Smart investors look for ways to maximize their monthly cash flow from rental properties. These diverse income sources will bring in extra revenue and increase your bottom line.
1. Always plan on regular rent increases. Consider your investment properties as a business and plan for rental increases to cover higher taxes, insurance and other routine expenses that may increase each year. Increasing rents by a small percentage assures that your return on your investment does not decrease. Rent increases should not be a problem you have addressed this in your lease and have made the tenant aware of annual increases.
2. Set definite “due dates” for rents to be paid and stick to your policy. Your lease should address late fees. Be fair to all your tenants and treat everyone equally when the payments are late. Check with your state regulations for the percentage allowable for late charges. We all know that people sometimes have circumstances that occur which results in a late payment but these delinquencies will cost you money.
3. Create other income sources on your properties. I know some landlords who rent garage space and storage buildings. Others have arranged for “rent to own” appliances, T.V’s. washer and driers, computer’s etc. which offer added profits. Many of your tenants will be purchasing these same items from local stores and paying interest on the purchase. Why not increase your profits by offering the same items and earning the profit yourself ?
4. Keep your costs low. It is easy for routine and other maintenance and repairs to easily eat away at your profits. Everything from replacing light bulbs to purchasing appliances can add up quickly and will take a big bite out of your profit. Create space to store frequently used maintenance items and purchase when they are on sale or from discount and salvage stores. Take advantage of discounts available to contractors or real estate investor”s association members to save on building materials, carpet , paint etc. Sherwin Williams, Home Depot and others give special discounts to REIA members.
5. Routine maintenance on your properties will save you money. Remember the T.V.commercial for motor oil where the mechanic says” Pay me now or pay me later” ? Depending on the number of rental units you have you may be able to hire a part time maintenance person. Taking time to create a schedule of the maintenance needed on properties will allow your maintenance man to schedule his time more efficiently. These routine maintenance visits also creates the opportunity to check on tenant damage, potential hazards or problems.
Buy and hold rental properties are designed to contribute to your wealth building strategy through real estate. By creating multiple sources of income from properties and having a policy that protects your from loosing money you can be on tract to operating a successful and profitable real estate investment business.