There are various benefits of investing in real estate, such as generating passive income to qualifying for tax advantages. But renting out a property requires more than finding tenants — you’ll also need to find investment properties with great amenities and handle the different parts of the renting process.
That’s why we outlined how to make money renting out a property and tools that can help you as a landlord.
How to Make Money Renting Houses
Having a plan in place before renting out your house can ensure you’re not spending too much time managing your finances and tenants. Here are six tips on how to make money renting out houses.
1. Purchase an Investment Property
If you’re not planning on renting out your house, then you will need to buy your first rental property. There are different ways to finance rental properties, each of which have their own set of requirements and eligibility guidelines.
Once you’ve determined how you’ll finance your investment property, you can work with a Realtor or explore house hunting websites that show available properties near you. When looking at properties, it’s important to pay attention to the following factors:
- Property taxes: Property taxes can vary by location, with some places having higher taxes than others. Tax rates can also vary throughout the year, so it’s advised to look at properties with a consistent history of low property taxes.
- Local demand for rentals: Properties in areas with a high demand for rentals can make it easier to fill your property compared to areas that have more for-sale properties.
- Amenities: Properties with great amenities have a higher chance of attracting tenant interest and can make it easier to charge more in rent.
The key to making money from a rental is finding properties with promising rates of return that offer great benefits to tenants.
2. Determine Your Operating Expenses
Managing a rental property comes with operating expenses that need to be covered on both a monthly and annual basis. Examples of operating expenses to prepare for are advertising costs, your mortgage payment, maintenance, landlord insurance, property taxes, and landlord software fees. To make money from renting out a property, it’s important to have enough money coming in from rent payments to cover costs and reduce out-of-pocket expenses.
The total amount of your monthly operating expenses can help you determine how much to charge in rent to cover costs.
3. Set a Competitive Rent Price and Rental Fees
Your rent price should consider seasonality, local rental comps, current events, and the value of your property amenities. You can find rental comps by searching local rental listings online or using an Avail Rent Analysis report for comprehensive insights on local rental demand, rental comps for 10 similar properties, and more. The six-page report offers valuable insights that can make crafting a fair rent price less stressful and time-consuming.
Additional fees — security deposit, move-in fee, parking fee, pet fees — can also increase your profits, but the fees should be based on what other local landlords charge.
4. Invest in Landlord Software
Renting out a property comes with various responsibilities that can take time to complete, especially without a property manager. However, property management software platforms like Avail make it easier to advertise your property across a dozen sites, screen prospective tenants, access state-specific lease agreements, collect rent, and much more, all in one place.
You can also earn up to $500 in account credit by inviting up to 10 fellow landlords to create an account through the Avail Referral Program. The account credit can be used to purchase an Avail Rent Analysis report, cover tenant screening fees, or upgrade to Unlimited Plus for more benefits.
5. Find Reliable Tenants
When you rent your property to reliable tenants, you’re less likely to avoid expensive property damage or costly eviction fees. To find great tenants, it’s advised to get your rental listing in front of as many tenants as possible and implement a solid tenant screening process.
Most landlords use a rental application and tenant screening reports to find the best tenant for their rental, but check your local landlord-tenant laws for screening restrictions. Some states do not allow landlords to check a tenant’s criminal history or conduct a background check, while others have fewer restrictions.
6. Reduce Tenant Turnover
Being an awesome landlord is one way to retain great tenants and reduce tenant turnover costs. But when a tenant decides to move out, you’ll need to find new tenants and prepare the space before the next move-in date.
Not being able to retain tenants can result in growing expenses to find and move in new tenants or a vacant rental. To avoid this from happening, establish a positive relationship with your tenants, allow them to pay rent online, and handle maintenance requests right away.
What to Know When Becoming a Landlord for the First Time
Are Rental Properties a Good Way to Make Money?
Rental properties can be a great way to generate income, so long as your operating expenses aren’t too high and your rent price is competitive. Rent payments, security deposits, move-in fees, and pet fees can also help cover your monthly expenses and leave money left over to save for future costs.
What Is the Average Profit on a Rental Property?
The average profit on a rental property depends on where your property is located, how much you’re charging in rent, and the total operating expense amount. To determine the profitability of your rental, you can use the Avail Rental Property Calculator to get cash-on-cash return, gross rent multiplier, and more financial outputs.
Once you get an estimated profit, you can determine if anything needs to be adjusted to increase the future profits from your rental.
Manage Your Rentals With Avail
Renting out a property can help you generate passive income and act as a great long-term investment. Create an account with Avail to help you streamline the renting process and help keep everything organized and in one place. Manage your tenants, collect rent payments, manage maintenance requests, and much more with landlord software designed with landlords in mind.
