Maximising Profits on Rental Properties

Now is the great time ton be thinking about yields and cash flow on your properties.  What I am going to do now is run you through a few tips to increase the yield or return that you have on investment properties.  This simple little things that once implemented, they can really increase the yield that you get on your property and that is what you should be focusing on.  Most people only have to think about yields and return and cash flow when money gets tight.  But the reality is, it is something that you should be doing all the time.  Cash flow is the lifeblood of any business and investing in real estate is a business.

Unfortunately, most people do not think of it as a business.  And that is why they let the status quo just carry them forward.  They just kind of drift along with their rental properties and then one day they look at it and go, “Oh, I think I might sell it.”  And that is when they actually spend some money to do it up to try and get a better value.  But the reality is that a little bit of money, a little bit of care and effort more than anything else spent along the way while you have got your investment properties is not only tax deductible but it will also increase the yield that you can get on those properties.  It will increase the cash flow that you are getting.

So let us have a look at some of the things you can do.  The first thing is you really got to present it well.  Now, while the market at the moment indicates that there are cues for rental properties, they are having options to get rental properties.  So, the yields are going up but the fact is, if you present your property well, you are going to get an even better return and you will rent it that much quicker.  So there are some simple little things that you can do to present that property well.  The first thing is to declutter.  Get it all cleaned up.  Do not have rubbish lying around the place.  Do not have little knick-knacks and shelves jutting out from the walls and things like that.  Clean it right up.

Another thing you can do is to keep it light and neutral.  Always go for neutral colors.  Do not go for heavy dark colors.  They make a room look too dark.  Always go for light colors.  One of my mates who owns ***** over a hundred properties now, his standard colors and white, white and white.  He has commercial properties, he has residential properties and every single one of his properties is either just of white or white.  Now, that makes it obviously pretty easy when he goes and buys his paint in bulk which of course he gets a huge discount for it because he buys it by the palette load.  But, it certainly enables him to keep all his properties uniformed as well.  Now, you do not have to go to that extreme but at least keep all your colors neutral because that way, your tenants’ furniture will fit it pretty much with whatever you have got there.

Simple little things like, if you got bedrooms that do not have any built-ins, just putting a built-in could mean a difference between an extra $20.00 or $30.00 a week or getting your property rented as opposed to not.  So things like built-ins are actually pretty important to renters because these values not many people have covers and wardrobes in their furniture that they cut around from house to house anymore.  Those days are pretty much gone now.  I always like to have my properties professionally cleaned even though when a tenant moves out.  They should be cleaning the property and having it professionally cleaned before the next tenant moves in.  That is all very well.  But that is one of the things that I really get fussy about with my managing agents to make sure that they do actually have the property professionally cleaned in between tenants.  It just makes such a difference.

And if you have the property professionally cleaned for your tenants going in that you are going to insist on the lease that they have to professionally clean the property when they move out.  And I have had just bought a property, I always have it professionally cleaned before I have it presented for lease or for sale for that matter as well.  Make sure everything works.  The last thing you want to do is have a dishwasher that does not work or if you are renting a place that is partly furnished for instance, a washing machine or an air conditioning unit, I would rather not have the appliance there than have it sitting there and not working because it is your responsibility as a landlord to have everything working.

I often have tenants who have left things in the property.  They left an air conditioner for instance and if I have not been talking to the agent, the managing agent then talks about what condition the property is in when the tenants actually left.  And what can often happen is that you will rent the property with an air conditioner in there even though you may not have put that air conditioner in there.  And because you rent it with the air conditioner there, if it breaks down or does not work in the first place and it has been rented with an air conditioner in place, it is then your responsibility to either fix it or replace it.

So one of the things I always have on my checklist when I talk to an agent when I have got turnover tenants, to make sure that the tenant has not left anything in the property because I would rather not have that air conditioner or that fridge or that washing machine.  I mean all of those things are quite off indeed are left there by tenants.  And as I say, if you re-lease it with that there thinking the next tenant can have it, then it is actually your responsibility and you do not know whether it has been tampered with from an electrical perspective or whether it works or does not work or whatever.  But if you rent it with that in place, it is your responsibility.  So make sure that is on your checklist when you got a tenant change over from one to the other.  That the previous tenant has not left something in there that then becomes your responsibility to pick some thing working.  But if you do have appliances in your rental property, make sure that they are all working and working quite well.  It does not cost a lot to have your property presented well but honestly, it just brings so many rewards from either quality of tenant coming in and the fact that you have got your property rented quickly and for the maximum dollar.

One of the things you can do to really increase your yield is think about what you can add in to your property to get those rents out.  For instance, if you rent predominantly to students, then high-speed internet might be something that you want to have included.  So if you put in high-speed internet, it might cost you, let us say $70.00 but you might get $100.00 or $120.00 a month extra coming in because your property is now rented with high-speed internet.  That can really start to increase your yields so you are adding services.  It might be for instance, I have got some properties in Manning Towns, and quite often in those regional areas, I will throw in cable TV.  Now again, it might cost me $70.00 to $80.00 a month plus something like that but I can rent that property quite often for $150.00 a month extra because I have got cable TV included in the rent.  And in places like that, it is a very desirable thing.  Cable TV, internet, it might be a pool maintenance or it might be a garden maintenance so particularly if the property has got a pretty heavy garden from a maintenance perspective.

So do the sums on that sort of thing.  Have a look at what it would cost you to put that service on and then what extra return you would get as a result of having that service there, simple Math, the cost benefit analysis.  If it makes your money, do it.  If it does not, do not.

When we are talking about gardens, one thing I like to do with my rental properties is not have very flamboyant gardens.  You do not want the little annual plants and flowers and things in there.  You want easy care gardens because your tenant coming in does not really want to have a huge job ahead of maintaining your garden.  Most tenants are really not into gardens.  They want nice and presentable and all that sort of thing but they just do not want a high maintenance garden.  So if you have got one of those, it is well worth the money to go in, reap it out and put in something that is really easy care because that is what your tenants will want and that will mean that you will rent your property quicker and you will get more for it.

Car parking can be particularly useful when you are in the high build up areas where parking on the street just is not the goal or parking on the sidewalk.  So, quite often if you have got a property that maybe do not have a carport or does not have a garage or maybe has a single carport or single garage as opposed to a double, have a look in the area, have a look in the streetscape around and see what the norm is.  See whether most houses are presented with single garage or double garage or carport or not at all or whatever because it could be well with you awhile having to look at your property and actually putting that in, putting on a carport.  If the carport costs you, lets us say $5000.00 to put on and you get an extra $20.00 a week, that is an extra $1040.00 a year.  That is about a 20% return on your money.  That has got to be a good return especially in these days.  You are not going to get that on the stock market.  That is for sure.

So right now is a great time to be looking at those existing properties.  Look at what you have got in your portfolio and really sit down and have a bit of a think tank as to what else you can do to make your property earn you more.  And if it means putting on a garage and getting an extra 20 bucks a week as a result, great!  You just made 20% on your $5000.00 investment.  Not only that, you have actually picked up probably an extra increase in value of your property as a result of having a carport as supposed to not having a carport.

If you have got a commercial property or residential property for that matter, that is not rented or has periods of time when it is not rented, then really look at your property compared to what else is around in the market.  Have a look at what your property maybe has not got that the other properties that they are renting have.  Have a look at the price differential.  Really do a bit of a shop around.  Do a bit of a secret shopper if you like.  Bring up agents, pretend you are renting, pretend you want to rent a property similar to yours and see what is on the market.  See what they go for.  See what condition they are in and then have a really critical look at yours and see what perhaps needs to be done.  This is particularly the case in the commercial market because tenants when they do move out it might take a little bit longer to get a tenant in.  So you have really got to make sure that your price is right and you got the right kind of fixtures, fittings, layouts, etcetera for the market that you are in.

Now, you do not want to be building the Taj Mahal if you are renting it in *****, but similarly, it got to be at a good standard for the area in which you are renting.  Just because you got your property under management or particularly if you are managing the property yourself, do not assume that the rental agent is going to be re-renting your property at the maximum market rental.  It is very easy particularly when you have got the change over of stuff in property management companies or people that have been there for a long term and they have a relationship with some of the tenants.  It is very easy for them to just re-lease it at maybe $5.00 a week more of $10.00 a week more than what it was just to account for a bit of inflation.  I find it all the time and it is something I have in my checklist when a tenant moves out or I get notification that one of my tenants is moving out.  I will ring the agent and I will talk to the agent and I will say, “If we are re-renting the property, is there anything that needs doing?  Is there anything I should be perhaps fixing up as the door jam need replacing or anything like that that I can do to make my property more presentable?”

But the other thing I talk about is what will be the market rental for that property because that really puts the managing agent on the spot.  It makes him think about what else have I got rented and what else is going for what kind of prices and what is the market rental?  Because I can tell you now, it is very, very easy for those managing agents just to let it slide and they have had a good tenant or it is not even when a tenant moves out.  It is just when the lease comes up.  I always like to have my properties at maximum market rental.  Not over the top but maximum market rental for the time.

If you are renting your property at below market rental, what you are doing is you have got an imposed forced donation upon you.  If I want to make a donation to somebody, I will do it.  I will give it to whoever I want to give it to but I do not want to have it forced upon me because my properties are being rented at below market value.  And it might only be $20.00 a week.  That is a thousand dollars a year.  It might be $20.00 a week on each one of a block of five.  Now that is five grand a year.  That could be the difference between positive or not.  And I can tell you now, with increasing rents the way they are at the moment, we have got auctions for rentals and you got such a high demand for rental properties and this is only going to continue.

Make sure that your rental properties are at market rental because you may find when your next review comes up or you lease it.  One lease expires and a new one is rewritten.  It might be an extra 50 bucks a week that you would get on that particular property.  That is not unusual in these times where have you got an increasing rental market.

So just watch out for those things.  I hope these tips have been useful to you and make sure that you are always on the job.  This is your business.  Your rental properties are your business.  So just start treating it like a business and maximize your yield.  If you had an opportunity if you are in business to get an extra dollar profit, would you do it?  Of course you would.  So what is the difference when you got rental properties?  It is exactly the same thing.  And maximizing your cash flow when you yield on your rental properties is part of your responsibility as a landlord.

Now, if you do not manage your property yourself, which I do not, I prefer to have my properties managed through managing agents.  Your job as a landlord is to manage your managing agents and make sure that they are on top of things, that they have got your property rented at maximum rental.  That you are talking to them every time there is a re-lease or a change over.  And you are talking to them about how you can maximize your yield on that property.  It is amazing, the difference it makes.  It can turn a negatively cash flow property into a positive cash flow property.  That is the difference it makes.  And it is now when people start to think about cash flow but it should be all the time.  Your cash flow is your profit.  Your cash flow is your ability to have the life you desire or not.  And that extra $20.00 a week or $30.00 or $50.00 there or a block of units, it might be the difference as to save five right grand.  That is the difference it makes to be on the top of the management job when it comes to renting your properties and not.  I hope that is helpful.  I will be back very soon to talk to you again.  Bye for now.