Increasing your net operating income (NOI) as a landlord with multiple properties boosts your property value, enhances profitability, and can even improve your chances of securing future financing by making your properties more attractive to lenders and improving their market resale value.
However, knowing the value of higher NOI doesn’t mean you know how to achieve it. By taking note of these tips, that may soon change:
Use Rent Coverage Insurance
It may not cross your mind to use a rent coverage insurance provider like PandaGuarantee to improve your NOI.
However, rent coverage insurance, also known as rent protection or default insurance, protects your revenue stream and reduces the high costs of tenant defaults.
Rather than deal with the risks of missed rent and legal fees yourself, you shift this burden to your insurer.
Having this form of insurance also means you may be more willing to accept a broader range of tenants, which may keep your properties vacant for less time and earn you more money.
However, it’s not just you who benefits from a rent coverage insurance arrangement.
Renters who may otherwise not qualify for specific properties because they’re job-seeking, self-employed, face credit challenges, or don’t meet a landlord’s requirements for another reason could be more desirable to landlords with an insurance provider guaranteeing their lease.
Increase Rent
Rent increases won’t always make sense, but if it’s been a while since you’ve noticed what the market is doing, a review can be a great way to ensure you’re not leaving money on the table.
Look at market trends and see what properties similar to yours are being rented for in your area. Where possible, adjust your rent to match your competitors.
However, it’s important to be aware of rent increase laws in your state, as they vary by state and locality. For example, California caps rent increases at 5% plus the local inflation rate, or 10% in a year, whichever is lower.
Reduce Vacancies
If you have multiple properties and not all are currently generating rental income, it’s time to question why and set a goal to change that. How you approach this situation depends on where you live and the rental market in your area.
Sometimes, improving your rental outcomes, including rent increases, involves property upgrades and maintenance, such as new appliances, fresh paint, and additional amenities like storage.
Good marketing can also make a difference, including using high-quality photos and detailed descriptions to make your properties stand out from others. When competition is stiff, don’t underestimate the importance of setting competitive rent rates.
Create More Income Streams
There is more than one way to make money through rental properties; you just have to get creative.
For example, you can maximize rental income by charging pet rent, which is a monthly fee to cover potential damages, odors, and extra wear-and-tear from your tenants having pets.
If you have apartment blocks with parking areas and extra space, you may charge parking fees, set up storage areas for rent, or even establish laundry facilities that tenants have to pay for.
Many landlords with multiple tenants in a small area also install vending machines. It’s even worth looking at all the underutilized space you own and turning it into functional, revenue-generating spaces, like building ADUs.
Reduce Your Operating Expenses
You have to spend money to make money, and most landlords understand this. However, when your goal is to increase your net operating income, it’s worth looking at just how much you’re spending and seeing if you can spend less.
For example, rather than covering water and utilities for your rentals yourself, you may install submeters and pass the costs directly to your tenants.
If you regularly use vendors for different services, enter negotiations to secure the most competitive pricing.
Even preventative maintenance may make more of a difference than you think. Rather than waiting until a problem happens, such as a roof leak, routinely maintain your properties to improve your chances of avoiding emergency situations that cause significant damage and cost you even more money.
Invest in Value-Add Upgrades
You won’t always be able to justify a rental increase, especially if more comfortable, modern apartments and homes are being rented out for the same or less than your dated property.
When you know that a rental increase is the best way to boost your rental income, consider value-add upgrades before you do so.
Simple renovations like updating flooring, replacing counters, and painting cabinets generally make it straightforward to justify higher rent.
Depending on the property and area, you may even explore technological upgrades like keyless entry systems and smart home technology.
Add Another Bedroom
As a general rule, more bedrooms typically mean more rent. If you’ve bought a new rental property that you intend to remodel, consider whether its existing layout could be optimized.
For example, you might turn a large living space or dining room into an additional bedroom, or split an oversized bedroom into two. If you need help with reconfiguration, contact an architect.
Appeal Your Property Taxes
You can’t avoid paying property taxes, but you may be able to pay a smaller amount. If your property taxes have increased significantly, and you don’t agree with the calculations, file an appeal.
To determine if it’s too high, check your property’s assessed value and compare it to nearby properties. If you’re successful, you can pay less in taxes and increase your NOI.
Offer Premium Tenant Services
Depending on the type of rental properties you own, it may be possible for you to maximize your rental payments by offering premium tenant services. Busy tenants are often happy to pay more for convenience.
For example, you might offer fully furnished homes or apartments at a higher rent, or provide lawn and gardening services so tenants don’t have to worry about maintaining their yards. Even cleaning services can be a worthwhile consideration.
Increasing your net operating income as a landlord is a great way to build wealth and become more desirable to future lenders. If you haven’t yet explored these income-generating options above, now might be the right time. You may be surprised by how much extra money your rental properties can generate.
