11 Ideas to Increase Rents
My favourite of Steve McKnight’s books is From 0 to 260+ Properties in 7 Years. The reason I love it is because it’s packed full of practical tips and detailed strategies on deal evaluation. It was the first of Steve’s books that I read back in 2005, and it marked the turning point for me in turning desire into action.
One of the many practical tips that Steve serves up is how to increase rents while keeping your tenants happy. If you own rental properties, you understand the importance of boosting your cash flow. There’s only two ways to do this: decrease expenses and increase income. I wrote about a few ways to decrease expenses here. But that’s only one side of the equation.
Here’s a quick overview of 11 win-win solutions from Steve’s book for increasing rents and boosting your property’s cash flow:
1. Offer A Longer Lease In Exchange For A Higher Rent
A longer lease may or may not be a value-add for a tenant, depending on the market. For instance, I once negotiated a lower rent as a tenant in exchange for a longer contract.
At that time, it was the landlord that wanted to minimize vacancies, and he was willing to give up cash flow to get it. Besides, he was a high income earner who believed in negative gearing.
But if the market has a low vacancy rate, and you offer a home for rent that is in short supply while rents are appreciating, the ball may be in your court as the landlord. In this instance, a greater sense of security and peace of mind may justify a higher rent, in your tenants mind.
2. Offer A Rent-Free Period As An Introduction To A New Higher Rent Lease
Tenants never like to receive word that their rent is increasing if they want to stay. It’s an open door for them to leave, which could mean a period of vacancy for you, the landlord.
A rent-free period at the beginning of the new lease can ease the shock of this transition. You may only end up slightly ahead in the first year, but you’ll be better off in the years that follow. This is an especially useful strategy if you believe you have a long-term tenant on your hands.
3. Offer A Rental Rebate As A Reward To Good Tenants
The best tenants not only pay their rent on time, but they also look after your property as if it was their own. Tenants like this deserve a reward because they will cost you less money in the long-run.
One way to do this is credit part of the rent each month to a holding account, and then refund it back to them after every inspection, provided they’ve paid their rent on time and looked after the property well. Be sure to have a specific objective check list, so they know exactly what to do in order to receive the rebate.
4. Improve The Property In Exchange For A Rental Increase
Unless you’re in a market where rents are appreciating across the area, you may be better off finding a win-win when increasing rents. Here are a few ideas to add value in the eyes of the tenant:
- Improve the lighting.
- Upgrade the heating or air conditioning.
- Lay new carpet.
- Add a coat of fresh paint on the walls.
- Improve the kitchen or bathroom.
- Add a remote garage door opener.
- Spruce up the landscaping.
5. Offer Quality Tenants A Bonus For Recommending Their Friends And Family
Great tenants often have friends and family members who will make great tenants. If your tenants are moving out, offer them a referral bonus of some kind for recommending friends or family.
You could offer them cash, or even tickets to a show or a sporting event.Before signing a lease with new tenants, use idea number four above, and offer the option of paying a higher rent in exchange for an improvement or luxury item.
6. Offer To Rent Furniture As Part Of The Agreement
Unless you’re servicing a niche market, you rarely find a tenant who needs an entire house full of furniture. It might be only a couch or dining suite they need, but temporarily renting the item from you may be better than buying it themselves.
When setting the additional rental price, you’ll want to aim to recoup the cost of the furniture within about 18 months.
7. Rent The Home By The Bedroom
If you own a rental property near a university campus, this can be a great niche strategy. There are some potential vacancy risks, as these types of tenants tend to be more transient, but if you can make up for it in a higher overall rent, then it could pay off.
Be sure to check with your local council to ensure there are no compliance problems. You’ll also want to read the fine print of your insurance policy to confirm there are no restrictions.
8. Provide Access To Technology
It’s not uncommon today for homes to be wired with Ethernet access points in living areas and bedrooms. Wireless high-speed Internet included in the rent can also be a value-add, and can put some extra money in your pocket each month.
If you’re offering student or shared accommodations, unlimited Internet is a standard expectation.
9. Provide Quality Second-Hand Appliances Or Electronics
For some tenants, offering a refrigerator, or washer and dryer can meet a basic need. If you know where to look, you can purchase these items for much less second-hand.
Check your local classified advertisements or Gumtree for deals.
10. Charge A Premium For Allowing Pets
Pets increase the likelihood that your property will sustain some damage. That risk can be more than offset by charging a premium for pets. Besides, pet-friendly rental homes are in high demand.
Paying a pet bond should be a condition of the lease. Conduct at least quarterly inspections, and be sure to repair any pet-related damage promptly.
You can also include a clause that stipulates tenants arrange to treat the house for fleas annually and upon vacating at their own expense.
11. Rent The Garage Out Separately
I wrote here about building granny flats to boost a property’s cash flow. Depending on your state’s laws, a prime granny flat strategy is to convert the garage into a second dwelling.
This is potentially a low cost option, as long as the slab and frame are structurally sound. You’ll need to have a structural engineer certify that the building meets compliance requirements.
Or if you want to take a simpler approach, you can rent the garage out separately for storage only. Storage facilities make big bucks using this strategy, so why not employ it on your property? Just be sure to check how this might impact your insurance policy.
If you want to delve deeper into improving your property management skills, Steve has an entire session in his Property Apprenticeship course called Strategies for Increasing Rent Returns. It is just one session in an entire module on Managing and Reporting on Property.
Have you used any creative techniques to boost your investment property’s rental income? Please take a moment to share your experience, ideas or comments below.