How to Increase your Rental Return

Rental Return

Increasing the capital of your property is easier than you think. While not every investor has the ready cash to install a restaurant-quality kitchen, there are many ways in which you can quickly – and cheaply – get more return from renting out your property.

1. Get the right advice from the right person

When figuring out how much you want to ask for rent, always get a realistic view from a specialist property manager (rather than the selling agent). Seek out a recommendation from other investors, or look for an experienced property manager with local knowledge of the area, as well as knowledge of the types of tenants your property is likely to attract.

2. Increase the rent (or decrease it!)

The ideal rent is always market rent – so do your homework and find out what the going rate is in your area. By doing this you can increase your yearly yield by $1,000 or much more. Rather than alarming a good tenant with a sudden price hike, it can be easier, and more beneficial in the long run, for you to regularly increase rents by a smaller amount. With the advice of your property manager, build six-monthly rent increases into your lease agreement.

Converse to that, don’t forget to consider the negative impact of advertising rent that is too high. It may be worth asking for a little below-market rent to quickly find a tenant (then you can increase the rent when the lease is renewed). Some property owners prefer to keep rents low to keep stable, long-term tenants (rather than deal with the costs associated with a new tenant coming in at the end of every lease).

3. Renovate

Don’t just maintain your property at a minimum standard – update it! To attract a better standard of tenant, relatively inexpensive renovations such as a new coat of paint or new carpet can increase the rent by up to 10%. More extensive renovations such as a new kitchen or bathroom can add even more, particularly if you add extras such as air conditioning or a dishwasher. You may be rewarded with a higher rental (and a better tenant).

4. Claim all tax deductions

A quantity surveyor can list all the items in and on your property that can be depreciated which in turn can result in a larger tax refund. Good quantity surveyors will not charge you for a depreciation schedule if their professional fee is more than the tax benefit you are entitled to.

5. Take care of your tenants

Keeping one good tenant is worth far more than dealing with a number of mediocre tenants. If you need to increase the rent, the best way to achieve a good agreement is to liaise with your property manager – with experience of the tenant, they can gauge their willingness to accept a rental increase and how to go about it. Don’t forget that in fostering one good relationship you will also save on any repairs needed attract a new tenant.

6. Keep an eye on the calendar

As well as good seasons for selling properties, there are good ones for renting as well! Generally speaking, these are in January-February and June-July. Properties let during these times typically attract up to three times more interest than properties rented out during other months – meaning you have an excellent chance of attracting higher rents. Further to that, staggering the lease means that you can take advantage of these peak rental times. Structuring future lease agreements around these times will minimise the likelihood of long wait times between tenants.