Maximizing Your Rental Profits
In order to maximize your rental property profits you need to break it down before building it back up. With rising costs of utilities, property taxes, insurance, etc. if you’re not increasing your bottom line along the way, you’ll be in the red before you know it. Let me show you a few simple ways to increase that profit margin on a rental investment property.
Start with the numbers. Break down all of your revenues and pit them against all of your current expenses. There isn’t much point in diving in if you don’t know how deep the pool is. From here you can begin to find the inefficiencies that are plaguing your margins. If you have utilities included, and your tenants have installed a hot tub, you’re likely bleeding cash. Are you spending too much time using band aid solutions to serious problems? This kind of attitude will only cost you more in the long run. Whatever is lacking, broken, or costing too much, get it taken care or properly.
Now if you have existing tenants, keep in mind that you can still increase their rent year over year within specific guidelines (usually around 2%). As a landlord you are well within your rights to put this into effect. And, if you aren’t for some reason, you are losing money as the rest of your costs increase. Vacancies are a great opportunity to quickly increase profits between tenants. This year alone we saw, and took advantage of, a dramatic increase in rental prices across the board. Bachelor apartments were renting for about $500 per month in January; by June we were renting them out at $700. Do you really want to throw away an extra $2400 per unit per year?
That being said, to manage an increase like that you need to know your market. There is a big difference in what people are willing to pay, and what they can afford. Don’t get me wrong; we’re not out to gouge people of their hard earned money, but we are in a business that survives on profits. Understanding the upper limits of what are willing to shell out for rent will help you maximize your profits for years to come. I have found that for the quickest response I turn to Kijiji when dealing with bachelor and 1 bedroom apartments. When renting upper end I do my best to using our website and personal word of mouth. These are small efficiencies that have worked in the past, but may not in the future. Keep up on the changing market and make yourself adaptive.
Can you just throw out an increase and get people into your vacancies? Answer, you can try. You need to know your target. Don’t push a high income property on a low income tenant, and vice versa. Like any business in the world, there is a sales aspect. Knowing your target market will help to conserve efforts, and focus on closing to the bottom line. Time to sell your product as efficiently as possible. Have a pitch ready in advance and know the ins and outs of your product. The door swings both ways on this interaction. On one hand these perspective tenants are coming to you for a product, but don’t forget that they ultimately hold the money. Increase your profits by increasing your sales skills.
As always you can farm out these services to a company that specializes in this field. Harbourview Property Management have experts that can do the work for you. Increasing your profits increases our own. Few things in the business world are truly “win win”, but choosing Harbourview to manage your investment property is just that. You’re busy. Let us do the work