When you first bought your rental property in Milwaukee, you were excited to add some extra income to your life. However, now that you’ve purchased your property and leased it, you realize you aren’t generating as much profit as you thought you would.
You spent hours crunching the numbers and searching for the perfect property.
What could be the reason that it’s not making you any money?
Truth is, there could be quite a few reasons why your property lacks profits and even shows a negative cash flow. By the end of this article, you’ll know eight of the most common reasons that rental properties don’t make money and how to change that.
1. YOU HAVE EXTREMELY HIGH EXPENSES
As with any investment or business, you must consider your expenses in order to determine your profit. Expenses are costs you have to pay to keep your investment running smoothly. These include taxes, maintenance, insurance, and any other services you may use.
If you’re paying more for expenses than you’re making in rent from your property in Milwaukee, it can cause serious problems. This means you’re operating at a loss and are actually losing money on your investment.
Keep these costs low when possible. If you can repair something yourself instead of hiring a professional, you can save quite a bit of money.
2. YOU’RE DEALING WITH BAD TENANTS
Renting your property to bad tenants can be quite a nightmare for a landlord. Whether they’re causing damage to the property, paying rent late, or not paying at all, it could be causing your property to generate low profits.
Instead of finding quality tenants who pay their bills on time and take care of things, you’re stuck with tenants who create more costs for you. When they’re paying rent late, you have to use your time and resources to chase them down for it. If they aren’t paying at all, that results in an expensive eviction.
This can all be avoided when you screen potential tenants. With a thorough background and credit check, you can save yourself from spending even more money trying to evict them.
3. YOUR PROPERTY IS OUTDATED
If it feels like you’re walking into the 1980s or 90s when you go through the front door of your property, it’s probably pretty outdated. This could be causing your property in Milwaukee to generate less profit than you would like.
Because your property is outdated and doesn’t compete with others on the market, you can’t ask for competitive rent. Therefore, you aren’t making as much as you could.
To increase your profits for an outdated home, take some time to renovate and update it. While this is yet another investment, it will surely pay off when you can generate more profits because of it.
4. THE RENT IS TOO LOW
One of the most common reasons properties in Milwaukee aren’t generating good profits is because the rent is set too low. Instead of making a profit, everything is going towards your expenses to maintain the property. It’s a never-ending cycle!
To see how much you can raise your rent, do a quick market analysis. Look at comparable rental properties in your area and see how much they are renting for. This will help you stay competitive in the market and hopefully increase your profits.
5. YOU’RE FOCUSING ON ACQUIRING TENANTS
Acquiring new tenants for your property in Milwaukee is costing you much more than you may think. Consider all the costs that go into marketing your property and the time spent showing it to potential tenants. Plus, the possibility of having a vacancy for one month.
All of this can be avoided if you focus on retaining your current renters, especially if they’re great tenants. To do this, you’ll want to build a good relationship with them. This means attending to maintenance requests, keeping open communication, and respecting them.
In fact, 60 to 70% of your current tenants are more likely to renew their lease if asked. This could be a game-changer for your rental property’s profits.
6. THE PROPERTY IS IN POOR CONDITION
Do you always find yourself making repairs or calling a professional to fix something on your property? This could be yet another reason your property isn’t generating great profits. These repairs are driving up your expenses and taking away from the income you can profit from.
7. THE PROPERTY IS DEPRECIATING
When we invest in real estate, we assume it will appreciate over time. Unfortunately, this isn’t always the case. There are times when the value of your property actually goes down.
This can actually affect the amount of profit your property is generating. If the area isn’t as desirable as it used to be, you may have to lower the rent to meet the market’s standards. Therefore, causing you to lose income each month.
8. TAXES HAVE INCREASED
Maybe you’re finding yourself in an increasingly popular area where taxes have just been increased. While this is excellent news for your property’s value, it isn’t good news for your annual expenses.
The only way to combat rising taxes is to increase the rent for your property. However, this is most effective if it is in good condition and has modern amenities that are attractive to tenants.
AVERAGE RENTAL PROPERTY PROFIT
How much does the average rental property profit each month?
Answer: About $100-$400 per month if the owner is paying a mortgage.
If you’re expecting to make a killing from owning just one rental property, you are sadly mistaken. It takes time, strategy, and multiple properties to build passive income to support yourself.
To figure out exactly how much you can expect to profit each month from your rental property in Milwaukee, use the formula below.
Monthly Rental Income – Monthly Expenses – Monthly Mortgage Payments = Monthly Profit.
INCREASE RENTAL PROPERTY PROFITS WITH A PROPERTY MANAGEMENT COMPANY
The best way to increase the profits generated from your rental property is to hire a property management company in Milwaukee. With professional practices and resources, these companies often save struggling rental properties, retain more tenants, and increase profits.
Performance Asset Management is Milwaukee’s leading property management company and can help you boost your passive income. As experienced investors, we know the ins and outs of creating passive income, so let us take the reigns and make it easy for you.
Our expert team will manage, maintain, and monetize your rental property in Milwaukee right before your eyes. You can stop worrying about finding new tenants and making repairs and focus on building your property portfolio.
Contact us today to see how we can help you generate the kind of profits you want and deserve!