When you first become a landlord, it doesn’t take long to realize you have to do more than just collect rent and make repairs. You need a plan to maximize profitability. That requires understanding how to manage tenants, operating costs, market rates, legal obligations, maintenance responsibilities, and more. This is only possible when you have a clear strategy.
Below are 10 proven ways to make your first rental property profitable.
- Start with professional property management
The biggest mistake new landlords make is trying to do everything on their own just to save money. In the end, this will work against you. A seasoned management team will help you with market pricing, tenant relations, maintenance and repairs, and legal compliance. The result will be fewer vacancies, better tenants, fewer legal battles, and stronger long-term income.
The daily responsibilities of being a landlord are immense and time-consuming. Hiring a property manager is the easiest way to ensure you have time to manage your real estate investments. For instance, San Marcos property management company Green Residential real estate helps investors offload day-to-day landlord responsibilities and concentrate on growing their holdings.
- Understand market rates
Before setting a rent price, research comparable properties in your area. Use your research findings to set competitive rates that won’t deter qualified tenants. If you underprice your property, you’ll lose income. If your property is overpriced, you’ll have longer vacancies.
But don’t just set a rent price blindly based on similar units. Factor in your mortgage payments, taxes, insurance, utilities (if you cover them), maintenance costs, and management fees. Know your operating costs before you set the rent so you don’t end up hurting your cash flow.
- Build a financial buffer
It’s crucial to set aside reserve funds to absorb unexpected costs without having to use rental income. This is the best way to cover repairs and maintenance without taking the cost out of your cash flow.
- Offer incentives
Consider offering perks like internet, parking, and certain utilities to increase value perception. You can also add home automation, like a smart thermostat or doorbell security system. The right perks can justify slightly higher rent.
- Review and adjust rent annually
Rent is never static. It’s important to review it every year (or at the end of each lease term) and make adjustments based on how the market has shifted. This will optimize revenue and prevent you from realizing years down the road that you’ve been missing out on justifiable increases.
- Make an effort to keep tenants long-term
Keeping your tenants is one of the most effective ways to maximize rental income. The more turnover you experience, the more costs you’ll incur. Start by responding fast to all tenant inquiries and concerns. When repair and maintenance needs arise, tackle them immediately. You want your tenants to know they can trust you to handle their issues quickly and effectively.
- Run regular inspections
Regular inspections are critical for profitability. You need to see the condition of your property firsthand. Never rely on tenants to tell you about everything that goes wrong. Sometimes they will, but often they won’t. By scheduling regular inspections at least twice a year, you can look for issues tenants often overlook, like signs of water damage and pest infestation.
- Manage taxes properly
Report all of your rental income properly. All rent and other payments need to be reported on your tax return. However, you can claim certain expenses like repairs, maintenance, and property management fees. You can also claim depreciation to write off a portion of your property’s cost.
- Follow all landlord-tenant laws to the letter
Knowing landlord-tenant laws, fair housing obligations, and following your own lease is crucial for avoiding legal trouble like fines and lawsuits. The last thing you want is a tenant who has earned an eviction to countersue you and win all because you served the eviction illegally. This is where hiring a professional property manager becomes a huge benefit to your rental business. They know the law and will handle evictions for you accordingly.
- Keep meticulous records
Keep organized records of all your income, expenses, tenant communications, problems, maintenance, repairs, and anything else related to managing every property you own. Being organized will make your life easier if you get audited by the IRS or any other federal agency.
Maximize your income with a solid strategy
Maximizing landlord income requires strategic pricing, cost control, maintaining tenant satisfaction, offering reasonable incentives, and being disciplined in managing your finances. By following the tips outlined in this article, you can turn your first rental property into a profitable asset that supports your long-term financial success.
