SS186: Maximizing Rental Property ROI: Expert Tips

SS186: Maximizing Rental Property ROI: Expert Tips

How do you best maximize the return on investment of your rental property? In this episode, Charles discusses some expert tips for doing just that.

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Talking Points:

  • After decades as a multifamily investor, I have realized several strategies that rental property investors should consider to help optimize their property’s return on investment.
  • 1: Underwrite the Property Conservatively: Before purchasing a rental property, ensure you are underwriting it conservatively. Take contractors with you through the property to receive accurate repair estimates. Write your target rent projections lower than the current market rents. Verify all major expenses, including insurance and the new taxes you will be paying after acquisition.
  • 2: Location Is Very Important: The old adage of “location, location, location” holds water as one of the most important aspects of rental property investing. You cannot move your property; properties in better locations appreciate faster than properties in worse locations, and one of the best ways of ensuring that tenants not only rent a unit from you but also renew the lease is to own a property in a good area. Look for areas with good schools and amenities, such as being close to shopping or restaurants, low crime areas, and transportation and employment centers.
  • 3: In-depth Tenant Screening: Do not rush to rent your property to the first person who applies. I have made that mistake several times, and it has become a mess. If you rent to bad tenants, it might also push other tenants not to renew their leases. When I have lost tenants because of a bad tenant, the tenants I have lost are usually the ideal tenants you want as long-term renters. You have to develop your tenant screening criteria and stick to them. This includes verifying employment, income, and credit. Performing in-depth background checks.
    • Do not keep your tenant screening criteria a secret either. Put it all in the rental listing, and verify this in the first minute of speaking with the potential tenant. I would move on if they cannot confidently verbally confirm every requirement.
  • 4: Focus on Tenant Retention: Boiled down, good tenants really have 3 main qualities in the landlord’s view: they pay rent on time, they respect the property, and they respect their neighbors. The longer you keep tenants in your units, the more money you make. Strive to find long-term tenants and provide them with a hassle-free rental experience. When stuff breaks, fix it. When they have a problem, address it immediately. Keep the property well-maintained. This is good for you as the property owner but also goes a long way towards retaining tenants. Good tenants will not rent or stay in a property they are not proud of. We love tenants who take pride in where they live.
  • 5: Minimize Vacancy Periods: When tenants leave, repair and/or rehab the unit as soon as possible and get it on the market immediately. Turnovers are extremely expensive for property owners. Try to set up the repairs before the old tenant leaves, and once they are out, get your team in there immediately to start preparing it for the rental market.
  • 6: Strategically Increase Rents: I suggest you raise rents yearly, even if only 1 or 2%. Your expenses have increased over the past year, and tenants must understand this. You don’t want to surprise a good tenant who has rented from you for 4 years with a 15% or more rent increase because you were too lazy to minimally raise their rents yearly. Understanding the market rents will also assist you with where to price your rents with new and existing tenants.
  • 7: Consider Value-Add Improvements: By understanding market rents, you will also see other similar units that might be more updated than yours, that also are being rented at a much higher rate. When this happens, it might make sense to start renovating your property to obtain higher rents and a higher property value.
  • 8: Regularly Review Your Contractors and Handymen: Be aware of price creep. This has happened to me dozens of times. You find the best contractor, they do great work, and their pricing is very reasonable, and then a year or two into your relationship, they quote you a price for a renovation that is insane. You overlooked the price creep over the first 1 or 2 years, and the service was good, so you didn’t ask for a discount or explanation, but then, on your next renovation, it seems like they are trying to retire from your job. This is where you need to ask some questions and get more bids from other contractors.

By following some of these tips and staying proactive in managing your rental property, you can significantly enhance your return on investment and build a successful real estate investment portfolio.

Transcript:

Charles:
Welcome to Strategy Saturday; I’m Charles Carillo, and today we’re going to be discussing maximize rental property, ROI. So after decades as a multifamily investor, I’ve realized several strategies that rental property investors should consider to help optimize their property’s return on an investment. Number one is underwrite the property conservatively before purchasing rental property. Ensure you are underwriting it conservatively. Take contractors with you through the property to receive accurate repair estimates. Write your target rent projections lower than the current market rents and verify all major expenses including insurance and the new taxes you’ll be paying after acquisition. Two is location is very important. The old adage of location, location, location holds water as one of the most important aspects of rental property investing. You cannot move your property properties in better locations appreciate faster than properties in worse locations. And one of the best ways of ensuring that tenants not only rent the unit from you, but also renew the lease, is to own a property in a good area.

Charles:
Look for areas with good schools and amenities, such as being close to shopping or restaurants, low crime areas, and transportation and employment centers. Number three is in-depth tenant screening. Do not rush to rent your property to the first person who applies. I’ve made that mistake several times and it’s become a mess. If you rent to bad tenants, it might also push other tenants not to renew their leases with you. When I’ve lost tenants because of a bad tenant, the tenants I’ve lost are usually the ideal tenants. You want as long-term renters because they care where they live. You have to develop your own tenant screening criteria and stick to it. This includes verifying employment, income and credit, performing in-depth background checks. Do not keep your tenant screening criteria a secret either Put it all in the rental listing and verify this in the first minute of speaking with a potential tenant.

Charles:
I would move on if they cannot confidently, verbally confirm every requirement with you. Number four is focus on tenant retention. Boil down good tenants really have three main qualities in the landlord’s view. They pay rent on time, they respect the property and they respect their neighbors. The longer you keep tenants in your units, the more money you make. Strive to find long-term tenants and provide them with a hassle-free rental experience. When stuff breaks, fix it when they have a problem, address it immediately. Keep the property well maintained. This is good for you as a property owner, but also goes a long way towards retaining tenants. Good tenants will not rent or stay in the property they’re not proud of. We love tenants who take pride in where they live. Number five is minimize vacancy periods so when tenants leave, repair and or rehab the unit as soon as possible and get it on the market immediately.

Charles:
Turnovers are extremely expensive for property managers. Try to set the repairs before the old tenant leaves and once they’re out, get your team in there immediately to start preparing it for the rental market. Number six is strategically increased rents. I suggest you raise rents even if it’s only one or 2%. You have to raise the rents every year. Your expenses have increased over the past year and your tenants must understand this. You don’t want to surprise a good tenant who has been rented for you, say, for four years with a 15% or more rent increase because you were too lazy to minimally raise the rent yearly. Understanding the market rents will also assist you with where to price your rents with new and existing tenants. Number seven is consider value add improvements. Now by understanding the market rents, you’ll also see other similar units that might be more updated than yours, that also are being rented at a much higher rate.

Charles:
Okay, when this happens, it might make sense to start renovating your property to obtain higher rents and higher property value. Number eight is regularly review your contractors and handyman. So be, be aware of price creep. Now, this has happened to me dozens of times. You find the best contractor, they do great work and their pricing is reasonable. Then a year or two into your relationship, they quote you a price for a resident renovation on a new property you’re buying, and it is insane. You overlook the price creep over the first one or two years, and the service was good, so you didn’t ask for a discount or explanation, but then on your next renovation, it seemed like they’re trying to retire from your job. This is where you need to ask some questions and get more bids from other contractors. By following some of these tips and staying proactive and managing your rental property, you can significantly enhance your return on investment and build a successful real estate investment portfolio.

Charles:
So I hope you enjoyed. Please remember to rate, review, subscribe, so make comments and potential show topics at Global Investors Podcast. If you’re interested in actively investing in real estate, please check out our courses and mentoring programs@syndicationsuperstars.com. Look forward to two more episodes next week. See you then.

Charles:
Have you always wanted to invest in real estate, but didn’t have the time, didn’t know where to find the deals, couldn’t get the funding and didn’t want tenants calling you. Since 2006, I’ve been buying income producing properties and great locations that provide us with consistent passive income. While we wait for appreciation in the future and take advantage of tax laws while we’re waiting and unlike your financial advisor, we invest alongside our investors in every property we purchase. Check out to investwithharborside.com. If you like the idea of investing real estate, if you like the idea of passive income partner with us at investwithharborside.com, that’s investwithharborside.com.

Announcer:
Nothing in this episode should be considered specific, personal or professional advice. Any investment opportunities mentioned on this podcast are limited to accredited investors. Any investments will only be made with proper disclosure, subscription documentation, and are subject to all applicable laws. Please consult an appropriate tax, legal, real estate, financial, or business professional for individualized advice. Opinions of guests are their own information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of syndication Superstars, LLC exclusively.

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