Richmond is a growing city and an emerging real estate market for investors who are local as well as those from all over the country. It’s easy to understand why people are drawn to Richmond. This city enjoys a unique blend of historical significance and dynamic modern growth. The cost of living is low, compared to other cities up and down the eastern seaboard, and more expensive markets like Washington, D.C. and Atlanta aren’t too far away.
Maximizing your return on investment (ROI) in such a market is easy to do as long as you have a strategic approach and strong partnerships with local experts.
Earning more money on what you currently own is a great way to grow your real estate portfolio, even without any new acquisitions. As Richmond property management experts, we have some ideas on how to earn more on your rental property in the short term and the long term. We have put together this guide for investors who are looking to grow their profitability.
Here’s what we recommend.
How Well Do You Know the Richmond Real Estate and Rental Markets?
Before diving into specific investment strategies that are likely to earn you more, it’s crucial to understand what makes Richmond an appealing market. You can use current market trends to your advantage when it comes to marketing, pricing, choosing tenants, and making renovations.
You have to know who you’re renting to and why they might choose your property over others.
Demographic trends show a steady rise in population and job opportunities throughout Richmond, particularly in sectors such as technology, manufacturing, and education. This growth influences demand for housing and commercial spaces, setting the stage for a profitable investment. It’s important to stay informed on economic trends and market data to predict your own potential ROI accurately.
Study your competition so that you know what other properties are renting for. You also want to know how quickly properties are being rented, whether the consumer trend sees more people buying or renting, and what kind of properties are in higher demand.
Understand Where You Stand in the Market
As you’re getting an idea of how the market is performing and where it may be going, you’ll want to do evaluate where you stand within that market. How does your location measure up? What about the condition of your property? Are you offering smart home tech and energy-efficient appliances?
A profitable rental property will be located in neighborhoods with high growth potential, low vacancy rates, and strong rental demand. It will be well-maintained, nicely landscaped, and full of all the things that good tenants expect to find in their next rental home, whether that’s in-unit laundry or a video doorbell.
If you’re preparing to invest, focus on location. Look for up-and-coming neighborhoods where there’s a lot of demand for housing. Tenants will want to live close to schools, shops, and conveniences like grocery stores and restaurants. Opt for properties that require minimal renovations so that it doesn’t take you too long to get them onto the rental market.
If you are not buying anything new but focusing on increasing ROI on the property you currently have, focus on property condition. Look for cost-effective upgrades and renovations that will make a difference in what you earn and the tenants you attract. Make sure your existing residents are having an excellent experience so they’re likely to stay in place and renew their lease agreement.
Improving Your Richmond Rental Property
Focus on making updates and improvements that will add value to your investment and attract good renters. The type of improvements you want to make will depend on the current condition of your property. Evaluate where you might be able to earn more money with some cost-effective changes.
Some of the best renovations that we universally recommend include:
Updated appliances. If your refrigerator, dishwasher, or other appliances are starting to look old and worn, or if they’re not working as efficiently as they should, it’s probably time to replace them. Tenants are looking for energy-efficient models that are as attractive as they are functional.
Better landscaping. Curb appeal makes a big difference in how you present your property to current and prospective tenants. Remove any weeds, debris, or unpleasant visuals from the outside of your property. Provide a clean, green exterior that looks like a pleasant place to live.
Improved lighting. Bring lights work best in kitchens and bathrooms. Replace any old bulbs with energy-efficient LED lights. Tenants will appreciate the lower energy bills, and you may never have to replace those bulbs again.
Smart home tech. Tenants are increasingly looking for technology when they rent a home. Consider updating your property with smart thermostats, video doorbells, and other features that will attract good residents to your property and justify a higher rental value.
Renovating kitchens and bathrooms can significantly increase rent prices. Even small aesthetic changes like a tile backsplash or new, shiny drawer pulls and cabinet knobs will make a notable difference.
During turnover periods, always invest in new paint. Consider your flooring and whether your carpet is in good shape. Pulling up carpet and installing hard surface floors is always an excellent way to increase your property value and rental value. Tenants appreciate those hard surface floors because they’re easier to maintain and clean.
Focus on Tenant Retention for Higher ROI
One of the best ways to earn more money on your rental property is by avoiding vacancy and turnover. Those are always more expensive than property owners expect.
Retaining your residents will earn you more in both the short-term and the long-term. When you have a tenant renewing their lease agreement, you’re avoiding days, weeks, and potentially months of not earning any income. You’re also saving on the turnover costs that could include extensive maintenance, wear and tear repairs, and marketing for a new tenant.
As Richmond property managers, we always prioritize tenant retention. We do this by communicating responsively and openly, providing fast and thorough maintenance services, and ensuring that the tenants have an excellent rental experience while they’re living in your home.
We’re also careful with rental increases. Most tenants expect that rent will go up when it’s time to renew the lease. But, we make sure that the increase is aligned with the current market. With competitive rental increases, we give them a reason to stay instead of providing a reason to leave.
Prioritize Preventative Maintenance
Deferred maintenance, unreported repairs, and emergency needs will always cost more than preventative and routine maintenance.
Be proactive with the way you treat your investment property, and you’ll find you save a lot of money on repairs, which leads to higher earnings and better ROI.
Schedule routine HVAC inspections, pest control treatments, and plumbing inspections. Take the time to do a complete maintenance walk-through any time you’re in the property. You’ll find that this attention will alert you to any repair needs right away, making that maintenance more affordable. This type of responsiveness will also keep your tenants satisfied.
Leveraging Tax Benefits to Increase Earnings
Something that’s easy to forget is that owning a rental property can provide some great tax benefits that increase what you earn overall. Through deductions and write-offs, you will find that tax benefits can significantly impact your ROI.
You’ll always have to include your rent as income. But, you can offset that income and provide some relief at tax time by capitalizing on deductions for:
Property depreciation
Mortgage interest deductions
Deductions for maintenance and repairs
Home office deductions
Professional services are also deductible on your taxes, so if you’re working with a Richmond property management company, those management fees as well as leasing fees can be included as business expenses. We always recommend that you consult with a tax professional who specializes in real estate investments to ensure you’re getting the most out of these tax benefits.
Effective Property Management Increases Earnings
Efficient management of your investment property is key to maximizing ROI.
If you are managing the property yourself, make sure you have the time, resources, and technology to earn as much as you possibly can on it. If you’re new to renting out a property or you’re not sure how to leverage the right resources in order to earn more and spend less, you’ll want to partner with a property manager in Richmond who has the experience and the know-how to help you earn more.
Effective management that leads to more profitability requires low vacancy and turnover rates, good relationships with vendors and service providers, and ensuring that rent is collected on time. Protecting your investment’s value and condition is essential to increasing ROI, and property managers have the expertise required to do that.
Maximizing the ROI on your Richmond property investment requires a careful and ongoing market analysis, strategic property improvements, smart management, tenant retention, preventative maintenance, and taking advantage of tax benefits.
We know that there are many ways to increase what you earn on your investment property, and we’d be happy to talk about specifics that will help your unique property. Contact us at PMI Presidential for more information and assistance.
