Understanding how to make money from rental properties is an essential part of succeeding as a real estate investor. Maximizing your rental income is largely about raising rent. But, it’s more than that. There are other, more creative ways to earn more and spend less on your investment.
At Redwood Residential, we know that adding value for your residents is the best way to increase what you earn. So, how can you add value without driving up your operating expenses?
We have some ideas that may help, whether you’re renting out a single property or an entire portfolio.
Let’s maximize your rental income. Here’s where we start.
Begin Earning More by Pricing your Property Right
The Santa Rosa rental market is strong, and that has led to an increase in prices, thanks to the rising demand and the general increase in just about everything; including housing.
Pricing impacts what you’re earning on your property, but not for the reasons you think. It might seem like the higher your rental value, the more money you make. That often works out to be true, but sometimes a price that’s too high can have the opposite effect; leaving you with a vacancy that lasts too long and eats into your return on investment (ROI).
That’s not to suggest you price your property below market rents. When you do that, you’re damaging your potential earnings.
The idea is to price your property exactly where you should, according to the market. You want to be profitable. But, you also want to be competitive and most of all, correct.
The right price will attract the best tenants, and placing and retaining those great tenants will also drive your ROI even higher.
Always be strategic about your rental value, especially when you’re thinking about how to improve the performance of your rental property. Vacancies are a problem for your earnings. They also leave your property at risk.
Invest in Improvements that Raise Your Rental Value
Improving your property makes it worth more. Residents are willing to pay higher rents when they’re living in a home that’s been recently upgraded and renovated. We don’t recommend you undertake an expensive kitchen remodel. You don’t have to add an extra room. But, when you make cost-effective improvements that get the attention of potential tenants, you can easily ask for more rent and attract high quality residents.
The best improvements for you will depend on your property, specifically its age and existing condition. These are some of the easy places to start:
- Fresh Paint. The cost of paint has risen, but if you invest in fresh paint on all the walls in your rental property, you attract better residents and higher rents. Invest in high quality paint so you don’t find yourself having to repaint every year.
- Better Floors. If you want to keep carpet in your rental property, consider durable fibers. You can also go a step further and replace your carpet with hard surface floors. Laminates and faux hardwoods look great, they’re easier to maintain, and they’ll absolutely maximize what you’re able to earn in rent.
- Focus on Kitchen and Bathrooms. New appliances are great, especially if you want to increase your rental value. But you don’t have to go that far; by installing backsplashes or new faucets and hardware, you’ll give your kitchen an updated feel. Put in a new mirror and better lighting in the bathrooms.
Maximize what you’re able to earn by making upgrades like those we’ve listed. You can also improve your lighting, invest in better window treatments, and take a look at your landscaping. All of this will elevate your rental value and allow you to earn more.
Work Hard to Retain Santa Rosa Residents
Avoiding vacancy and turnover costs will maximize what your investment property earns. Long term residents are more valuable to you and safer for your property. Tenant retention provides stability, consistent income, and the assurance that your residents are taking good care of your investment.
As residents move out after the lease term ends, you’re facing a vacancy. That leads to a loss of rental income and additional expenses. You’ll have to invest in repairs, cosmetic touch-ups, cleaning, and marketing before you find a new tenant who can start paying rent again.
Retain your residents by providing an exceptional rental experience, responding right away to maintenance and repair requests, and listening to them when they have concerns or need help.
Allow Pets to Earn More Income
Since we’re talking about retention, here’s one easy way to retain your tenants more consistently: allow pets. Studies have shown that pet-friendly properties earn more money for their owners and reduce turnover.
A majority of renters have at least one pet. If you decide you’re not going to allow pets, you’re eliminating a large section of the tenant pool.
In addition to avoiding long vacancy periods, you can also collect more income when you have tenants who move in with pets. Charge a pet fee, which can be $200 or $300 per pet. When you have someone moving in with two cats, that’s a few hundred extra dollars.
Pet rent can also drive up what you earn in rental income. Some pet rent is as much as $50 per pet. This extra rent should apply to all animals; the type of pet does not matter. Typically, people move in with a dog or a cat. The pet rent should apply to each pet.
A good pet policy will protect your investment property and tell tenants what you expect in terms of behavior, maintenance, and cleanliness. We recommend allowing pets in your rental home to attract more tenants, earn more income, and likely retain the residents who don’t want to go searching for another pet-friendly rental home at the end of the lease term.
Prioritize Your Maintenance Response
Maintaining your property is something that every investor must take seriously. If you’re not willing to keep your rental home in good condition, you’re going to lose money. Obviously, to maintain the property, you have to spend money. That’s part of the process; you’re protecting the condition and the value of your investment. If you let the property deteriorate, you’re not going to find tenants who are willing to rent it. That will quickly put an end to your rental income.
Residents expect to have reliable systems and functions in the property they’re paying money to rent. You have to keep things safe and habitable. You have to provide running water, working electricity, and functional appliances.
Keep your property looking great and running properly. It’s the only way to continue attracting residents and raising rents. The more effort you put into maintaining your property now, the fewer problems (and lost rental income) you’ll have later.
Preventative maintenance will be your best path towards providing great maintenance at a lower cost.
When you respond to maintenance issues preventatively, it reduces the risk of emergency maintenance needs, which are always expensive and frustrating.
Put Together a List of Preferred Vendors
How can you save money on maintenance?
By working with great vendors. These relationships with expert vendors and contractors will help you be more responsive with maintenance, and also maximize your rental income. Put together a list of preferred vendors and contractors who know you and your investment property. You’re hoping to avoid those middle-of-the-night emergencies, but if one does occur, you don’t want to be looking for a plumber at 2:00 a.m. You’ll want to have someone reliable and responsive who will answer your call and take immediate, affordable action.
Develop working relationships with licensed and insured professionals before you need them, and listen to their advice and recommendations when it comes to caring for your property. You’ll earn more in rent and spend less on repairs.
Partner with Santa Rosa Property Managers
Here’s your best chance at earning more and spending less: a relationship with Santa Rosa property managers. Partnering with expert managers to lease, manage, and maintain your property will come with quantifiable results. There are multiple ways in which your management partner will help you earn more. With industry expertise and a deep understanding of the local rental market, you can expect:
- Shorter vacancies.
- Better resident screening.
- Fewer legal mistakes.
- Higher rents.
- Lower maintenance costs.
- Resident relationships that promote retention.
When you work with professional property managers, you’re also protecting yourself against the risk that often comes with renting out properties, especially in California. There are strict laws in place around rent control, eviction, security deposits, background checks, Section 8, and habitability. Avoiding expensive legal mistakes with the help of your management company saves you a lot of money and easily maximizes what you earn.
Following these tips can help maximize your rental income and make sure that your investment earns you as much as possible over the long term. By keeping up with renovations and improvements, retaining residents, and prioritizing maintenance, you can increase the chances of having successful and more profitable tenancies over time. Work with a Santa Rosa property manager, and you’ll have an easier time earning more rental income and maximizing what you earn on the entire investment experience.
Questions about how this might work best for you and your properties? Contact us at Redwood Residential Property Management.
Marla Shaw
Graduate of Empire Business School, Santa Rosa in 1998 with an AA degree in Office Administration. Lorena has over 30 years of experience in office administration. From the California State Legislature to North Bay Realtors Association and most recently with Sue Carrell & Associates.