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How To Become A Landlord - Articles

11 Ideas to Increase Rents

Date: 14/03/2015

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

Longer Lease 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

Higher Rent LeaseTenants 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

Improve The PropertyUnless 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

FurnitureUnless 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

 high-speed InternetIt’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

 PetsPets 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.

GarageOr 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.

Conclusion

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.

Profile photo of Jason Staggers

By Jason Staggers

Jason was a personal mentor working with Steve McKnight's Property Apprentices. He helped hundreds of investors apply Steve's teachings in the real world and achieve greater results on their journey to financial freedom. Jason now lives in Perth, WA where he leads Neuma Church.

Comments

  1. Profile photo of Benny

    Hi Jason,
    Another really useful article there, my man !! Thanks.

    In the realms of “increasing income in creative ways”, one of our properties just suited being changed from a straight family rental into a Holiday Rental. Though this requires more management and cleaning, etc, the rental amount earned per week is more than double what a family would pay for a home fulltime.

    Other benefits are :-
    1. Access to the place for us to enjoy when guests not present (often thru the week, as weekends are our usual prime time)
    2. Easy to arrange tradies through the week when needed without disruption to guests/tenants.
    3. Premium letting rates during School Hols, etc.
    4. Rates can be tailored to suit situations – e.g. discount to attract guests when taking a short notice spot. Similarly, premium dates call for premium rates.
    5. Furnishing was done on a Mastercard with “No Deposit, No Interest for xx months” deals. The higher rental return made this a positive way to go (no upfront $$ required).

    Of course, the location needs to suit this style of rental – Our is in Springbrook (in World Heritage Listed Rainforest) so it draws many who enjoy an active, scenic, and/or peaceful holiday. Works for us.

    Regards,
    Benny

    • Profile photo of Jason Staggers

      Thanks for that @Benny. Those that I’ve worked with who have converted their rental property to short-stay have been able to increase their income but their expenses have been higher. What is your net return on this property compared to when it had a traditional tenant?

  2. Profile photo of MilkTruck

    I certainly like #4. I think it can help tenants make it feel that it is their home and not simply another rental. The increased quality of the home makes it more desirable too and justifies the increased rent. If managed well it should see a much better transition between tenants by having less niggly maintenance to think about at that time. But hey, hopefully the tenants will be happy and you won’t have to think about re-letting as much anyway. MT

  3. Megan

    We spoke to our property manager about higher rent for allowing pets and she said that according to the rental board there is nothing stopping renters owning pets if they want them so its better just to allow the tentants to be honest with you about whether they have pets. The are responsible for leaving the house as they found it pets or no pets. If the pet does major damage to the property you have to prove it was malicious intent by the animal and how are you going to prove that?

    • Profile photo of Jason Staggers

      Your property manager’s opinion is debatable. The pet clause issue is a legal grey area. While the residential tenancy acts in NSW and VIC in my opinion fail to offer reasonable protection for landlords on the pet issue, it is still in the power of the landlord to charge a premium rent to pet-owners.

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