exterior of your property includes a fence or wall, you can rent these areas to businesses who want banners or signage placed there. This tactic is especially effective if these spaces face a heavily trafficked road. You can also rent out spaces around your communal areas like the clubhouse, pool, laundry room or gym for advertisers to market their services.
Don't just look at your physical space for advertising opportunities — consider your virtual resources, too! Do you have space on your website you could sell? Do you send out a monthly or weekly newsletter that could include an advertisement for another business? Your virtual opportunities are perhaps more versatile than physical advertising because your advertisers can monitor click-through or retention rates. These opportunities also limit the length and commitment of the advertiser, enabling you to look to make many new partners to advertise with.
There are two things you need to remember when engaging in an advertising campaign with another business. First, you must always honor your agreement with them. Take care of their banners or signage to the best of their ability and make sure you hold up your end of the bargain. Second, don't turn your website or property into one giant advertisement. Your tenants likely do not want to see ads at every turn, and too much promotional material may turn off potential future renters.
Update Your Rental Property
You've secured revenue through advertisement, you've saved money with smart tech and you've discovered tax deductions that save every penny possible. Now it's time to focus on the rental unit itself. The best upgrades for rental properties are those that make your unit feel like a welcoming home. Keep in mind, even small elements like proper lighting, attractive colors and clean presentation can help your potential tenants visualize what life would be like living in this space.
Best Apartment Renovation Strategies
Here are a few ideas for the best renovations for rental properties. Some of these projects are not only affordable, but you can also complete them on your own with a little time and elbow grease.
- Upgrade your lighting: Lighting is crucial. It adds or removes visual appeal, and it impacts our body's circadian rhythms. Dim lighting is just as bad as harsh lighting. Consider replacing your bulbs with LED bulbs. You can also swap out old fixtures for modern ones.
- Modernize your bathrooms: New tile, hardware and fixtures in the bathroom are a great start, but if you truly want to wow your new tenants, replace old furnishings. Add a vanity with plenty of counter space and consider replacing the bathtub with a walk-in shower.
- Clean up your kitchen: The kitchen is the heart of the home. Make sure it looks the part. Replace old cabinetry, place an attractive backsplash behind the sink and consider new countertops. You may even want to swap outdated appliances for new, energy-efficient models.
- Consider fresh exterior paint: As a rental property owner, you know just how much of a difference a fresh coat of paint can make on a wall. While it's always wise to keep your interior walls white for new tenants, you can give the exterior of your property a refresh by changing the color scheme.
- Invest in flooring: Some renters prefer carpets, but they can show their use quickly and cost you money in cleaning or replacement fees. Instead, consider investing in attractive, durable flooring throughout the space.
At Focal Point, we believe one of the best renovations for your rental property is new crown molding. We are ready to help you achieve professional-quality results from DIY crown molding installation. Our crown molding kits are available in four distinctive styles that include everything you need to get the job done. Our Quick Clips make installation a breeze — within a few hours, you'll snap together crown molding in every room of your rental unit.
With licensed designs by trusted brands like Williamsburg, these innovative, yet classic, products offer affordable renovation solutions for your rental property. We're also ready to provide you with the ceiling medallions, molding accessories, panel molding kits and shelving you need to complete the room. Just screw, trip and snap — installing Focal Point crown molding is easier than you'd imagine.
Increase Your Rental Profits With Focal Point
Increasing your rental profits is possible once you discover which strategy works best for your unique property. Accommodating pets with a fee is a smart way to increase your potential tenant pool while safeguarding yourself against damages. Offering laundry services and updating your property is an excellent way to attract new quality renters as well. Ultimately, the more thought you put into your budget, resources and goals, the higher your chances are of increasing your profit and the satisfaction of your renters.
Are you interested in remodeling the crown molding inside your rental units? Do you want to learn more about how much value crown molding adds to a home? Place a call to the helpful team at Focal Point and let us help you transform your rental property into a gorgeous space your tenants will pay top dollar to live in.