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<\/p>\nOne of the biggest drains on a landlord\u2019s rental income is expenses. Owning rental properties is never as easy as buying a property, finding a tenant and waiting for the big fat checks to roll in \u2014 and savvy landlords know this.<\/p>\n<\/div>\n
\u201cOnce a property is purchased, its ROI mostly comes down to minimizing losses,\u201d says Brian Davis, a real estate investor with 15 rental properties and co-founder of the real estate blog SparkRental<\/b>. \u201cI like to think of rental income as a pipeline that you want to keep flowing smoothly and with minimal leakage.\u201d<\/b><\/p>\n
Whether you\u2019re planning on getting into the landlord business <\/a>or you\u2019re an experienced landlord, you probably want to know how to net more income. We talked to an array real estate experts to gather their top suggestions for how to maximize your rental income.<\/p>\n One of the biggest hassles we heard landlords mention was the cost (in money, time and stress) of evicting troublesome tenants. An eviction can take three to six months and can cost <\/b>upward of $5,000<\/b>, so do some preventative work by putting new tenants through a thorough screening process.<\/b><\/p>\n Run a credit check to give you a sense of their financial responsibility, along with a criminal and eviction investigation. Also, do a little reconnaissance.<\/p>\n \u201cDrive by their current residence,\u201d says Denise Supplee, a real estate agent, investor and former property manager, as well as co-founder of SparkRental. \u201cIs it messy? Are there trash cans thrown all over \u2014 or worse, is the trash just piling up? Is there an old broken-down car with expired tags just sitting? Big warning flags!\u201d<\/p>\n \u201cLandlords can\u2019t deduct money from a security deposit for \u2018normal wear and tear,\u2019 so they need to do what they can do prevent it,\u201d <\/b>says Davis.<\/p>\n This includes forbidding mounted TVs in your lease, securing hardware like towel bars into studs, opting for low-maintenance flooring like hardwood over carpeting and installing door stops. Anything that prevents reasonable daily use from leaving a mark on your property is a wise move.<\/p>\n Simpler landscaping and durable exterior materials like brick and vinyl can also cut back on your maintenance costs, advises Chad Carson, a real estate investor and blogger at CoachCarson.com<\/a>.<\/p>\n This should go without saying, but always spring for landlord liability insurance<\/b>.<\/p>\n \u201cJust the cost of one frivolous lawsuit could empty your bank account,\u201d Carson says. \u201cA good insurance policy will hire attorneys to defend you in the unlikely case of a lawsuit.\u201d<\/p>\n The Penny Hoarder editor Justin Cupler rented out his old house for a year after moving out, and he adds: \u201cCall your insurance company and change to a structure-only policy. <\/b>Most homeowners policies cover the entire house and its contents. If you\u2019re renting it to strangers, no need to insure their items. This can save you about $25 to $50 per month.\u201d<\/p>\n \u201cIf your house is older, things are bound to break<\/b>,\u201d Cupler says. \u201c(A home warranty) typically costs only $20 to $50 per month and covers you in the event of an unexpected breakdown that can drain your reserves.\u201d<\/p>\n \u201cHaving a rental property is less about maximizing income and more about minimizing expen<\/b>ses<\/b>,\u201d says Andy Panko, owner of two one-bedroom condos in a complex in Woodbridge, New Jersey. \u201cI always try to personally do as much as I can with regards to my properties. I\u2019m very handy and can handle most typical repairs and updating. I also do all of my own advertising (free via Craigslist), showing of my units, and do all of the background checks and credit screening (via TransUnion\u2019s SmartMove <\/a>service, which I charge to the tenant).\u201d<\/p>\n Some landlords find rental agencies and property managers are worth the expense, as they save them time and stress in the long run.<\/b><\/p>\n \u201cI was too easy on my tenants \u2014 not charging late fees or starting evictions when they got behind. This allowed them to walk all over me and cost me even more money,\u201d says Mark Ferguson of Invest Four More<\/a>. \u201cWhen I had seven properties, I handed them over to a management company, and they were much tougher. Even though I paid them a percentage of the rents, we collected more rents and had better tenants. It saved me headaches, time and money.\u201d<\/p>\n If you go this route, just make sure you\u2019re getting the most bang for your buck. Cupler suggests comparing fees first by \u201cgetting a few agencies vying for your business and finding the one with the best benefits for the cost.\u201d<\/p>\n If you\u2019d prefer to forgo the fee, there are helpful tools.<\/p>\n \u201cHiring a property manager may take some of the headache out of dealing with tenants, but their fees can take up to 10% of your returns.<\/b> In today\u2019s real estate market, that could reduce your cash flow to the point of barely turning a profit,\u201d says Callie Hamilton, a real estate investor whose husband founded Rentlit <\/a>to help fellow landlords handle things like online automated payments, maintenance services, background checks and lease creation on their own.<\/p>\n Even if you\u2019ve hired someone to handle your day-to-day management, make sure to inspect your properties on a regular basis to ensure your tenants are properly keeping up on your investment.<\/p>\n \u201cWalk through the properties as often as you can,\u201d says Deb Tomaro, broker associate with RE\/MAX Acclaimed Properties. \u201cChanging the furnace filter every 60 days is a great excuse. That gives you a chance to look for any issues before they turn into a huge and expensive repair.<\/b> For example, I can\u2019t tell you how many cabinets under the kitchen sink get rotted out because the tenants stuff the cabinet full of things and never know that there\u2019s a small leak. The leak goes on for a year, the sink base is destroyed. Every time I go into a rental unit, I ask if I can check under the sinks for any leaks, and I run my hands along all the plumbing to make sure I don\u2019t feel a leak.\u201d<\/p>\n Even a simple drive-by to make sure things are being maintained on the outside can tell you a lot, she says.<\/p>\n In addition to eviction, turnover costs rank high on landlords\u2019 lists of things to avoid.<\/b><\/p>\n \u201cThe biggest expenses in the rental business occur when a tenant moves out,\u201d Carson says. \u201cA tenant who stays five or six years doesn\u2019t complain about smudges on the wall, but for a new tenant, you\u2019ll have to paint and do other repairs.\u201d<\/p>\n Keep your tenants happy by responding to maintenance requests promptly and politely. If you find you have to raise rents<\/a> to meet monthly expenses, give tenants an incentive to stick with you, like a small upgrade when they renew their lease, Carson suggests.<\/p>\n \u201cBigger is not always better in the rental world,\u201d Carson warns. \u201cFind properties with the highest rent per square foot. Many times a 1,000-square-foot apartment will rent for the same as a 1,300-square-foot apartment.<\/b> But the painting and other ongoing maintenance will cost more for the larger unit.\u201d<\/p>\n1. Thoroughly Screen Tenants<\/b><\/h3>\n
2. Tenant-Proof Your Property<\/b><\/h3>\n
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3. Get the Right Insurance<\/b><\/h3>\n
4. Buy a Home Warranty<\/b><\/h3>\n
5. DIY Whenever Possible<\/b><\/h3>\n
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6. Use Rental Agencies With Caution<\/b><\/h3>\n
7. Check Your Properties Regularly<\/b><\/h3>\n
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8. Keep Your Tenants Happy<\/b><\/h3>\n
9. Get the Most Rent Per Square Foot<\/b><\/h3>\n