After buying a new investment property, you might be thinking, "now what?" If you're like most new investors, the idea of managing tenants and collecting rent on top of all the other aspects of owning a property is overwhelming. You're not wrong.
Managing a rental property is a lot of work! So, today our Everett property management experts offer some tips to get you started on the right foot. With these insights, you have an expert guide to help you maintain your investment profitably.
The primary way a rental property can make money is through cash flow from monthly rental checks. Your profit from rental properties is the difference between the rent collected and all operating expenses. As a landlord, those expenses become a critical factor in how much revenue your rental generates and the profit that lands in your pocket after paying ongoing costs.
Net Operating Income (NOI) measures the rent you collect minus all operating expenses. When evaluating the profitability of a property, NOI becomes a critical metric to keep up with. Some of the most common operating expenses for residential property owners in Everett include:
When managing a rental, property owners must set the rental rate to stay competitive while covering common (as well as unexpected) expenses every month. At the end of each month, the ideal rental rate covers every cost and leaves you with some profit to build cash flow, reserves, and long-term wealth.
A property manager can tell you that a rental is a valuable asset beyond monthly rent collection. Real estate investments appreciate over time, leading to the opportunity to sell the home at a profit when you've decided it's time to let it go. Thinking long-term, a home's value might appreciate if:
When your rental is in an up-and-coming or sustained community that thrives, chances are that your property values will increase to make the property more valuable over time.
With ongoing expenses and property values that appreciate over time, one way investors can maximize rental income is to know exactly what they're getting into. Of course, you might not be able to predict the future or make bold changes in how you manage your property with every little activity in the market. However, property managers recommend staying on top of fundamental aspects of rental property management that can impact your returns, like vacancy and rent collection. Understanding these factors and applying the right strategies can maximize revenue and profitability!
Building a good rapport with tenants helps establish trust and gets everyone on the same page about expectations around rent payments, noise level, pets, etc. Taking excellent care of the property and being responsive helps tenants decide to renew a lease. In addition, applying professional marketing practices helps owners minimize vacancy times (to maximize income).
Many property management companies have their own systems, but not all owners work with them. Even for owners who prefer to self-manage, having a system in place will help streamline communication between you and your tenants. The right system can also help you stay ahead of rent delinquency by notifying you when the rent is due or reminding your tenant if they are late.
Screening tenants not only reduces the risk of intentional property damage but it can also prevent you from having to deal with noise complaints, rule violations, late rent, or eviction. Apply a tenant screening process to every prospective tenant!
A rental property that is well maintained not only attracts tenants for longer periods of time, allowing you maximum rent revenue, but it can also mean increased property value if you're looking to sell. By regularly maintaining every aspect of the property, you not only protect your investment by keeping everything in top condition, but you maintain a good rapport with tenants who expect a clean and attractive home when they move in.
We hope these tips have helped you understand how rental properties make money. If you're looking to grow your wealth and build a stable, long-term portfolio with real estate investments, we recommend getting in touch with Everett property management experts at The Joseph Group!
Our property management team can help optimize operations so that you have more time for other endeavors while still maximizing their income from rentals. Plus, our services save you the headache of micromanaging everything on your own. Reach out soon to learn more about how our property management services can help you make more money.