If you’re trying to take home more money as a real estate investor, you’re going to want to focus on improving rental yield and cash flow. In a competitive market, this means maximizing income and cutting costs wherever possible–so you’ll have to get creative.
Here’s how you can make the most of your rental property investments.
What is Rental Yield?
Rental yield measures annual rental income as a percentage of the property value. It has two main forms: gross rental yield and net rental yield.
- Gross Rental Yield: This measures the gross annual rental income against the property’s purchase price or current market value.
Formula:- Gross Rental Yield = (Annual Rental Income ÷ Property Value) × 100
- Net Rental Yield: This considers operating expenses, such as property taxes, maintenance costs, and utility bills, to give a more accurate picture of your rental property cash flow.
A good rental yield varies by market but typically ranges between 5% and 8%. Higher rental yields generally indicate better potential cash returns. If your goal is to contribute to a higher net yield, the name of the game is to decrease your monthly expenses. This means you’ll take home more money at the end of each month. Your rental yield will also determine whether you will see positive cash flow or negative cash flow at the end of each month.
Here are some tips to increase your positive cash flow and maximize your rental yield.
1. Focus on Minimizing Vacancies
Impact: High
Effort: Medium
Reducing vacancy rates in rental properties is ultimately the best way to keep cash flow flowing. If you’re paying for vacancies, it’s going to eat away at your returns.
Here’s how to minimize your vacancies.
- Set Competitive Rent Pricing: Regularly assess market value for similar properties and set fair market rents to keep tenants interested.
- Offer Flexible Lease Terms: Offering different lease lengths, like month-to-month or shorter terms, can reduce vacancy risk. Plus, it will keep the unit occupied during slower market periods, ensuring you have continuous rental income, irrespective of market conditions.
- Retain Tenants with Incentives: Offering a few months of discounted pet rent (or pet fees), renewal discounts, or unit upgrades encourages tenants to stay.
2. Upgrade to Improve Property Value
Impact: High
Effort: High
Upgrades and renovations are great ways to increase the market value of your units, driving up rental income. If you can increase the rent at a reasonable rate, you’ll be on your way to building great equity over time. Although these investments take resources, a little can go a long way. The goal here is to make enough upgrades to justify higher rent, but not invest too much to where you’re overleveraged.
- Cosmetic Upgrades: A fresh coat of paint, updated fixtures, and modern flooring can make a property more appealing, attracting renters with more purchasing power.
- Energy-Efficient Upgrades: Eco-friendly appliances or insulation improvements can justify a higher rent while lowering utility bills for tenants.
3. Boost Monthly Revenue by Renting Unused Space
Effort: Low
Impact: Medium
If you’ve got what seems like unused and wasted space, you might be able to increase net cash flow. Neighbor helps you rent out your extra parking spaces or self-storage units to non-resident renters in need of storage. The best part is you don’t have to do the work of tracking down qualified renters. Neighbor simply matches you with the right people and collects payment for you.
4. Manage Costs to Maximize Net Operating Income (NOI)
Effort: Medium
Impact: High
Real estate investors need to keep operating expenses low to improve net cash flow. Here are a few ways they can do that:
- Automate Income and Expense Tracking: Automate common processes by using property management software to streamline rental collection and monitor cash flow. (Here are a few examples of the highest-rated property management software programs on the market – see link here)
- DIY Repairs: Handle minor maintenance costs yourself (or with the help of internal maintenance employees) while still establishing relationships with reliable contractors for major repairs.
- Negotiate Contracts: Stay competitive and try to secure lower rates for services like landscaping and pest control.
If your focus is on reducing operating costs, you can increase net operating income and drive a better cash-on-cash return.
5. Increase Cash Flow with Additional Revenue Streams
Effort: High
Impact: High
You can maximize rental property cash flow by offering unique amenities or leveraging ancillary revenue streams.
- Pet Rent and Parking Fees: Charging additional pet rent or offering paid parking spots can bring in extra cash.
- Electric Vehicle Charging Stations: Electric vehicles are everywhere. Many EV vehicle owners will want the convenience of charging at home. Offering charging stations is a great way to collect additional revenue while keeping tenants happy.
- Valet Trash: Offering valet trash service at a reasonable monthly cost is an amenity most residents don’t know they need until they have it.
Note: If you’ve already established one or more of the above revenue channels, there’s still room to optimize your rates. The 2025 Multifamily Parking Report shows that property owners can increase NOI by as much as $189,844 per year, per property (depending on the market). *See chart below.
6. Pre-screen Tenants
Effort: Low
Impact: Medium
Pre-screening tenants is the first step in reducing turnover and evictions. But how do you go about this? Start with payment identification, which will ensure tenants earn enough to cover monthly rent costs and minimize the risk of non-payment. I’d also recommend leveraging background checks to screen applicants.
A well-screened tenant base ensures steady rental income and less risk of dealing with vacant properties.
7. Optimize Financing and Debt Service
Effort: Low
Impact: Medium
Your mortgage payment and interest rates have a significant impact on cash flow. If you can minimize your monthly expenses by refinancing, consolidating debt, or paying off a mortgage, you’ll be able to stockpile more cash.
If interest rates drop, refinancing an investment property mortgage can save on debt service, leading to higher net cash flow.
8. Explore Short-Term Rentals
Effort: High
Impact: Medium
If regulations allow, short-term rentals through platforms like Airbnb can generate higher rental yields but may involve more work. Evaluate the market demand and potential income before drafting a policy on short-term rentals in your long-term rental property.
In Summary
When it comes to maximizing rental yield, there are a few commandments to live by:
- Focus on high-value tenants
- Leverage unused spaces for revenue (with the help of Neighbor.com)
- Keep operations lean
- Stay proactive in evaluating market trends and opportunities.
In competitive markets, adaptability and a sharp focus on cash flow make all the difference.
