Simple Ways to Be a More Profitable Landlord

Byline: Will Jones 

The difference between struggling landlords and profitable ones isn’t just luck or market conditions. In almost every instance, it comes down to implementing specific strategies that maximize revenue while controlling costs. These aren’t complicated techniques requiring special expertise. They’re practical approaches that any landlord can implement to improve their bottom line. 

Not sure where to start? Here are some relatively simple and straightforward ways to become a much more profitable landlord.

Screen Tenants to Avoid Costly Problems

Your biggest profit leak often comes from poor tenant selection. Problem tenants who pay late, damage property, or require you to explore the eviction path can cost you thousands or tens of thousands in lost rent, legal fees, and repairs. Thankfully, thorough screening usually prevents these expensive mistakes.

Start by always checking credit reports to verify payment history across all obligations. Someone who chronically pays credit cards late will likely pay rent late, too. Verify employment and income, as well, to ensure rent is actually affordable. (The standard is income at least three times the monthly rent.) To get clear on whether a tenant is a good fit, contact previous landlords to pick their brains.

As part of the process, you’ll want to run background checks to reveal things like eviction history, criminal records, and other red flags. An applicant with multiple prior evictions or significant criminal history presents unacceptable risk regardless of how desperate you are to fill the vacancy.

The cost of thorough screening – maybe $50-100 per applicant – is pretty trivial compared to the cost of one bad tenant. Quality tenants who pay on time and stay long-term are worth the effort to find.

Set Rents at Market Rate, Not Below It

Many landlords undercharge because they’re uncomfortable raising rents or don’t research market rates carefully. This “nice landlord” approach costs you substantial money over time. If the market rate for your property is $1,200 but you charge $1,100 trying to be reasonable, you’re giving away $1,200 annually per property.

Research comparable properties on a regular basis and monitor what similar properties rent for in your area. Don’t just check once – rental markets change, and you need current information to price competitively.

Based on your research, raise rents annually for existing tenants, even if just small increases. Many landlords avoid raises hoping to keep good tenants, but this gradually creates larger and larger gaps between what you charge and market rate. Small annual increases of 2-4 percent are far less likely to drive out tenants than large jumps when you finally realize you’re drastically undercharging.

Reduce Turnover Through Better Retention

Turnover is expensive. When a tenant leaves, you lose rent during vacancy, pay for cleaning and repairs, and spend time marketing and showing properties. Keeping good tenants in place longer will significantly improve profitability. Here are some suggestions:

• Do your best to always respond to maintenance requests as quickly as you can. Tenants who feel their concerns are ignored start looking for better-managed properties. Yes, quick maintenance responses can cost you your free time, but it also prevents the much larger cost of turnover.
• Make properties comfortable and well-maintained. You don’t need luxury finishes, but functioning appliances, fresh paint, and updated amenities all help. Small investments in good property conditions will prevent expensive vacancies.
• Consider offering lease renewal incentives to quality tenants. A modest rent concession –  maybe one month at current rate rather than increased rate – costs so much less than turnover expenses. You might also offer small upgrades like new appliances when long-term tenants renew.

At the end of the day, do your best to build positive relationships with your tenants without becoming best friends. Professional, responsive, fair treatment makes tenants view you as a good landlord who is worth staying with. 

Use Professional Property Management

A lot of landlords resist hiring property managers because the 8-12 percent management fee feels like giving away profits. However, professional management often increases net profitability while reducing your time investment.

Property managers typically reduce vacancy through better marketing, faster tenant placement, and professional property presentation. And their experience pricing rentals often means they achieve higher rents than owner-managers who are unfamiliar with market rates. These factors alone can offset or exceed management fees.

The scalability benefits are also substantial if you plan to grow your portfolio. Managing one property yourself might be feasible, but managing multiple properties becomes a second full-time job. Professional management frees your time to acquire additional properties, scaling your business in ways that aren’t always possible when you’re doing everything yourself.

Calculate whether management fees are worth it by comparing your net income with professional management versus the time cost of self-management. If professional management delivers similar or better net income while freeing five or ten hours per month, the value becomes clear.

The Compounding Effect

There isn’t any one trick you can use to dramatically improve your profitability as a landlord. However, when you pull multiple levers at once, they have a way of working together to create significant improvements. 

With that being said, try one or two this month and start measuring the results.