How to bulletproof your rental income in 5 ways
Owning an investment property can be a rewarding experience financially – provided you manage it correctly.
Landlords who find their properties stressful to own and difficult to financially manage are often those people who don’t factor in all of the costs of ownership when they buy investment property. However, it’s possible to bulletproof your rental income and ensure you derive maximum profit from your investments.
Below are five strategies you can use to ensure that your cash flow remains strong and a consistent rental income is achieved from your investment properties.
Use a skilled property manager to decrease vacancy
You won’t have a rental income in if no one is occupying the property and paying you rent, so be sure you are doing everything to help minimise the amount of time the property is vacant.
Enlisting the help of a property manager is a good way to ensure your property is priced correctly and marketed strongly.
When your property is coming up for a vacate, ensure that you allow time well before the current tenants move out to advertise and run open homes. This way, you can sign up a new lease with new tenants, who can move in as soon as the current tenants have gone.
Minimise turnover by offering longer leases
When landlords are considering where to buy investment property, one of the main considerations should be tenant demand. When renting out your investment property, you ideally want to find tenants that are willing to sign longer leases – and where demand is high, this is easier to find.
Aim for 12months at the minimum. Having to re-advertise and change over tenants every six months can be challenging and not only costs you in rental income, but in time as well.
If you end up with excellent tenants who pay on time and look after your property, try and keep them in your property by renewing their lease for as long as possible. In some instances, offering incentives for them to stay – or even tokens of your appreciation, such as a small gift at Christmas time – can prove to be worth it in order to hang onto excellent tenants.
Ensure you have insurance
After working long and hard to secure a good investment property, one thing you will need to do is protect that investment from any possible damage and the costly repairs involved to fix them.
For the relatively modest cost of a few hundred dollars per annum, you can be covered for damage to you building, contents, rental defaults and tenant damage via a landlords insurance policy.
It is important to note that not all policies are the same and it is imperative that you do your research as to what your property should be covered for, including floods and other natural disasters. Even if the chances are low, it is a risk to not get coverage for acts of nature such as floods, storms and fire, so you need to weigh up the potential outcomes. Ensure you read all the fine print and understand what your policy will pay out for.
Raise your rent strategically
Staying abreast of the market trends and similar rental properties in the area will allow you to make educated decisions when it comes to rental increases.
You want to ensure that you are not letting additional rental income go by being hesitant to raise rents as the market does for the fear of pushing tenants away. Whilst you might be worried the tenants will see it as unfair and move out, if you have increased your rent in line with the market movement, they will find the vast majority of other properties have also increased their rent.
The best way to go about raising the rent is to increase it slightly at regular intervals, say once a year, so that they don’t feel overwhelmed by the full force of a large increase after two or three years. Give your tenants as much notice as possible (at least the required 60 days’ written notice) and explain to them why the rent is being raised. If you are raising them fairly and legally then you are unlikely to have any issues.
Do cost-effective renovations and additions where relevant
Making small updates to your investment property can improve the desirability of your property and attract more rent.
If your property is looking a bit tired and worn out, then it might be time for a fresh lick of paint and perhaps some new carpet or flooring to lift its value and even give it the edge against other properties in the area.
A property manager will have a good understanding of what improvements you should make in order to maximise the return on your investment and often have good relationships with tradespeople and can get a good price for the work. The goal is to ensure that the money you outlay for the updates will be returned over time with an increase in rent and/or lower vacancy as a result of the improvements.
If you have any questions or would like any further information on investing or managing an investment property, contact your local experienced property manager for investment property advice. At Mint360, our property management professionals are always more than happy to help and answer any questions you may have about being a landlord in Australia.