It’s challenging to turn a profit as a landlord when you have only one or two rental properties — partly due to the lack of economies of scale and partly from being on a learning curve as a landlord.Whether you’ve recouped your investment on the real estate or not, you can always find ways to boost your bottom line. Here’s how.
Screen Tenants Carefully
There’s no such thing as overscreening applicants; this can save you a bundle compared to what you might lose to early or abrupt terminations of a lease leaving you with an unoccupied unit.
It can also keep you from having to go through the potentially even more expensive eviction proceedings, complete with legal expenditures.
Don’t just do a credit check and confirm employment with reliable income. Research prospective tenants’ rental histories. Check whether the previous addresses listed on the application match what you find on the credit report.
Assume discrepancies between the two are potential red flags unless you can prove otherwise. Check references and call previous landlords to find out whether the applicants honored the terms of the lease and were good neighbors.
Of course, all of this is a lot of work, but you don’t have to do it yourself. Have a company like SmartMove do it for you. Apparently they even look into whether applicants have criminal backgrounds as well.
Then pass all of the fees to prospective tenants by charging application fees. They’ll have the added benefit of weeding out less serious applicants.
Put the Right Clauses in the Lease
You can further maximize your profits by adding clauses to your leases that cover situations that would otherwise cost you money. It’s worth the one-time legal fees to consult with a real estate attorney on how to phrase these things. Then, once you have an updated lease, go over the lease with every new tenant to ensure compliance.
For starters, put in a clause requiring tenants to give 30 days’ notice before moving out. That will give you enough time to find a new tenant in time to avoid a missed month of rent.
Stipulate that failure to give sufficiently advance notice may result in the forfeiture of the security deposit. Although that might only motivate people to not pay their last month’s rent before moving, you can offset that by making the security deposit equivalent to one-and-a-half or two months of rent.
Prevent Early Terminations
Another helpful clause you might want to add to the lease would stipulate that prematurely terminating the lease might also result in forfeiture of the security deposit. Again, level up the amount of the security deposit if you’re concerned that someone terminating early might opt not to pay the last month of rent.
You might want to put a clause into the lease requiring tenants to notify you of all of their roommates who will be moving in so that you can check their backgrounds.
Further stipulate that the tenant must notify you of any change in the roommates so that you might check their backgrounds as well and potentially raise the rent based on that; failure to do so could be a grounds for eviction.
Plan Rent Increases
Your lease could state your intentions regarding when the rent might go up and by what percentage. Even if your property is subject to rent control laws, you are still entitled to raise the rent by a tiny amount every year. You can also stipulate an annual percentage increase on leases that are month-to-month.
You’ll need to give the tenant advance notice of the increase before actually raising the rent, but don’t let that keep you from also including the increases in the lease.
Your lease might stipulate whether the tenants should put down rugs to protect wood floors. That way if they don’t and the floors become damaged, you can deduct that from the security deposit.
Pets and Deposits
Finally, the lease could require a higher rent if the tenant has pets. The extra money could go toward the added insurance and also offset any damage the pests actually do to the home.
This might not need to go into the lease itself but rather should be a matter of policy before you rent to a new tenant. Reduce the likelihood that prospective new tenants flake out at the last minute by requiring them to pay the full deposit and first month’s rent in order to claim the rental. Any applicant you lose because of this stipulation might not have been solid enough in the first place.
Look into whether you can make energy-efficient renovations that might save money on heating and a ir, since these investments qualify you for tax deductions and save you energy costs. These improvements might also attract tenants who are willing to pay higher rent for the eco-friendliness of your facilities.
Make More Money as a Landlord
Increasing your rental profits doesn’t need to be difficult. Try one of these simple steps to start maximizing your revenue and get the most out of your investment.
Fellow entrepreneurs, what has your experience in the realm of landlord-tenant dynamics gone?