Renting out a property can be lucrative if you do everything right, including avoiding common mistakes. Failing to account for every cost you accrue can have a negative impact on your bottom line.
Remember, you’re only going to maximize your return on investment if you’re able to minimize your costs because the higher the operational costs, the lower your profits, and vice versa.
As such, start paying attention to the costs you’re accruing to avoid overspending. The following are areas you should pay more attention to when it comes to rental costs.
This is key to running a profitable investment property. Both prospective and current tenants will find your property desirable and this will boost your occupancy rates.
As you perform maintenance on the property, pay attention to the costs as well. What you want to avoid here is under-planning for moderate or major maintenance issues.
Sure, a few drops from a leaky faucet won’t cost you an arm and a leg to fix. However, failing to address the issue while it’s in the nascent stage can become a problem. Left unaddressed, the problem could morph into something serious, such as a burst pipe, mold growth, or flooding.
Fixing such issues will end up costing you a lot. That’s why it’s important to regularly inspect your property and respond to maintenance concerns promptly. This will help you identify potential issues quickly before they become serious and costly.
Additionally, responding quickly to tenants’ maintenance requests can be beneficial to you in more ways than one. The tenant will not only be happy and comfortable, but this can also lead to longer tenancies.
To run a successful investment business, you need to surround yourself with the right experts. Among these is a legal expert. A legal expert can help you deal with an eviction or prepare a solid lease agreement.
Where the problem comes in, however, is hiring the wrong person for the job. Besides not getting good value for the money, those billable hours may also accrue significantly.
Whenever you need professional legal services, make sure to perform due diligence. Ask the right questions during the initial interviews. Then, after finding the right person for the job, ensure you regularly talk with them about the services performed.
With that in mind, note how frequently you are engaging with lawyers. If it’s often, then your tenant screening process may need revision in order to better select quality tenants from the prospective pool.
Vacant properties are risky. Vacancies mean there’s no income to look forward to at the end of the month. In addition to that, you also have to look for funds elsewhere to pay for other expenses, such as property taxes and mortgage payments.
To fill vacancies quickly, you can mistakenly end up compromising your screening process just to land a tenant. This can be a grave mistake!
Renting to a difficult tenant can cost your bottom line in a big way. The tenant may not abide by the terms of the lease, causing excessive property damage, breaking their lease early, and paying rent late or not paying it altogether.
When choosing tenants, it pays to be diligent. Screen all prospective tenants based on their:
- Credit score
- Criminal status
- Income level
- Employment history
- Rental background
Your goal should be to find a tenant that is going to observe all rules dutifully, care for your property, and pay rent on time, every time.
If you’re just getting started, have a portfolio of properties, or have a full-time job, hiring a property management company may be ideal.
Lengthy vacancies may also be eating into your profits. When your property sits vacant for prolonged periods, the more expenses you’re going to incur. Without a monthly income to offset it, the impact on your bottom line will be severe.
Calculating vacancy costs is simple. Let’s suppose you’re renting out your property for $1,500 a month. If it sits vacant, then it means that you’re incurring a loss of $1,500 every month.
If you’re experiencing high vacancy rates, then you’ll want to approach the issue proactively. Does your property look appealing? If you were a renter yourself, would you consider renting the property?
If the property looks like it has seen better days, upgrade it to make it attractive to prospective tenants. Take care of the curb appeal. Repaint the walls. Give it a thorough clean.
Add new, energy-efficient fixtures. Allow pets. Invest in new kitchen appliances. Install new flooring. Just do what you have to do to make the property attractive.
Next, actively advertise the property. Use a combination of both ‘traditional’ tactics and non-conventional methods, including using yard signs, newspaper ads, social media, and rental listing sites.
Once you land a large prospective pool of tenants, screen every individual applicant to find great tenants for your rental property.
Contractors and Vendors
As already mentioned, successful landlording requires a team effort. Among the team members you’ll need are vendors and contractors. These professionals may include roofers, HVAC technicians, inspectors, plumbers, and general handypersons.
The problem can come in if you’re not diligent in getting the right professionals for the job. You may either end up overpaying for the job or getting substandard workmanship.
Screening these professionals is just as important as screening prospective tenants. Spend time identifying great service providers and building long-term relationships with them. Also, remember to negotiate favorable rates.
These are the five most common costs that you may not notice you’re accruing when renting out your property.
If you have a question or need expert help in managing your property, Windermere Property Management can help! We provide quality property management services to property owners in Spokane, WA. Get in touch to learn more!