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Protecting Your Rental Income

By - 2010

Let that rental income drop below your expenses and a good investment becomes a financial burden. What can you do to keep that income high, and raise it even more? Try the following.

Keep Those Apartments Rented

One of the most important goals has to be to to keep that vacancy rate down. Keeping tenants happy is an obvious approach to this. How do you do that? Talk to them, and resolve any problem quickly. Find out why tenants leave, and if any of them are leaving for reasons that are within your control, do something about it (as much as possible - don't lower rent just because a few can't afford it).

Choosing the right tenants in the first place is a great way to reduce vacancy rates and keep that rental income coming in. You will never be able to instantly fill an apartment. They need to be cleaned, and perhaps advertised, so more turnover means more of this "down time." Suppose it takes a month on average to fill an empty apartment, and you fill them with tenants that stay an average of two years instead of one. You just cut your vacancy rate from 8% to 4%.

How do you know who will stay a long time? Start by listening to what they say, so you can rule out the obvious, "this will work for now" tenants. But beyond what they say, pay particular attention to their history. A man who has moved every six months for the last five years will likely move again soon. On the other hand, a family that stayed six years at their last place is likely to do the same here.

Another way to reduce that vacancy rate is to rent out those vacant apartments more quickly. Have advertising ready to go before you have a vacancy. Keep applications in a file so you can call possible tenants the moment you have a vacancy - they may still be looking for a place. Keep in touch with other landlords with whom you can trade "leads." If his place is full, he can refer prospective tenants your way and you can do the same for him.

If you hire a property management company, ask what their typical vacancy rate is, and how long it takes them to prepare and rent a vacant apartment. Choose the best according to results, not just by what they charge. And if they are better at this than you, definitely hire help.

Other Ways to Protect Rental Income

A couple years ago there was at least one company offering rent guarantees. All applicants had to be screened by them, and then you typically paid 1/2 of one months rent per year to be guaranteed that the tenant will pay for the term of the lease. I'm not sure if this idea has caught on yet (I haven't heard more about it), but it does show the value of a good screening routine. If they made money, and landlords thought it was worth it, they must have been doing a better job than landlords at choosing tenants. That is something to think about.

Some investors only rent to those who will provide a credit card number, and allow them to run the rent charges on the card if the tenant is a day late on rent. Incentives for paying on time have also worked for some properties. These usually involve a prize that can be won by any tenant who pays on time.

Getting rid of non-paying tenants is another important part of keeping that rental income up. You need to get the next - and better - renter in there. Have an eviction process that is as fast as it can legally be, and have it ready to put into action at all times. Consider paying non-paying tenants to leave fast. This may be tough to stomach, but if he'll get out this week for $100 cash, rather than wait a month for the eviction to go through, it means you get that new renter in a few weeks faster.

Finally, the most obvious way to keep that rental income up is to raise the rent you charge. Check comparable properties if you haven't in a while. If your rents are low, raise them. Your renters may complain, but if others charge the same (or even slightly less), there is no real incentive for them to leave.

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Houses Under Fifty Thousand | Protecting Your Rental Income