Are you looking to increase the ROI (return on investment) of your rental properties? With the right strategies and tips, you can maximize your rental income and ensure that your portfolio is a profitable one. Here, we explore 8 expert tips and tricks that you can use to boost the ROI of your rental property — from understanding your target market to finding ways to reduce costs, there are plenty of ways to increase the value of your portfolio and boost your bottom line.
1. Understand your target market
Before we get to boosting the ROI of your rental property, it’s important to understand your target market. This will help you to tailor your rental marketing strategy to suit the needs of your ideal tenants, making it easier to find good tenants and increase your rental income. Put yourself in your future tenants’ shoes and ask yourself what they’re looking for in a rental property. What location do they prefer? What kind of amenities do they care about most? What number of bedrooms are they after? What are their financial circumstances? By considering all of these factors, it will be easier to market directly to your target market and ensure that you find the right tenants.
2. Make your property attractive to tenants
One of the best ways to boost the ROI of your rental property is to make it as attractive to potential tenants as possible. You might have a great rental property with a strong rental income, but if it’s not appealing to the right prospects, it might stay on the market longer. There are a number of ways you can make your rental property more attractive to tenants.
- Improve the curb appeal: The first thing potential tenants see when they walk up to your rental property is the curb appeal. If the yard is unkempt, the exterior is in bad shape, or the paint is peeling off the walls, you might be losing potential tenants before they even get inside.
- Make your rental property energy efficient: Make your properties energy efficient and they will be more attractive to a wider range of potential tenants. Not only will your future tenants enjoy lower energy bills each month, but taking care of the environment is a big priority among most renters on the market. Try installing LED lights, make sure the insulation is up to code, and replace old appliances with energy-saving appliances.
- Improve the interior: Another way to boost the ROI of your rental property is by making improvements to the interior. There are a number of ways to do this, such as replacing old appliances, repainting the walls, and refinishing the floors. This will make your rental property more attractive to those touring, and prospects will be able to move in faster as a result.
3. Invest in regular maintenance and upgrades
Regularly investing in maintenance and upgrades will help you to avoid costly repairs while protecting your bottom line. By taking care of small maintenance issues before they become big problems, you’ll be able to save on expensive repairs in the long run. Additionally, investing in upgrades once every couple of years will help to increase your rental income: small upgrades, such as replacing old appliances or installing new flooring, are relatively inexpensive and easy to do, and can make a big difference to your long-term rental income.
4. Utilize technology
Utilizing technology is one of the best ways to boost your ROI — the Proptech industry is booming because property managers are realizing that technology is the key to sustainably scaling a business. You can create a rental website (or use your property management software to syndicate your listings) to post your rental listings online to reach more potential tenants. You can use apps like Zillow to post listings and track your rental income, Showdigs to handle all your leasing fieldwork and tour scheduling, Property Meld to coordinate your property maintenance, and more!
5. Advertise your property to the right people
Once you understand your target market, you can advertise your property to the right people. While many industry experts will tell you to advertise your rental property on as many sites as possible, this isn’t always the best strategy. Instead, focus on specific websites and publications that will help you reach the types of tenants most likely to rent your property. You can also boost the ROI of your rental property by utilizing selective screening and a thorough rental application process. This will help ensure that you’re only renting to the right people, and down the road, it will help avoid costly rental repairs, extra days on market, and maintenance issues.
6. Understand the laws and regulations
It's always a good idea to understand the laws and regulations related to renting. Every state and city has different laws and regulations when it comes to renting, and it’s important to stay on top of these to avoid costly mistakes (like charging a late fee for a rental payment in a state where it's not allowed). Another way to boost the ROI of your rental property is by making improvements and updates to your rental agreement. It’s super important to keep your rental agreement up to date and to address any new rental laws and regulations. If you're struggling to find tenants, you can also make your rental agreement more appealing by adding some bonuses, such as a reduced security deposit or a month-to-month lease after a year.
7. Set competitive rates
It’s important to set competitive rates from the beginning, but it’s even more important to keep them competitive over time. First, you'll want to set rates based on the market rate for your area. Once you have an idea of the market rates for similar properties, consider adding a small profit margin to boost your ROI. Another way to keep competitive rates while boosting the ROI of your rental property is by offering incentives. You can offer incentives such as a reduced security deposit, free parking for 6 months, or even a gift card or gym membership for new tenants while still charging a competitive rental rate.
8. Outsource where it makes sense
You might think of our friends over at SecondNature when you hear "outsource," but we mean something a little different. Try outsourcing your fieldwork activities (like tours, condition reports, marketing photos) to a network of on-demand real estate agents, like Showdigs. You can free your team from wasting time in traffic and have them work on bringing in new business. Outsourcing property management tasks to trained professionals on a pay-per-activity basis is the cost-effective way to lease faster and boost the ROI of your properties.