As an investor, it is essential to figure out which strategies help maximize your investment home’s returns. If you are investing a significant amount of money and yet earning comparatively less, it implies that there is some problem in the investment strategy.
Smart investors know that relying on only the conventional ways of earning rental income is not enough. There are many ways to actively increase your profits and build a successful real estate portfolio.
Here are five tips to help you get the best return on investment (ROI) on your Sacramento rental home.
1. Upgrade or Renovate Your Sacramento Rental
While renovations and upgrades can be costly, they are two of the most reliable ways to enhance the desirability of your property, draw more tenants, and increase the rent value. Depending on your budget, you can analyze how much you can renovate your unit.
Upgrades for your unit can include simple things like adding a fresh coat of paint, installing new kitchen countertops, changing the backsplash, installing new carpets, adding new curtains, or setting up a medicine cabinet in the bathroom.
If you are willing to invest a substantial amount of money in renovations, you can consider changing the wall sidings, installing a new roof, re-designing the porch, installing new doors or windows, or replacing the old furniture. If your home is in one of the high-demand areas like Richmond Grove, Land Park, or Meadowview, you can consider increasing the rent due to the amenities and services in the vicinity.
2. Invest in Effective Marketing
Modern-day marketing is the most powerful tool for the success of any business and it requires investing a good amount of money for promoting your investment unit, if you want to see the results. There are two ways to market your Sacramento rental.
- Do it yourself or
- Hire a professional advertising/marketing agency
Advertising professionals can effectively market your unit on trusted listing websites and popular social media platforms through email newsletters and messages that can grab the audience’s attention. They employ highly effective online and offline strategies to make your home reach the right target audience.
Advertising and marketing companies also often use photographs and videos of your unit’s features to make it more attractive and presentable. Hiring a professional photographer can be an additional cost, but it can pay off in the long run when your rental gets reflected in the Sacramento property hotlist.
3. Have a Rigorous Tenant Screening Process
Bad tenants occupying your investment property can cause significant financial losses. They could delay or miss the rental payment, damage the unit due to negligence or abuse, not follow the lease terms, or create trouble for your neighbors. Therefore, it is essential to screen tenants rigorously through a thorough process and select only those tenants who fit your criteria.
In your screening process, ensure you check their:
a. Proof of Stable Income
The applicant must have a stable source of income to cover the rent. Your potential renter should not spend more than 30% of their income on rent. As proof, ask for their pay stubs, bank statements, and references. You can also talk to their employer for reference and verification.
b. Clean Rental History
Check their rental history, and see if they have been evicted before for any specific reasons. Talk to their past landlords or property managers to know if they are cooperative, maintain the unit well, and pay the rent on time.
A high-quality renter occupying your home can add to your ROI.
4. Encourage Tenants to Renew the Lease
Property vacancies can significantly lower your ROI as you need to start finding and placing tenants again. Since this process is time-consuming and can leave your house unoccupied, it is essential to retain good tenants.
The best way to ensure a consistent cash flow is by encouraging your existing tenants to renew the lease, by offering discounts like tickets to a movie or concert, free Wi-Fi, or other perks they might appreciate.
5. Set the Right Rent Price
Setting the right rent price can help you obtain an excellent and consistent ROI. A comparative rental analysis can help you fix the right price, which can attract more tenants to your unit. This ensures that your home gets occupied faster and protects you from costly vacancies. However, if you set the price higher than the current market prices, you could drive away potential tenants.
On the other hand, if you set a rent price lower than what is reasonable, it can become difficult to earn a profit post deducting your expenses.
Additional Ways to Secure the Best ROI For Your Sacramento Rental
We have seen some standard ways to increase ROI for your rental. However, they all need some investment of time and money at your end, for successful implementation. So, apart from the ones mentioned above, here are a few other tips to get the best return on your Sacramento investment home –
- Respond to tenant requests on priority and make timely repairs
- Create a detailed lease agreement and documentation that protects you financially in times of any disputes
- Maintain your property well to keep it in demand and avoid high renovation costs
- Hire a property manager who can handle your Sacramento property and your tenants. Ensure that the property management company can protect you from issues like unforeseen vacancies, security deposit disputes, failure to be legally compliant, or bad tenants.
If you are looking for a company that understands your needs and shows proactiveness, Eagle Property Management is here for you. At Eagle Property Management, we have developed strategies to help homeowners like you maximize return on their investments. We have been in Sacramento real estate for over ten years and know the ins and outs of the local market.
For more information on how to maximize your ROI, contact us.