Welcome to 2017!
It is a very exciting time to be in the real estate market, experts are predicting a strong 2017 without many risks involved. Many positive factors are in play that we didn't see last year, such as our post-election economy, more millennials purchasing their first homes, low interest rates with a healthy moderate rise and more people qualifying for purchasing after a hard recession. With a new year comes new opportunities to grow your investments and solidify returns in rental properties, so here are 5 quick tips going into 2017 that can help you with your self management or when considering how to strengthen your rental assets.
1. Limit Vacancy
Many property management companies and owners don't understand that vacancy is the highest expense when owning an income property. Not only do you have to pay for your home to be “rent ready”, but you are missing out on the potential rent you could be collecting if you just resign your tenants. What if your tenants are unhappy with their rental? A good manager or landlord would negotiate with the tenants ways to get them to stay, such as keeping the rent the same and not raising it, fixing minor issues that could be bothering the tenant, giving them a $250 credit towards next month's rent, etc. As an owner, hearing these options might make you cringe, but think about it. If you are collecting $1400 a month in rent, what is $400 worth of requested repairs compared to a month of vacancy and no rent? Do what you can to keep your tenants there.
2. Do Not Be Cheap, Yet Limit Expenses
This tip expands to many different avenues of owning a rental property. Leasing your home to the right individual makes all the difference in limiting expenses and wasted time on your house. When renting on the open market, make sure to charge your prospects for a background check. Check the essentials: Credit, Income, Background, Rental History. Evictions are a cancer to successful rentals, so do it right the first time. When you have a tenant in place, make sure the home is ready for your tenants to move in so your first week isn’t consumed with fixing the small issues.
Understand that owning income properties will invite unexpected costs to your wallet such as broken appliances, normal wear and tear, etc. Remember, spending the extra penny now will save you down the road. I’ve seen too many owners go the cheap route and install a cheap laminate flooring just to have it cut out and replaced a year later because of water damage. If they would have spent 50% more in the beginning and purchase tile, they wouldn’t have to spend 150% a year later. Have a go-to handyman that you can trust and give all your business to. Most contractors will give you a better deal if you use them each time you have an emergency or repair. Fix items at once while your handyman is at the home instead of prolonging the repairs. Consider a property manager who has their contacts and are more knowledgeable regarding what you can and cannot charge tenants. The flat fee or 8%-10% may help you limit expenses during the lease and also help you get top dollar for rent.
3. Establish Expectations
This tip is crucial to a steady, consistent return for your income property. When a new tenant moves into your home, establishing the lease terms and expectations in the beginning will save you many late nights and unwanted phone calls during vacations. Give your tenants an email to reach out to for issues or requests. Do not let them call or text you after 6pm for non emergencies. When rent is due on the 1st, that means it’s due on the 1st! Naturally, we want to be compassionate towards our tenants. If one comes to us with not enough to cover rent or asking for more time, we may feel bad and allow our feelings get into the way, but once you allow them to be late once, get ready for a spiral of reoccurring issue that takes more of your time each month. Enforce late fees and be quick to start any court actions if rent is not paid on time or if terms are being broken in the lease.
4. Business is Business
A very common mistake is renting to friends, family or the general public without an official lease. When things are not okay, they go bad quickly. The best way to prove an agreement in rentals is a signed lease. Some may purchase income properties for the sole purpose of renting to family which is completely ok! But if your intentions are to maximize your returns and limit costs, do not comply to a favor, smaller rent or unnecessary repairs. Investments are purchased to make money, so stick to that original idea. Remember that everything is going to be fine until it is NOT.
5. Treat Your Tenant Right
You must find the right balance of strict enforcement while respecting each other. This doesn’t mean take your tenants to dinner and a movie, but you can create a professional relationship. Understand that if a tenant doesn't like their landlord, they are not as motivated to take care of their home. Your tenant is an investment as well, so treat them with respect just like you expect them to treat your home with respect. If they are planning on moving out, let them know that your goal is for them to get their full deposit back. This mentality will give you a greater chance of receiving the home in a rent ready condition which limits vacancy and repair costs. It makes all the difference.
Some self managing landlords can do it all themselves. Many strike the goldmine with great tenants who respect their homes, pay rent on time and rarely have problems. Others experience issue after issue and are done with the self management aspect of rentals. These are the principles MyHome Property Management do business by. They do not guarantee perfection (we wish) but we continue to grow weekly because it sets all parties up for success. Owners appreciate how we do business with their tenants and the tools we provide them to succeed. Let 2017 be your year of success and growth in real estate.