Rental property income is an income you earn from a rental property that you own. Usually, this income comes from monthly rents, but it can also come from rehabbing the house and selling it for profit. The latter approach has declined in popularity with the collapse of the real estate bubble. The real estate value has dropped, while the number of properties on the market has remained high, so the home buyers have plenty to choose from. If you try to sell your property, the chances are pretty good that you won't make any money. This is why this article will concentrate on how you can get the most money out of renting your apartment out.
1. Do Some Preemptive Maintenance
Unless your rental property is brand new, chances are that it can use some maintenance, if not outright rehabilitation. You may be tempted to hold off maintenance and hope that nothing happens. However, the longer you delay maintenance, the more likely it is that something will go wrong. And once that something does go wrong, you might have to pay so much that maintenance costs would seem bearable by comparison. Therefore, while doing maintenance work will undercut your profits at first, it will save you money in the long run.
2. Upgrade Utilities
In some of the older apartment buildings, the utilities go back decades. While they may work fine now, they are more likely to break down than their newer counterparts. Furthermore, when they do break down, you will have a harder time making repairs and finding replacement parts. Furthermore, the newer utilities tend to be more energy-efficient than their older counterparts, so upgrading utilities will help you save on your energy bills.
3. Be Smart about Setting Rents
As a rental property owner, you have to strike a careful balance when it comes to rents. If you raise them too high, your potential tenants will simply go somewhere cheaper, but if you keep them too low, you won't make any profit. Your best approach is to charge within a hundred dollars of the average rental rates for a similar type of building in the nearby area. You can figure out those averages by looking through the classified ads in the local newspapers and on the Internet.
4. Engage in Targeted Advertising
When you are looking for new tenants, you will have to spend some money on advertising. That much is a given. You can get the best value for your buck, though, through targeted advertising. This means that you try to aim your ads at the groups that are most likely to rent. During the school year, for example, you can post advertisements in local college newspapers, since this is when college students are most likely to look for apartments. For best results, you should start doing it before the school year begins. If your rental property has apartments big enough to fit families, advertise in family-orientated newspapers and magazines. In short, figure out what kind of renters are most likely to rent from you and design your ad campaign accordingly.
5. Look for Potential Tax Breaks
As an owner of a rental property, you have the right to make a number of landlord-specific tax deductions. This will ensure that you will get to keep more of your profits and minimize your losses. First and foremost, you can deduct maintenance and repair costs. You can also report other expenses, such as utility bills and management fees.
Negative gearing is a tax strategy in which an income-producing asset is profitable in the long run but not in the short term. An investor using this strategy borrows money in order to purchase a rental property or income-producing asset. The gains on the rental are smaller than the interest paid on the loan taken to purchase the property itself, and the investor can write off these ongoing losses against high income. The investor hopes the asset will gain value prior to sale. The strategy works only if the taxation of capital gains in the future is lower than the taxation would be for earnings in the short term.