How do you maximize rental income? As a real estate investor, maximizing your positive cash flow is essential. For one, while we don’t want to be greedy, investing in real estate is “for profit.” Now, being profitable is not just about putting more money in your pocket. There are other reasons why having good looking cash flow numbers is important.
How about lenders? As you work with lenders to put long-term loans on your rentals, they will look more and more closely at how profitable you are when determining whether they want to work with you or not. Additionally, there is an inherent risk you take on by putting a stranger into a house you own. Charging as much rent as possible helps mitigate that risk.
In this post, we’ll look at 4 ways you can maximize your rental income while not charging so much that you end up turning good tenants away.
I’ve written several other posts about the benefits of self-managing your rentals, but here are a few main reasons I strongly recommend you consider it:
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You can find tenants faster than a property manager
This is because when you self-manage, you’re only focused on your properties whereas a property manager has many properties owned by many people, and their focus is, therefore, divided.
Self-managing saves you money
Property managers typically charge 50% of the first month’s rent and 10% for subsequent rent payments in exchange for their services. This is money you obviously don’t pay when you self-manage.
Lower vacancy periods
This ties in with my first point about finding tenants faster. In the beginning of my real estate career, I worked with several property managers, and I always found I could find tenants faster than they could. The shorter your vacancy periods, the more cash flow you have. I also strongly advise you to check out Rently. Rently will help you speed up the process in finding your next qualified tenant.
According to AOL, a survey done by apartments.com, indicates that 75% of renters have at least one pet. The survey also revealed that many of these pet owners have trouble finding rental properties that will accept their furry friends. Trust me. Allowing pets in your rental property will give you a quick competitive edge, and tenants expect to pay more rent because of their pets.
Tenants with pets are also accustomed to paying a non-refundable pet deposit, so enforcing one will likely not be met with resistance.
Rent-to-own is something I also strongly suggest considering. While rent-to-own does give the tenant the option to buy your rental, you can usually get tenants to pay top dollar for the house since you’re giving them several years to rent.
Additionally, you can get tenants to pay a non-refundable down payment that is substantially more than they would provide as a standard rent deposit. This down payment would come off the purchase price if they exercise their option to buy. However, if they don’t buy or can’t buy within the option period allowed, then you keep the down payment.
Consider Section 8
Possibly the biggest reason landlords choose to accept section 8 tenants is because they get a guaranteed rent check. The government does pay on time, and you can even set up direct deposit to save yourself a trip to the bank. Keep in mind, however, that while there are some folks who get 100% of their rent paid by section 8, in my experience, section 8 tenants usually pay a portion of the rent.
I’ve also noticed that section 8 tenants tend to be less transient and stick around longer. I imagine this is because many landlords don’t accept section due to all the paperwork and housing quality standards their property must meet. So, between guaranteed rent and longer tenancies, you may see your cash flow increase. If you decide to accept section, be sure to still screen your tenants well.