Looking to maximize your income property’s earning potential…without alienating your tenants?
Here are 10 ways to raise more income without a rent increase.
There’s no doubt about it: rental properties can be a great source of passive income. But it can take a while to become profitable. Is there anyway to increase your profits without increasing rent?
Or maybe your profits have taken a hit due to the COVID-19 pandemic or other natural disasters. Perhaps you’d just like to give yourself a “raise.” But you don’t want your tenants to leave because the rent’s too high (frustrated tenants leads to empty rentals).
Is there any way for both of you to get what you want?
Here are a few options you can explore before you send out a rent increase letter.
1. Optimize your taxes
Everyone has to give Uncle Sam his due—even landlords. But you can maximize your earnings by making sure you’re optimizing your rental income taxes every year.
Many landlords are unaware that expenses like advertising, maintenance, and HOA fees are tax-deductible. Go through your budget and make sure you’re getting every deduction possible under the tax code.
By optimizing your taxes, you’ll be putting a bit more money into your pockets.
2. Purchase Loss of Income Insurance
Not only can insurance provide protection for unforeseen property damage and injury, it can also protect your bottom line.
Loss of income insurance will reimburse you if your rental property is vacant for an extended period of time due to a natural disaster. And if your losses are due to a less-than-ideal tenant, rent guarantee insurance can step in if one of your residents stops paying you.
Which brings us to our next point….
3. Set High Standards
Never underestimate the importance of holding out for a good tenant!
The right tenants will pay rent on time and keep the place in good working order. They’ll understand what fair market value is for rent and never give you good cause to evict them.
Remember, they might be living there, but the house belongs to you. Make sure whoever you put within those walls is someone you can trust.
That being said, there’s no need to be a pushover. When it comes to issues that affect your income, set your standards and don’t budge.
It isn’t “asking too much” to demand that rent be paid on time or to charge late fees when it isn’t. But if you don’t hold your tenants accountable for policies they agreed to, you’re just letting them take advantage of you.
Ultimately, be friendly but firm. Remember, you need your tenants just as much as they need you.
4. Decrease Vacancy
The best way to ensure that you still have rent checks coming in? Keep your rental properties occupied!
But this may be easier said than done—especially in a buyer’s market.
If your income property has been sitting in the Classifieds for longer than you’d like, here are some things you can try:
- Spruce the place up (a little paint can go a long way!)
- Keep up with maintenance
- Boost your “curb appeal”
- Make your ads more attractive
- Look at the neighborhood comps (you might be asking too much for rent or may be missing a key feature that other landlords are offering)
Another easy way to decrease your vacancy rates is to work with a property management company. They’ll take over each of these tasks (and more) to find a tenant who will stick around.
5. Get Creative
Get creative with your pricing structure while still avoiding a rent increase.
Offer tenants a pricing structure that bases their monthly rent amount on their lease term. For instance, rather than charging $2,000/month across the board, consider charging $2,500 for month-to-month leases, $2,000/month for a one-year lease, and $1,800/month for a three-year lease.
You may find that some tenants are perfectly happy with paying a higher rate if there are other perks involved.
6. Charge Pet Rent
Whether or not you allow pets in your rental properties is up to you. But charging a monthly “pet rent” (in addition to the deposit) can help put a bit more money in your pocket.
As cute as they may be, pets can be destructive. And a $300 pet deposit might not be enough to counteract the antics of a bored Great Dane.
By building up an emergency fund ahead of time, you’ll have a better chance of being able to fix the place up without having to cut into your profits.
And if the pet was perfectly behaved and never so much as peed on the tile? You’ll have a little something extra for a rainy day.
7. Rent Out Appliances
While larger appliances like an oven range, fridge, and dishwasher should be included in the monthly rent, some people might like to have a few extra things on-hand.
You can increase your profits by renting out things like:
- Storage sheds
- Upgraded electronics (TVs, gaming systems)
- Pool tables
These are some things that tenants may enjoy having but don’t necessarily want to purchase.
8. Concierge Services
Don’t have anything extra to rent out? No problem. You can also charge extra to take care of certain services.
Most people have extremely busy schedules, so offering to cross something off of their to-do list plus make some extra money is a win-win.
Landscaping, house cleaning, pool maintenance, and dog walking are just some of the tasks most people would be willing to pay a little extra money for. Survey your tenants and see what services they may be interested in adding to their monthly rent.
9. Take Care Of the Property
Repairs, improvements, and routine maintenance do involve an upfront cost, but they’ll save you money in the long run.
A well-maintained property shows tenants that you care—about them and your property. This makes them more likely to stay and also justifies any rent increase notices you’ll have to send in the future.
And preventive maintenance is not only much cheaper than major emergency repairs, it’s a lot less stressful.
Remember, at the end of the day, it’s still your property, so don’t count on tenants to let you when maintenance is necessary. It’s too easy for them to miss potential issues when they’re used to seeing the property every day.
10. Work With a Property Manager
First-time landlords tend to think of property managers as “just another expense” but the right property management company can actually save you money in the long run!
In addition to collecting rent, following up on late payments, and bookkeeping, property managers know how to find your “Dream Tenant.” When you’re learning how to be a landlord, it’s normal to make plenty of mistakes. But a rental property management company ensures that things are done right the first time.
Find a property management company you can trust and watch those profits soar!
If You Have to Raise Rent
There are lots of things you can do to avoid a rent increase, but you won’t be able to put it off forever.
In fact, most tenants expect a rent increase every once in a while (it’s simple inflation), so don’t apologize if you need to raise the rent! In fact, it’s best to increase rent by small increments every year than leave it alone for five years and then hike it way up.
Limit rent increases to no more than once a year and work within the legal limits of your county and state.
If your income property isn’t bringing you much in the way of income, these 10 tips should help you add some cushion to your budget without annoying your tenants with a rent increase.
However, this doesn’t mean that rent increases should be avoided at any cost. Inflation and fluctuating markets will sometimes dictate that prices should change. And part of being a great landlord is staying on top of these changes and adapting accordingly.
If this sounds like a lot of work…that’s because it is!
At American Home Team Realty, we understand how difficult it can be for a first-timer to manage multiple rental properties successfully. But for us, it’s just another day in the office.
If you’re looking for some help with maximizing profits and minimizing stress, we’d love to meet you! Give us a call today to see how we can help.