If you have a rental property that is not performing the way you would like, maybe it’s time to shake things up.
If you are struggling to meet your profit goals with traditional leases, here are some ideas that could get you back in the black:
1. If the property is located in an appealing area, consider going short-term. Vacationers, executives and other short-term renters often will pay top dollar, and you may avoid the headaches that come with long-term tenants over problems like traffic noise, early morning trash pickup, or personality clashes.
First, check out the local laws for any restrictions on short term rentals. It may be necessary to change licensing, or pay “hotel” taxes in some areas.
The cons: The neighbors may not be on board. That means they will watch the property like hawks and report any unruly tenants. Make sure you stress noise, parking and related ordinances in your leasing documents.
2. Furnished units fill a popular niche for renters, and can work for both short-term and long-term tenants. Another advantage of a furnished home is that “staged” rentals fill faster. That’s because prospects don’t have to use their imagination to understand how the space can work.
It may be more cost-effective to spend a little more upfront on furnishings. Buy durable items that take longer to show wear.
Con: It will be necessary to develop an inventory list and check that for losses each time a tenant leaves. Clean up may take longer, too. Be sure to charge the maximum allowable security deposit.
3. Convert underperforming spaces rather than the entire property. For instance, there’s easy money to make if you come up with more paid parking spaces. A small unit that is frequently vacant could be converted to a ‘coin’ laundry. Vending machines are a secret money-maker for landlords. If not a laundry room, consider converting wasting space into a game arcade, complete with beverage machines.
Paid storage units are another effective way to enhance profits in an underperforming space.
4. Where cash flow prevents upgrading a number of units to justify a rent increase, don’t ration the upgrades between all units — go one unit at a time. Just like airline seating, creating a hierarchy can entice some renters to pay top dollar for prime space. Choose a “honeymoon” unit and glam it up with great appliances, counters, cabinets, in-house laundry and the like. Pump up the rent and market it as the best unit on the property. Keep doing that as money allows until you have the Taj Mahal of rental properties.
5. If converting the property doesn’t work for you, another possible way to improve profitability for underperforming properties is to seek the advice of a property manager. The expertise of an experienced manager can be crucial in determining which upgrades or amenities sell in your market so you don’t waste money on ineffective solutions. Property managers also know your rental market inside and out. You may be pleasantly surprised — the problem could be as simple as increasing your rents because you are coming in below market.