How to Increase Rental Profits
I recently did an interview with Forbes, and the article was just published last week. The focus of the interview was on how a landlord can increase rental profits. I thought many of you would benefit seeing the main points shared, so I have reprinted some of the key points of the article below.
Forbes Real Estate Council member Jeffrey Taylor is a landlord coach, mentor, instructor and author. Having managed rental properties himself for the past 35 years, Jeffrey Taylor has experience with thousands of renters from many walks of life. He believes today’s landlords should collaborate with current and prospective tenants to establish and update leasing terms that encourage lower turnover rates and higher profits.
“Turnover is one of the biggest killers of cash flow for rental property owners. If, however, landlords can encourage renters to voluntarily rent for longer periods by getting them more actively engaged in the decisions surrounding the lease terms, this can create more of a win-win environment,” Taylor says.
As a landlord, Taylor’s goal is to offer individual residents options in the lease terms that will work best for them. He begins by asking new residents if they would prefer a one-year lease or month-to-month agreement with slightly higher ($30-$50) monthly rates but greater flexibility, should they need to move. He also offers security deposit options. Residents can pay the standard one month’s rent plus security deposit (equivalent to one month’s rent) upfront, or they can pay a reduced security deposit upfront and a small monthly rent increase (usually half of the standard security deposit and a 5% monthly rent increase).
Amenities (washer and dryer, Wi-Fi, lawn care service) are additional variables that can be added or subtracted from lease terms. Taylor says the most important part of offering flexible leases is establishing a collaborative landlord-tenant relationship upfront. “When meeting with renters to sign a new lease and go over the lease terms, I would encourage rental property owners to consider offering renters the opportunity to provide input in some of the above lease terms,” he says.
In Taylor’s experience, utilizing these strategies can increase a landlord’s average annual net income by 10 to 20%. They can also increase the average length of time residents stay in rental properties by an additional year or more. Taylor’s residents generally stay about three to five years, far surpassing the national average. His congenial approach to working with tenants is epitomized in the first words of every lease: “Welcome as one of our new 3-Star Residents, and we look forward to working with you for the next 3 years!”
Test Ads on Different Platforms
The next time you have a vacancy, it may help to advertise on different marketing platforms to increase the chances of filling the vacancy faster. What worked for you last time on one platform may not always work as well the next time. A regular contributor to MrLandlord shared the following tips from his experience on this very point:
“When you are marketing your properties, keep track of calls/emails etc., to see what source they are coming from. We had good results in the past from a Facebook group for rentals. This past go round, it was horrible. Bottom of the barrel types who wouldn’t qualify to rent a broken bicycle in a third world country. This time we listed it on Zillow and we have gotten several GOOD calls from applicants who (at first glance) seem like they have jobs, income, and might qualify.
SO if you are having difficulty renting a place, it might be worth getting a couple extra email addresses and running ads across different platforms and keeping track of where the good applicants come from. Another tip is to track the time of the month as well. Our phone/email was blowing up the last week of the month as the deadbeats were looking for a place to go. First week of the month was quiet with only a few requests and they were better qualified.”
Always Get More Than One Quote
A landlord visitor to MrLandlord was very surprised at how much he was able to save by getting more than one insurance quote (he saved thousands overall). This is even though it is often suggested on our website to get additional quotes. The landlord shared his recent experience and success below.
“How often do you all quote insurance? It might be worth it for you. Here’s what happened to me recently: I bought a new house and called my insurance agent to get a quote. Their rate was $1,200/year for actual cash value with a $2,500 deductible. When I was taken back by that and she could tell, she assured me that was “a very good rate”. I politely disagreed and said I would get another quote before totally deciding. I did get another quote. This one came in at $610/year for replacement cost and $1,500 deductible. All other limits were the same. Needless to say, I opted for this one.
Out of curiosity, I had this agent start quoting my other houses. He has saved me enough money to bring this new house into the portfolio and totally absorb the TAXES AND INSURANCE. My costs are the same and I now have better coverage (replacement instead of ACV – Actual Cash Value) and I also have lower deductibles.
Today, I had him quote my home and autos. This one will end up saving me $1,000/year. I have seen people say quote your insurance on this board before. I figured I might be able to save a little, but never did I dream that I would save this much! My old insurance agent was a little upset when I switched all those policies away. Asked if her service was that bad. I said no, you guys are great, it’s just your rates are way out of line. She couldn’t get me off the phone fast enough after that.”
AOA’S NOTE: Call AOA’s Group Insurance Plan TODAY and get a money-saving quote! Our members have said that AOA’s Workers’ Compensation rates are THE most competitive in California!
No More Carpet for This Landlord!
There are pros and cons of still installing carpet in rental property. Many landlords have definite opinions both ways, though the last I checked, more landlords were in the NO MORE CARPET category, including a landlord who shared below:
“No carpet here – in rentals or my home. It’s dirty; it hides allergens for those who are sensitive. Have you ever seen the huge amount of dirt under a carpet when it is removed? Even when it was regularly vacuumed and cleaned. It’s just impossible to keep it truly clean.
And residents do too much damage – stains, tears, general filth, animals peeing and scratching. Then they complain to the landlord that the Landlord should come clean it (my socks are dirty).
Hard flooring is popular–you see it in all the decoration magazines & HGTV, with area rugs. It looks good, it’s easy to clean, non-allergenic, and durable.
I’m becoming more of a fan of sheet vinyl everywhere since I put it in my daughter’s renovation. She tends to spill stuff and has contributed to the damage on my own laminate, so I decided to do sheet vinyl for lack of seams. Plus it is cheaper than good carpet or LTV – and it looks GOOD. I had pros lay down high-quality sheet vinyl that really looks like wood. It is beautiful, comfortable underfoot, waterproof, and I expect it to be durable.
My electrician had been there a while when he dropped a tool, and exclaimed ‘What kind of floor is this?’ Because it didn’t sound like wood. He thought it was real wood – it looks that good. Sheet vinyl has come a long way!” — by DJ, (VA landlord).
How to Screen a Pit Bull
If you are seriously considering renting to an applicant who has a pit bull, a successful landlord shared the following tips and words of advice this month on the MrLandlord website:
First step is to contact your insurance company and make sure that you will still be covered if the pit bull moves in.
Check local law and make sure there are no breed-specific laws that do not allow pit bulls in your area. Be aware that many more dog bites come from shy dogs than from aggressive dogs. It’s called fear biting.
You will also want to meet the dog inside the dog’s own home. If you allow the dog to move in, every time you go to work on your rental, you will be going into the dog’s home. If the dog is squirrelly about strangers inside his own home, you will have a lot of problems with doing repairs.
The dog should be clean, groomed, and not stinky. The dog should approach you in a friendly manner and welcome petting. Be breed-specific about that. Some breeds will ignore you but allow petting. A pit bull should be butt-wiggle friendly and fawn over you.
If the dog hangs back, hides behind the owner, and looks worried, reject the dog. If the dog growls or rumbles, reject the dog. If the dog skitters away when you reach to pet, reject the dog. If the dog gives you a hard eyed stare, reject the dog. What is called “the stink eye” indicates an aggressive dog, or a dog that is not happy to have you in its territory.
The dog should have decent manners and be under control. I don’t really expect obedience training from residents, but the dog should not climb on you or rush the door every time the door is opened. The dog should bark when you knock and then be quiet when told to be quiet.
Ask to see a current rabies vaccination certificate and a spay/neuter certificate. Do not allow an un-neutered dog or an unspayed female.
Editor’s Note: I would also suggest interviewing at least one “neighbor” next to the applicant’s current home. And of course, always run a credit check on the applicant.
The tips in this column are shared by regular contributors to the popular MrLandlord.com Q&A forum, by real estate authors and by Jeffrey Taylor, [email protected] To receive a free sample of Mr. Landlord newsletter, call 1-800-950-2250 or visit their informative Q&A Forum at LandlordingAdvice.com, where you can ask landlording questions and seek advice of other rental owners 24 hours a day.