5 Money Saving Tips for Landlords
Real estate investors using the long term buy and hold strategy to scale their portfolio know the importance of maintaining and protecting their assets. While many people think of rental property as “passive income,” the reality is rental properties require a lot of active work and attention. Property maintenance, quality tenants, and overall asset management require landlords to commit themselves to every aspect of their business.
As real estate investors, it is easy to get caught up in a cycle of spending, outsourcing as much as possible to save time and energy. To help landlords protect their business and their bottom line, Asset Based Lending is here to offer 5 tips for landlords on ways you can save money with your rental properties.
Vet Your Tenants
Placing good, reliable tenants in your rental properties is a key step to saving money and ensuring your property is positively cash flowing. The value a good tenant adds to your property directly affects the number of financial pressures landlords experience. Doing your due diligence prior to leasing a tenant is the first step to ensuring your property experiences minimal issues.
Running background checks, assessing credit history, and requiring landlord references for each tenant can paint an accurate picture of the characteristics of the individuals that are applying to be tenants. Taking these measures for each applicant helps to root out people with a subpar credit history or a reputation for leaving properties damaged or in disrepair. As a landlord, trusting your tenants is essential and part of building trust is knowing that you can expect timely rent payments and that the property will be cared for by those who make it their home.
The cost of cutting corners when placing tenants in your rental properties can quickly become overwhelming. The toll that the eviction process takes on investors’ pockets is severe and time consuming. Removing tenants from your property requires landlords to hire lawyers and shoulder the financial burden of not receiving rent payments for extended periods of time – all of which quickly adds up and can devastate an investor’s bottom line. This includes the potential risk of unhappy tenants retaliating by damaging the property before being removed. Taking on the expense of repairs, rent non-payments, and vacancies can wreak havoc to an investor’s profit margins.
Stay on Top of Maintenance
Maintaining your property and making sure everything is in good and working condition helps to avoid large expensive repairs over time and ensures that you are realizing the highest appreciation rates possible. Property depreciation directly affects how much landlords can charge for rent for each unit and allowing your investment property to fall into disrepair means potential tenants will look past your available units, preferring to live in a unit that is updated and cared for.
Scheduling regular unit inspections helps landlords tend to the wear and tear that is inevitable in rental properties. Communicating with renters is important when inspecting your properties as it allows them to have ample warning to make sure units are accessible so you can complete your inspection. This is also a time for tenants to communicate any issues with the unit with you. If there is a leak in the unit from the plumbing or roof, the damage is often extensive and expensive. Preforming regular maintenance checkups can help identify these issues before they become overwhelming.
By checking safety mechanisms such as smoke and carbon monoxide detectors on a regular basis you can avoid bigger, more costly problems down the line. It is common for renters to neglect this simple lifesaving equipment and moving the responsibility to the landlord can potentially save them a lot of money down the line, and of course save the lives of the tenants if emergencies occur.
Do Repairs Yourself
For real estate investors who have a background in construction or home repairs, taking on the necessary repairs for your units can greatly decrease your overhead costs for repairs as a landlord. Overtime, paying contractors to complete tasks like painting units between leases and regularly managing the landscaping cuts investors’ profits. By eliminating some of those costs and handling basic maintenance and repairs yourself, you can hold onto more of your monthly income from rent and eventually use that money to expand your portfolio.
When a tenant moves out it is necessary to freshen up the space for the next tenant in line. By choosing the same paint for each unit you can purchase it in bulk and reduce the cost of repainting. Then, taking the extra step and painting the unit yourself can also help save hundreds of dollars as well as time. Hiring a painting service can be expensive and you risk the possibility that the contractor of your choice may not have availability in a timely manner, and you will have to incur the cost of the vacant unit for longer.
Many landlords also choose to do their own landscaping. Depending on the square footage of your property, taking the time once a week, or even every other week, to maintain your lawn and any plants or shrubs can help landlords save a lot of money over time. Instead of paying for a lawncare company to regularly service your property, you can spend a few hours each week tending to your investment. This is also a great way to show your tenants that you are available and attentive and provide you with the extra opportunity to survey the property for any necessary maintenance like gutter cleaning or roof repairs.
Manage the Property Yourself
Property management services are extremely costly, and many rental property investors holding fewer doors choose to forgo using these services to save money. Though it is a lot of work, it can surely pay off if you take a more hands-on approach to being a rental property investor.
If you decide to manage your rental properties yourself, it is imperative that you research your local landlord-tenant laws. Remaining compliant with the laws in your area helps to avoid any costly legal issues that may arise and safeguards both you and your tenants from being taken advantage of. As a responsible landlord, being ignorant of the laws in your area can greatly impact your return on investment.
Property management companies take on the responsibility of marketing the units when they are available for rent, screening potential renters, collecting monthly rent, accounting, and handling any tenant issues. Landlords holding a manageable number of rental units can take these tasks inhouse and use resources readily available to help them to help with these tasks. Accounting software and background check services have become accessible and relatively inexpensive compared to full-service property management companies.
Alternatively, rental property investors with many rental units or properties spanning multiple states may find that using property management services saves them both time and money. It is not uncommon for landlords to operate many properties, or own units in a tri-state area like New York, New Jersey, and Connecticut. For them, driving sometimes hundreds of miles to get to all their properties each month would eat up a lot of their profits as well as a good bit of time. In instances like these, working with property management companies to handle the overall property maintenance, rent collection, and marketing for each available unit is more beneficial to their business than trying to remain as hands-on as possible.
Shop Around for the Best Mortgage for Your Needs
As a real estate investor, you already know the importance of finding the right financing options for your investment goals. However, the real estate financing landscape is often a moving target, and the best option today might not be the best option tomorrow. That’s why it is important for landlords to regularly review your mortgage to evaluate if you are in the best financing position possible.
If you are searching for a rental property to hold in your portfolio during times when interest rates are higher compared to previous years, as they are today, it’s important for investors to stay connected to the market movements. Staying in tune with the markets means investors can refinance their property and take advantage of better rates when the opportunity arises. Working with a financing company to refinance your investment can help you save money month over month. Reducing your monthly mortgage payment translates to improved monthly cashflow. With a lower monthly payment for your mortgage, it is possible to scale your business and expand your portfolio.
Working with a lender that offers flexible DSCR loans is a great way to explore new financing for your rental property. Having a dedicated team of financing specialists advising on your options for cashing out, refinancing, and helping you grow as an investor means you can put more energy into your planning for your goals and future investments. To learn more about ABL’s rental loan options, contact one of our experienced loan officers today.
Building towards your real estate investment goals can be overwhelming and seemingly very expensive. However, when you take the time to evaluate each piece of rental property ownership, from screening tenants to keeping up with necessary maintenance, you will find that you can easily reduce costs by taking on some of the responsibilities yourself.
From painting units between tenants, to checking smoke detectors, and mowing your lawn each week, you will see a significant increase in cashflow each month when you dedicate a bit more time and energy to your investment. And, of course, having a skilled private lender on your side to guide you through your financing options can be your key to producing positive cashflow and scaling your real estate investment portfolio.