What’s the main objective of each real estate investor? To make money by buying, renting out, and selling investment properties, right? That’s why what income property you will buy and where it is located is one of the most important investment decisions that you make in the real estate business. Nonetheless, this doesn’t mean that once you’ve purchased a rental property, your rental income for the next 5 or 10 years is set in stone. To the contrary, there are plenty of ways to make extra money from an investment property that you already own. In other words, there are tricks that you as a real estate investor – and a landlord – can apply in order to increase your cash flow. Let’s take a look at some of the top ways to make extra money in real estate investing:
There are basically two ways to raise your cash flow in real estate investing: to bring up your rental income or to bring down your costs. The first three ways to make extra money from your investment property – i.e., to get more cash flow – focus on the latter: spending less.
Related: How to Make Money in Real Estate: 7 Different Ways
3 Ways to Make Extra Money from Your Investment Property by Spending Less
1. Minimize your expenses
As a landlord you should try to spend as little as possible – within a reasonable limit – on your rental property in order to make more money from it. For example, you don’t need a professional property management company to take care of your income property; you can do all the management work on your own. This will save you lots of money and also ensure that your property is in an excellent shape as you as the owner will take the best care of your real estate asset. You could also try to do as much of the maintenance and repairs work as possible on your own, rather than hiring handymen for every small pipe leakage or paint work. However, as you are looking for ways to make extra money from your investment property, make sure not to get yourself into tasks which are well beyond your skills and capabilities as this might end up costing you much more.
2. Take advantage of tax deductions
One of the first things which every real estate investor should study carefully in any location where he/she decides to invest is the local legislation on tax deductions in the real estate business. Interest on mortgage, depreciation, insurance, legal fees, repairs, travel related to dealing with your rental property, income property supplies, and losses are all tax deductable items. Maybe you were not aware of all the options to decrease your tax bill which is a major recurrent cost in the real estate business. Well, you better do your homework right and study all the opportunities to apply tax deductions in the management of your investment property. After all, this is one of the major ways to make extra money from your real estate asset.
3. Choose good tenants
Buying a rental property and taking a mortgage loan from the bank are not necessarily the riskiest parts of investing in real estate. Once you are the proud owner of a new income property, you have to rent it out. Most markets have plenty of demand for rentals as more and more young people don’t see the need to hurry up with buying a home, which is of course great news for landlords. However, choosing good tenants and making sure that they pay the rent on time and do not destroy your property is really, really hard. Just keep in mind that taking enough time and putting sufficient efforts into choosing the right tenants will eventually pay off. Make all necessary checks to be sure that you are renting out your investment property to tenants who will not damage it beyond reasonable limits. Minimizing the need to conduct major repairs between tenants is one of the best ways to make extra money as a landlord.
Related: 8 Things That Make a Good Tenant
The next three ways to make extra money in real estate investing focus on how to increase your rental income.
3 Ways to Make Extra Money from Your Investment Property by Earning More
1. Upgrade your rental property for cheap
One of the ways to make extra money from your real estate property is to be able to charge more rent to your tenants. However, it is not ethical to just go ask for more money simply because you would like to bring up your profit. Moreover, if you try to charge more rent than surrounding properties without offering anything special, you run the risk of encountering significant vacancy rates, which will bring your overall cash flow down. The smart way to ask for more rent – in order to get more rental income – is to do some fixes around the investment property and add some amenities that you didn’t previously have. The trick is to choose repairs and additions which cost little but add a lot of value to your real estate property. Then you can easily ask for $200-$300 more because you are actually offering a better rental.
2. Try out Airbnb
Even if you are one of those real estate investors who are still not convinced of the power of Airbnb, you HAVE TO change your attitude. There’s plenty of evidence from the real estate market and the real estate investing business that Airbnb and similar short-term rental websites are the new hot thing in real estate. They have been around for a few years now, and they are here to state in the coming decades. Many major cities as well as smaller towns offer much higher rental income from Airbnb renting than from traditional rentals. You can use Mashvisor’s investment property calculator to check out the situation in your particular location in order to see whether switching from traditional to Airbnb could be one of the viable ways to make extra money from your property in your city.
3. Do something special
If, on the other hand, you have already tried Airbnb and plan to continue with short-term rentals, there are also ways to make extra money from your income property via this rental strategy. You should make sure to offer your guests something special, something which other hosts in your area do not offer. In this way, you will be way ahead of any competitors and be able to increase your rate for the additional service. For example, you could offer some more appliances or a richer breakfast or a tour around the city which in the long term will turn into one of the important ways to make extra money from your existing Airbnb property.
Related: How Do You Create the Best Airbnb Property in Town?
While every real estate investor should work towards growing at all times by adding more and more properties to his/her real estate investment portfolio, one should not forget also the option of making more money from the income properties he/she already has. To become even more successful in your real estate business, remember to try out the above-proposed 6 ways to make extra money from your investment property.