Owning rental property is one of the keys in developing a successful portfolio. The idea of someone providing you with long term wealth or short term cash flow can be a very appealing thought. A lot of new investors make the mistake of thinking this will happen by itself. In reality, if you own rental property, you need to treat it like its a business. The minute you get overconfident or lazy with your rentals, you will start seeing problems develop. The best way to avoid these problems is to develop a system to stay on top of every property you own. By doing these little things on a regular basis, you will find that building a rental property portfolio doesn’t have to be as hard as many make it out to be.
1. Know your property: When is the last time you drove by your rental property? If you haven’t seen it in weeks, you have nobody to blame but yourself if problems arise. You don’t need to knock on the door every other day, but you should have an idea of what is going on at all times. Having a property manager is nice, but it doesn’t mean that every problem will be wiped away. It is still your property and you need to know what is going on. Most tenants fall into two completely different categories: those who call whenever something minor pops up and those who will never call for the duration of the lease. This means that if there is an issue with the exterior of the property, the driveway or the yard, it is up to you to find it. You also want to know if there are excessive cars in the driveway or garbage in the yard. Being a good landlord starts with knowing your property and protecting your investment.
2. Be quick to resolve issues: Aside from the physical property, the next most important asset you have is your tenants. As much protection as a lease provides, it doesn’t guarantee that you will receive rent every month. To ensure that you will keep the process going as it should, you need to be quick to resolve issues with the property. A clogged toilet may seem like an inconvenience for you to deal with, but put yourself in your tenant’s shoes. If this is the only toilet in the house, things can get messy rather quickly. Every hour and every day you make them wait, you increase the chance that they will not be as quick to pay the rent next month. If this becomes a pattern for you, they will eventually stop treating the house like their own, and may eventually move out without warning. This means that you need to keep a core of people on file that you can call for whatever situation is needed. If you neglect what is going on with the property, your tenants will start to neglect the house. Happy tenants usually equal a happy landlord.
3. Stay on top of expenses: One of the things new landlords have a problem with is the amount of hidden expenses associated with a rental property. Most can figure out the mortgage payment, taxes and utilities. The hidden expenses fall with seasonal maintenance, lawn care, snow removal and advertising. Just like any other business you are in, it is essential to track your expenses. It is easy to accept certain expenses and blindly pay them every month. By breaking these expenses down, there may be ways to save money or be more efficient. Knowing your bottom line will also help you determine what you need to charge for rent. You probably wouldn’t blindly pay a utility bill for your primary residence. Don’t do it for your rental property.
4. Keep property occupied: Without cash flow coming in, the rental cycle will stop in a matter of months. Even if you were able to easily find a tenant last year, it doesn’t mean that will be the case this year. It is important that you give yourself enough time to find a tenant you are comfortable with. By waiting until the last minute, you run the risk of putting yourself in a position you don’t want. You can take on a risky tenant or cover all expenses for a month or two until you find the tenant you want. Neither option is very appealing. This is why you should start once you are anywhere from 90 days out in your existing lease. In a perfect world, you will have multiple options to choose from with plenty of time to spare. This only happens if you start the process early enough.
5. Know your market: If you don’t know your market, it is difficult to understand supply and demand. Demand directly leads to the rent amount you can generate. It is also important to know if there are any proposed changes in property taxes, new housing permits and increased foreclosures. It is not enough to simply sit back and wait for rent checks to roll in. You need to stay on top of everything that impacts your rent and property value. Things can often change quickly with a rental. Those owners who know their market are best to handle any changes.
The best landlords are proactive rather than reactive. Doing the seemingly little things every so often gives you the best chance at rental property success.