If you’re here, you’re probably already well-aware of the fact that the rental market is piping hot! Not only are more people renting, the average renter is also significantly more well-off. There has been a 175 percent increase in high-income renters in America in the past decade, with over 1.35 million renters making $150,000 or more per year in the years between 2007 and 2017.
But don’t go buying up all your area’s rentals just yet. Investing in rental properties is like all other investments in that it requires entrepreneurial savviness and a solid business strategy for success.
To get a big return on investment (ROI), you have to be strategic about where and how you invest.
As a landlord, your ROI is the amount of money you’ll pocket after all is said and done, which you likely already know if you’re considering investing in a property that you’ll exclusively rent.
Typically, you have several ongoing or one-time costs to get your rental up and running and to maintain it properly for renters, including:
● The rental property itself, including property taxes
● All upgrades and repairs
● Marketing the unit to potential renters
● Applicant credit and background checks
● Lawn and garden maintenance
● Management fees
● Management and rent payment software
● Realtor and broker fees (if applicable)
● Setting up and paying utilities (if applicable)
● Your time spent showing, maintaining, etc.
Easy Things You Can Do to Maximize Your Vacation Rental's ROI
So how do you offset all the above costs and, ideally, come out on top?
It’s all about one thing—optimizing your space so that it’s appealing to your target renter and earns you more in rent every month.
Here are a few of the simplest things you can do to get there:
● Make Impactful Upgrades Without Renovating
ROI is all about putting in as little as possible to get as much as possible, right? Here are some of the simplest but highest-return upgrades you can make on your rental.
- Window Treatments—Even the most outdated, aging apartments come to life when the windows are dressed in new window coverings. Consider adding blackout shades to help make the unit more energy-efficient and upgrade any corded blinds to cordless styles to make the unit more marketable to parents and families.
- Appliances—Nice appliances are more affordable than ever, so it may be worth the investment to upgrade to that mid-range stainless steel oven and fridge you’ve been eyeing for your unit. A washer and dryer also boost your rent potential with a relatively low up-front spend. Nice, new appliances should, in theory, need less attention from you, which helps keep ongoing maintenance costs in-check.
- Paint—A clean coat of paint is by far the simplest and lowest-cost way to spiff up a place. It cannot be understated: If there’s peeling paint, a drab color or simply an overwhelming feeling of “meh,” liven it up with a new paint job!
- Hardware—Kitchen hardware, like a fresh coat of paint, is an easy way to add dazzle without the dollar. It gives your space a feeling of newness and luxury without much money, and your potential tenants will notice.
- Smart Home Gadgets—Did you know that 86 percent of millennials say they’d pay more in rent for a “smart” apartment? Tech-enabled amenities, including Wi-Fi connected locks, outdoor security cameras, video doorbells and smart thermostats are extra-appealing to younger renters and don’t cost a ton up-front.
● Make Your Unit Available at the Right Time
ROI isn’t only about adding a new sparkle to your space. It’s also about strategizing. Of course, the ideal time to list your rental varies based on your market, but generally peak rental season is in the summer, with the largest share of renters moving between the months of May and August, according to SmartMove. Naturally, when there are more renters, you can charge more in rent.
● If You’re Looking for Properties, Prioritize Location
We’ll spare you the cliché, but yes, location really does matter as it pertains to real estate. If you haven’t already invested in a property, make sure to do a detailed analysis of rent prices by neighborhood. There’s a good chance that spending more to invest in a higher-rent area will pay off faster than spending less to invest in a cheaper one, and you may have fewer issues associated with rundown buildings and maintenance if you buy newer and nicer.
● Take the Time to Vet Your Tenants
The most common complaints of landlords include late payments, disorderly conduct and violation of rules, all things that can wind up costing you money in the long-run. What’s more, eviction—which costs landlords over $5,000 per filing, by the way—is a time-consuming, stressful and surprisingly common process. How do you prevent getting yourself into these messes? Make sure each and every tenant is well-vetted with credit checks, background checks and references from former landlords.
● Offer a Few High-Value Luxuries
Another great way to rake in more from your rental is to position it as a luxury unit. The highest-value amenities differ from market to market. For example, parking, a doorman and an elevator are rent-boosting premiums in big cities like New York, while swimming pools are big luxuries in the South. A few small but highly valued amenities, which yield higher rent in most markets, include laundry, air conditioning, outdoor space (both private and shared) and walk-in closets.
Focus on Appealing to Your Target Audience
Max rental status can be achieved by approaching your rental from a marketer’s perspective but doing so in a way that’s tailored to your unique market. Today, consumers have higher expectations and demands—i.e., they expect to be able to pay their rent online and more often seek out pet-friendly rentals—which must be accounted for in a highly competitive rental market. And, like any real estate endeavor, consumer demands vary widely from market to market. Learning the wants and needs of your ideal demographic in your specific area will help you zero-in on how to get the best possible ROI from your property.
About the Author:
Kenneth Gordon serves as the Assistant VP of Factory Direct Blinds. Kenneth is responsible for overseeing the planning, development and execution of all Factory Direct Blinds marketing and advertising initiatives. Before joining Factory Direct Blinds, Kenneth served 6 years in the United States Air Force as a Military Police Officer. Kenneth enjoys spending time with his two sons and beautiful wife Brittany when he’s not working or writing.