A rental home business can be a great way to earn extra income, but keeping it profitable is essential. According to a recent report, many rental property owners inadvertently let costs and profits slip away due to ignorance or neglect. This can lead to a decline in profitability and even eventual failure. But with a few simple tips, you can ensure your rental home business stays in the black. Here are some things to keep in mind.
1. Screen Your Tenants Carefully
The tenants you choose will make all the difference regarding profitability. Be sure to screen potential tenants carefully, looking at things like credit history and employment history. You may even want to require a background check. The goal is to find reliable tenants who will pay their rent on time and take good care of your property.
Some tenants may try to negotiate a better deal, and while it can be tempting to accept their offer, you should make sure it’s in your best interest. You want to keep your rental property occupied and profitable, so be sure to choose tenants who will not end up costing you more in the long run.
2. Take Advantage of Capital Allowances
Home letting capital allowances are tax reliefs available to residential rental businesses. These allow you to offset capital expenditures such as repairs and improvements against rental income. This can help to reduce your taxable income and make the process of filing taxes much easier. Keep accurate records of all capital expenditures, as you may need to provide these when filing taxes.
This task may be complex enough that it would be wise to seek professional advice or at least double-check with the HMRC website. You don’t want to miss out on the capital allowances you may be entitled to. Just be sure to remember that claiming capital allowances is not a way of avoiding tax – it’s simply a way of reducing your taxable income.
3. Set the Right Rent Price
Pricing your rent too high can make it challenging to find tenants, while pricing it too low will cause you to lose monthly money. Be sure to research and find out what other properties in your area are renting for. You can also use an online rent calculator to help you determine the right price for your property.
An excellent way to stay competitive is to offer additional amenities. Tenants are often willing to pay a bit more for things like Internet or cable access and off-street parking. You can also offer incentives such as reduced deposits or waived application fees to make your rental property stand out from the rest. Your rent price should be just enough to cover your expenses and make a reasonable profit.
4. Keep Up with Maintenance and Repairs
Tenants will expect their rental unit to be in good condition, so it’s essential to keep up with maintenance and repairs. Set aside a monthly budget for these expenses, and address any issues as soon as they arise. Ignoring maintenance problems will only lead to more extensive (and more expensive) problems later on.
You can hire a professional to help you with maintenance and repairs, but if your budget is tight, you can also do some of the work yourself. Just be sure to know your limits, and don’t take on jobs you’re not qualified to do. A property manager can also be an excellent resource for keeping your rental property in good condition.
5. Have a Contingency Fund
No matter how well you plan, running a rental home business will always incur unexpected expenses. That’s why it’s important to have a contingency fund that you can tap into when needed. This fund should cover things like emergency repairs or unplanned vacancy periods. With this cushion, you’ll avoid putting your business in financial jeopardy if something unexpected arises.
Of course, you can’t always predict the future, and some expenses may still catch you off guard. But having a contingency fund will help you to prepare for the worst and keep your rental business profitable. You can start small but aim to build up your fund over time. This will give you much-needed peace of mind in an emergency.
By following these tips, you can ensure that your rental home business is profitable year after year. Just remember to research thoroughly, plan carefully, be realistic with your expenses and always have a contingency fund on hand. With the right approach, you’ll be able to enjoy the financial benefits of owning rental property.