Investing in rental properties is one of the fastest and most reliable ways to generate wealth. Assuming you’re able to collect more in rental income than you’re paying in expenses, you’ll collect a small profit every month—and eventually, your property value should appreciate, resulting in a major profit when you’re ready to sell.
But if you’re interested in accelerating the process, or if you need a bit of extra income to close the gap between your revenue and expenses, you’ll need to find a way to increase your total income.
Improving Cash Flow With Rent Increases
The straightforward way to increase rental property income is by increasing the rent your tenants are paying. However, there are a few issues with this you’ll need to navigate. First, there may be legal restrictions on when and how you can increase rent; in some states and local areas, you can only increase rent by a set amount every year, and you must provide written notice well in advance of the increase. Even if you’re allowed to raise rent whenever you want, if you raise rent too much, your tenants may be forced to find other housing; if this happens, the cost of the vacancy will hurt you.
Of course, increasing rent is just one way to increase your rental property income.
Creative Ways to Increase Rental Property Income
Let’s take a look at some of the more creative methods you can use to increase income from your rental property:
1. Charge late fees. One of the easiest things you can do is start charging a late fee for rent submitted after the due date. If your tenants seem particularly bad about making the deadline, this is especially valuable. Something small, like $20, can be enough of a deterrent to prevent people from missing rent payments—and enough of an extra line of income to help your bottom line when they forget.
2. Allow tenants to sublet. Subletting allows your tenants to rent some or all of their rented property to another party for a fee they collect. This is a somewhat risky move, since you may not have direct control over when and how your tenant sublets the property, but depending on how you manage it, it could work out in your favor. For example, you don’t have to allow tenants to sublet the property; you could charge a one-time fee or monthly fee for the privilege, resulting in extra income for both you and the tenant.
3. Create a parking area. In some areas, parking is a valuable commodity. If you only offer street parking, you may be able to create a new parking area and charge your tenants a premium to use it. For example, you could pave a new area or expand a driveway or yard to include parking spaces for each of your tenants. You could even construct a garage, if you have the budget. Depending on the nature of the parking (indoor/outdoor), you could charge tenants a substantial monthly fee.
4. Provide additional storage. Some tenants will have trouble managing their personal storage. If you have the space, you could construct a garage, shed, or similar storage unit, and charge tenants a small additional fee to use it.
5. Include washers, dryers, and other appliances. One of the most common ways for landlords to generate extra income is to provide renters with washers, dryers, and other appliances; these can either be coin-operated, or you can charge an extra monthly fee for their use. This is especially common in apartment buildings with many tenants, where you’ll get significant foot traffic.
6. Install vending machines. Similarly, you can install vending machines and keep them stocked. Again, these are best for bigger apartment complexes, but some multi-family homes may be suited for vending machines as well. Keep these stocked with soft drinks, snacks, and candies, and charge a reasonable amount; the machine will likely pay for itself quickly, and everything after that will be profit.
7. Close vacancy gaps with Airbnb. Vacancies are the biggest source of profit loss for landlords, but you can fight back against them by closing the vacancy gap. If you’re struggling to find a good tenant for your open apartment, rent it out on a platform like Airbnb on a nightly or weekly basis; it’s not ideal, but it’s better than nothing.
Some of these methods require an upfront investment of money, and others require you to spend more time drafting additional tenant agreements, but they’re worth the costs in the long run. If your property is still struggling after increasing rental income, you may need to consider an alternative strategy, such as selling the property to find a more profitable area.