Many of us buy or build rental houses to get money but sometime find it hard to earn back what was invested. This is because we lack strategies to run such a business.
Jonathan Mugerwa, a real estate manager, says rather than just acquiring as many properties as possible, one should also watch the following.
Increase rent strategically
Mugerwa says increasing rent requires knowledge of your property’s value compared to your competition.
“Tenants can tolerate the increment if they cannot find lower rates elsewhere but this does not mean you should raise rent even when you do not have good reason to do so,” he says.
He adds that moving will cost tenants a lot of money. If the value of their current rental is significantly better than the value of a new rental plus the cost of moving, you still have a chance to retain them.
“You may even ask them if there is anything that would make them more comfortable and select items from this list that will justify an increment while increasing the market value of the home,” Mugerwa says, adding that you have to make improvements that are necessary for maintenance and have immediate return on investment.
Consider late fees
Mugerwa says although you may sometimes find it hard to collect rent, you must ensure your tenants understand that this is a business, they have a contract, and it is your job to complete this transaction, following the contract and all applicable laws.
“If you allow tenants to get away with paying late without charging for this, you are making loses. Your tenant will use it as an excuse to get away with late payments several more times, causing you extra work and stress,” he says.
Mugerwa says if a tenant sends you a late check without the fee for late payment, politely explain that rent is not considered paid until all fees are collected, and that unfortunately you cannot accept this payment until all fees are paid.
“If you hold firm, they will quickly learn that you cannot be taken advantage of and will most likely comply,” Mugerwa says
Mugerwa says one of your goals should be to find quality tenants that take care of your property and pay consistently. When you find these people, do what you can to keep them because it will take time to make maintenances,” he says.
“The price of rent is not the only factor involved in tenant retention, the other key is customer service. Whether you personally manage your properties or have a property manager, make sure your tenants are treated with respect and professionalism,” he says.
“To assess whether your property manager is performing in a way that adopts good tenant or landlord relationships, send a message asking for feedback from your tenants, know their opinion and contact them directly if they are dissatisfied with their manager,” Mugerwa adds.
Muhammed Kizito, a real estate manager, says retaining tenants for a long period of time is one of the most difficult tasks because you cannot predict what a tenant will do, although you have to do your best to keep them around.
Target your ideal tenant
According to landlordology.com, an online portal, getting the perfect tenants for your property is a triple financial bonus; you will be able to set a higher rent and if they are suitable they are less likely to leave, saving you costs associated with vacant units and tenant turnover.
Find out what your ideal tenant is likely to want, in terms of fixtures and fittings and décor, and give it to them. This sounds simple but just make sure you do you research first. If your best tenant is a professional twenty-something then they are likely to want different facilities and interior design than retirees or a family with young children.
Manage your own property
Muhammed Kizito, a real estate manager, says if you can manage your property at all, this will go a long way in adding to your savings.
“A property manager will get up to 10 per cent of the rent just to take and make calls. You can do that from anywhere in the world as long as you have cell service. You need to be able to take and make a call. Save this 10 per cent and increase your total profit by as much as 20 per cent,” he advises.