Maximizing Rental Property Income—Get The Most From Your Investments!

What do you say you pay your rent before I start to beg?

Rental Property Income Generators—The Basics

One of the biggest perks to owning rental property is that it generates income. Income can come from a wide variety of sources when you have a rental property, but the main generators this article will highlight are rents, applications and ordinary fees.

Rents—How Do I Appropriately Structure Rents on My Units?
As with all investment real estate ventures, make sure to do your homework. If you price your units too high, you won’t attract tenants. If you price your units too low, you won’t make the profits you could.

Before you begin your research, take a critical look at your property.

1. Do you have attractive landscaping to promote curb appeal?
2. Do you offer updates in the units?
3. Are your units cosmetically appealing or run of the mill?
4. Is the property in a desirable school district?
5. Is the property easy to get to from interstates?
6. Is the property close to shopping, hospitals, groceries or other desirable locations?
7. What are the demographics of the people living in the neighborhood?

Once you really take a look at what you have to offer, you can see how your property compares to what is currently available. Both site visits and online research are smart strategies to accurately price your rentals.

The best place to start with online research is to look at local listings. Get a feeling for what rates other similar properties are being offered. Make sure to see what tenants are responsible for, i.e. water, maintenance, etc. Also, be sure to check what amenities are offered.

When conducting site visits or phone calls with owners, act as if you were a renter. Find out exactly what each property offers and what tenants are responsible for. If you can tour the properties, you can get a clear idea of what is considered an upgrade or a must-have in your area. This will allow you to price yourself appropriately.

Applications—What should I charge for an application fee?
After you have researched your market, you can get a good idea of what other comparable properties are charging for application fees. A smart landlord runs a credit check with every application, which is an expense. A good rule of thumb is to set up an agreement with an online provider or local provider for a bulk discount in credit checks. Once you know how much each credit check will cost you, you can add an additional amount to compensate for your time. Many property owners will charge 30%-50% more than the actual credit check expense for the applications.

Once you have run the credit check and interviewed the applicant, you can determine what other fees are necessary. Some fee options include:
1. Rental deposits—These are common ways of securing money for property rehabilitation if the tenant damages the property. Rental deposits also allow you to have partial rent payment should the tenant default.
2. Pet deposits/fees—Many property owners that allow pets in the units require additional payment for the pets. While some of the money may go to removing pet odor or damage, this can also create significant income opportunities.
3. Noise/waste violation fees—Many property owners create a “quiet enjoyment” clause in their rental contracts. If tenants violate this clause, property owners can assess a fee.

Late Fees
As with any payment-based contract, if one party fails to perform (pay), the other party can assess a fee. When you set up your rental agreement, be sure to plainly set out the late fee amount and the time period that will elapse before the fee is assessed.

Automating Generators
To fully realize the income generators from rental properties, it is imperative to set up an automated system. If you schedule appointments with your online calendar, set reminders or appointments to generate fee statements or payments for demand. Software programs for money management and income management also are available to purchase. Investment real estate should focus on working smarter, not harder. Be sure to have a system that is easy for you to work with and does not require a significant investment.

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