How to Make a Rental Property Management Strategy More Profitable

The Top Strategies for Making a Rental Property Management Strategy More Profitable

With rental properties, you can make money in multiple ways. Hopefully, you’ll be able to charge enough rent to cover all your expenses and then some, and you can also benefit from the appreciation of your property value. If you plan your expenses properly and engage in strategies to increase your income, you should be able to make a greater profit.

But how exactly should you make your rental property management strategy more profitable?

The High-Level View

At the end of the day, there are only two ways to make your strategy more profitable: you either have to make more money or spend less money on expenses.

There are many viable ways to make more money, such as generating revenue in new ways, adding more units to your portfolio, or even increasing rent prices directly.

Expenses come in many forms as well, and there are multiple strategies for dealing with those expenses. For example, consider your tax strategy. Property taxes and income taxes are expenses that you’ll need to factor into your equations, but there are tactics that can help you mitigate your tax burden and decrease the amount of money you have to give back to the government.

The Problem With Straightforward Approaches

There are a couple of problems with simply trying to increase your income or decrease your expenses without regard for the impact or consequences of those moves.

As an example, let’s take a look at the prospect of increasing rent prices. Many people feel that rent prices are already too high, generally. If you set rent prices much higher than similar properties in your area, or if you charge more than a typical tenant would be willing to pay, you may not have a tenant at all. In other words, in your attempt to increase your income, you may actually end up decreasing it.

Similarly, if you simply postpone or ignore important maintenance or repair needs in your property, you could end up allowing problems to become worse, ultimately costing you more in the long run.

Because of these effects, it’s important to be thoughtful and strategic about which strategies you employ and how you employ them.

Strategies for Making a Rental Property Management Strategy More Profitable

These are some of the most important strategies to utilize when making your rental property management strategy more profitable:

·       Work with experts. First, consider working with experts in the discipline. Experienced property managers, real estate investors, attorneys, and real estate agents can help you make more effective decisions in multiple aspects of your property management strategy. Sometimes, you’ll need to pay for this professional advice, but the cost is often worth it.

·       Expand your portfolio. If you’re making good money from your current property portfolio, one easy way to increase your total profitability is to increase the size and scope of your portfolio. This is something you’ll need to do strategically and iteratively if you want to avoid growth pains.

·       Cut expenses without cutting quality. Typically, cutting expenses is a good thing, but you always need to cut them with the intention to avoid cutting quality or reliability. For example, it’s tempting to choose the lowest bid when you need to fix something at your unit, but sometimes, it’s better to pay a bit more and make sure the job is done correctly and with the best materials.

·       Pay close attention to rent prices in the area. Keep a close eye on rent prices in the area so you can keep your rent prices in line with them. This will allow you to increase rent at a steady, reasonable rate so you can keep making more money without putting too much pressure on tenants.

·       Keep your tenants happy. Tenant retention is one of the most important aspects of a successful rental property management strategy. It’s relatively inexpensive when compared to tenant acquisition and it spares you from tenant turnover and vacancy complications.

·       Plan proactively for taxes. Make sure you have a solid tax strategy in place. If you don’t know what you’re paying or why you’re paying it, you’ll probably end up paying more than you need to.

·       Create new streams of revenue. Creating multiple streams of revenue is a fantastic financial strategy, both for businesses and individuals. Consider making more money by adding vending machines, coin-operated laundry machines, extra parking, extra storage, or other services that can make you money on the side.

·       Regularly audit and improve. Keep a close eye on your finances and analyze them for opportunities for improvement.

A profitable rental property management strategy is a good property management strategy, but there will always be the potential to make it more profitable. If you keep looking for new ways to increase your income and decrease expenses, you’ll keep getting closer to that profitable ideal.