As a building owner, you need to have your rents keep pace with the market with the same diligence you look after your roof. Always remember that in the eyes of your banker, appraiser, buyer or real estate broker, the value of your property is tied to your rents.
Strategy 1 – Provide Discounts to Long-Term Tenants
Review the rents you collect from your current tenants. Likely, a good portion of your renters have been tenants for several years and our natural tendency is often to limit their rent increases. We rationalize that we are saving on maintenance expenses that we would incur if we had to rehab the apartment for another tenant.
Here’s a better strategy. Explain to your long-term tenants that you are going to offer them a discount – say $35 a month – with is less than what new tenants have to pay. Explain that you are giving them a discount because you appreciate them. In that way, you have softened the blow of raising the rents and hopefully ingratiated yourself to your tenants.
Strategy 2 – Create More Value Than Your Competitors
When renting a vacant unit, you need to stay abreast of what competing properties are charging for rents. If you don’t know what other apartment owners are charging within your area, call your real estate broker. They will be happy to assist you in gathering this valuable information. Once armed with this information, assess your property and offer prospective renters a superior value proposition.
Strategy 3 – Put Your Vacant Unit Under a Microscope Before Renting
Critically look at the vacant unit as a prospective renter would. Make sure everything is tidy and manicured, fresh and clean. It is more important to have your unit and all of the surroundings look well-cared for than it is to have the unit look like it has expensive appliances in a stylish sty.
Strategy 4 – Boost Rental Income By Including Utility Costs
If you aren’t already, consider adding a monthly utility reimbursement clause into your leases, thereby billing tenants for their utility costs. Many of the newer apartments have units sub-metered for water which provides the greatest opportunity to recapture the cost of water and sewer. However, if you have an older building, you can simply write a fixed monthly amount (per person, per bedroom, per unit style, etc.) into your lease or use a Ratio Utility Billing System (RUBS) to transfer a portion of the total utility cost to individual units. There are local companies that specialize in RUBS billing if a third party utility bill is desired. Utility costs [can be quite high] and returning some of that money to the landlord is an excellent idea!
Strategy 5 – Gain Rental Income When Turning Your Apartments
Many landlords miss an opportunity to collect rent at the end of a lease or monthly tenancy. Landlords typically receive notice by the 10th of the month and the unit is returned late on the last day of the month. Typically, the new renters want to move in toward the end of the month because that’s when their lease is up and they to minimize double rent payments.
By the time the unit is turned, landlords are often into the first week of the next month meaning you will carry the vacant unit for most of the month. In a landlord’s market, a better strategy is to ask the resident to sell the last 10 days back to you at the end of the month. Often, the tenant is happy to move earlier and receive a portion of the rent they paid in return. If a landlord can get a unit back with 10 days to go until the end of the month, they can usually re-rent it at current market rent, thereby limiting rent loss to 10 days or less.
Strategy 6 – Make Your Building a Non-Smoking Building
Dealing with a unit where the prior tenant was smoker is really expensive, both in dollars while turning and dealing with complaints from their non-smoking neighbors. While it is easy and rents are rising, make the change now to remove this problem from your life and re-rent the unit at the current prevailing rent, which is higher.
Saint Newton is a Founder at Paragon Real Estate Advisors in Puget Sound. Reprinted with permission of the Rental Housing Association of Washington UPDATE.