Ten Rental Income Maximization Strategies to Implement Now!

In the current inflationary environment, many landlords are struggling to maintain their cash-flow due to higher mortgage interest rates, increased property taxes, insurance premiums and general cost increases due to inflation. This is a problem both for properties currently financed with sub 5% mortgages from a few years ago as well as investors looking to acquire new properties today with much higher mortgage interest rates. Given all of these cost increases impacting the profitability of rental properties, it’s crucial for landlords to find effective strategies to increase their cash flow.

Here are ten strategies you might consider to squeeze more cash-flow out of your rental properties in the current environment:

1. Adjust Rent Strategically: Review and adjust your rental prices to reflect the current market conditions while remaining competitive. Regular, small rent increases can be more palatable to tenants than sudden large hikes. We have found small to moderate annual increases work better than large increases that can force good tenants out and create vacancy. We’d rather catch-up over 2yrs rather than try to increase rents all at once and then potentially generate unwanted vacancy.
   
   
2. Reduce Vacancy: Minimize tenant turnover by focusing on tenant retention. Offer incentives for lease renewals or consider slightly lower rent for longer lease terms to ensure steady cash flow with lower vacancy. As previously mentioned, increase rent in manageable chunks so as to not drive away good tenants. You make no money when your rentals are empty!
   
   
3. Add Revenue Streams: Introduce additional services that tenants might value, such as paid parking to guarantee a parking spot, adding storage units or renting W/Ds (if your units have hookups). We recently began charging a nominal monthly extermination fee which we use to pay for quarterly visits by our exterminator. This service, is valued by our tenants, keeps our unit’s bug free and also creates a little extra profit for us.
   
   
4. Charge Customary Fees: Consider charging new fees that are customary to your market. Things like:
5. - Time Pet Fee upon move-in. You can often charge as much as $300 per pet.
6. - Monthly Pet rent. You can easily charge $25/mo per pet.
7. - Month-to-Month: It is quite common to charge a premium for month-to-month leases.
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10. Utility Charge-Backs: Instead of including utilities as part of the rent, consider having tenants pay directly for their own utility usage. This can be done through sub-metering or by charging a flat fee utility back to your tenants. These fees can cover electricity, water, gas as well as trash service.
    
    
11. Property Improvements: Invest in cost-effective renovations that can justify a rent increase. Kitchens and bathrooms tend to have the highest value but new flooring, light fixtures or even just a new coat of paint can allow you to charge more rent. Upgrades that improve energy efficiency, such as better insulation, energy-efficient appliances, or low-flow toilets, can also reduce operating costs.
    
    
12. Expense Auditing: Regularly review all property-related expenses. Look for any possible savings, such as negotiating with contractors who provide maintenance or finding more affordable insurance options. We recently re-bid our trash service at a property that uses a dumpster and were able to cut our trash fees by 50%. We also have been willing to change insurance providers year-to-year to ensure we have a competitive insurance premium.
    
    
13. Effective Re-Leasing: Use high-quality photos and effective marketing strategies to advertise your properties. A well-marketed property attracts new tenants faster, reducing vacancy periods. Also, try to show your properties (when feasible) during the 30 day notice period rather than waiting for your existing tenants to move-out. This also helps reduce your vacancy periods.
    
    
14. Enforce Late Fee Policies: It is Ok to occasionally waive a late fee for a normally reliable tenant. However, by generally enforcing late fees for overdue rent payments you can incentivize on-time payments and add a small revenue stream in cases of late payments.
    
    
15. Protest Property Tax Assessments: Make sure your property taxes are based on an accurate assessment. If you believe your property's assessed value is too high, consider protesting or appealing the assessment to potentially lower your tax bill. This activity is particularly important in states that have higher property tax rates. We have a company that automatically protests the assessment on all of our properties each year. They get a percentage of any savings they generate for us. In periods when appraisals are increasing significantly each year, protesting your taxes can save thousands of dollars in a year.

These strategies, and others, can help mitigate some of the financial pressure’s landlords may be seeing from rising costs and help ensure that your rental properties remain profitable. Always consider the tax and legal implications as well as tenant satisfaction when making financial investments or when implementing new policies.