Tuesday, May 20, 2014

#1 Way Landlords Can Increase Their Rental Home ROI: 4 Tips




Landlords always want to know how to make a better return (ROI) on their rental homes:

Can we raise the rents?

Can the pet fee be an annual expense?

Can we charge for air usage within the confines of the home?  (OK, I haven’t really heard the last question… yet)

As a Charlotte property manager who has been in the business for a while, there is one clear cut winner on how to maximize rental home ROI.  And this earth-shattering, nugget of wisdom is…

Keep your tenants.

That’s it.  If they stay and sign long term leases, landlords avoid a litany of costs: vacancy, fix-up, utilities, lawn care, potential vandalism, property management tenant procurement and marketing fees, potential non-paying tenant moving in… and that’s just off the top of my head.

Wise landlords want to do everything they can to keep their tenants.

Here are 4 tips to keep them:

1.  Think about not raising the rent.  I’ve heard of some landlords who do not raise the rent EVER for as long as their tenants stay!  That seems extreme to me, but I can see the rationale. 

2.  If #1 (no rental increases EVER) doesn’t work for you, cap the annual rental rate increases at 5%.  Or offer to raise the rent 5% on a 1-year lease while simultaneously offering to extend the lease at a lesser rental rate for a multi-year lease.  (Incentives really work!- part 1)

3.  Pay your property manager for extending your tenant’s lease.  This will align their interest with yours.  We have a client who proactively offers us $400.00 to extend his tenants’ leases.  I think he has a great understanding of where his ROI comes from.  (Incentives really work!- part 2)

4.  (Most important) Execute the normal blocking & tackling of property management.  In other words, do what you’re supposed to do.  Make needed repairs in a timely fashion, don’t be a jerk, and set proper expectations and meet them.  Remember: Moving is a pain; don’t make your tenants feel they need to because their rental situation is unbearable.

There are many other tips on how to keep rental tenants (give them rental anniversary gifts, free months of rent for renewing, etc.).  However, it is not disputed that tenant retention is the #1 component of achieving a good ROI.  As the old song goes, “It’s cheaper to keep her!”
 

Brett Furniss is the President & Owner of BDF Realty (Charlotte Residential Property Management), the trusted real estate advisor for Charlotte landlords & Home of $100 Flat Fee Property Management.   BDF Realty utilizes their innovative Pod System for exceptional customer service in residential property management, home repairs, and home sales (including Rent-To-Sell) for single-family homes, condos, and town homes in the Charlotte-Metro Area.  Contact Us Today!

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