Some people become landlords because they like the idea of managing their own property. Others may have inherited a structure, or simply jumped on a good deal.
No matter what your motivation for becoming a landlord was, your goal is going to be making your investment profitable. It’s more than possible to earn a living as a landlord (if you dedicate yourself to property management), but you need to make sure your incoming revenue exceeds what you routinely spend; and eventually, you should be earning more from your property than you put into it.
These following eleven strategies will help you do that:
- Be choosy with your property investments. First, you need to be picky about the properties you invest in, and think carefully not only with regard to the attractiveness a property might hold for prospective renters, but how easily the house might sell in the future. Take a good look at the school district, neighborhood, and condition of the home, and compare the asking price to others in the same area. Look for a good deal and be patient; seize great opportunities, but don’t just buy a property for the sake of getting it because it’s available. If you’re interested in flipping houses, there’s an entirely separate list of factors to study.
- Do your research to know your payments. The most important variables in your profitability model are going to be how much you pay in monthly mortgage payments, and how much you’re able to collect in rent. Use online mortgage calculators to figure out how much you’ll be paying in principal, interest, property tax, and insurance every month, and look up what the average renter in your neighborhood pays. Does it look like you’ll be taking in more than you spend? That’s a good start, but there are a few other variables.
- Plan for emergencies and repairs. Monthly mortgage payments aren’t the only expenses you’re going to have. You also need to evaluate how much you might have to spend on emergencies and repairs. If the house sustains structural damage, such as a leaky roof or a weakened foundation, you’ll be responsible for fixing it. These costs may range between a few hundred and a few thousand dollars a year, depending on the age and state of the home, so try to factor in these costs accordingly.
- Screen your tenants. It may not seem like a big deal, but screening your tenants can have a surprisingly large effect on your profitability. Learning in advance that a tenant candidate has a history of non-payments and a sketchy track record with other landlords can save you the time, money, and hassle of having to deal with that tenant once he or she is settled at your property. Be patient, and choose the best candidates to fill your vacancy.
- Minimize vacancy periods. Although it pays to be patient and choose only the best tenants to fill your vacancies, it’s also not a good idea to let your vacancies sit idle. The minute a tenant lets you know they’re moving out, you need to start searching for your next renter. Every month your property sits without a renter is a month without income to cover costs, so advertise, spread the word, and work quickly to get those spots filled.
- Keep your tenants happy. It generally costs much more to go out and find a new tenant than it does to keep your current ones happy. If your tenants are getting everything they need and your property stays in good condition, they’ll likely stick around for the long haul … and that means a nice stream of consistent, dependable income for you.
- Keep up with repairs. Things go wrong, no matter how good the condition of your house was when you bought it. Appliances will break, plumbing will go haywire, and tenants will become unhappy, however temporarily. It’s in your best interest to keep up with these repairs diligently. This not only keeps your current tenants happy, it also keeps your house in a better condition for the day when you decide to sell it.
- Learn basic “handyman” skills. Whether you’re fixing up an older house or just doing what you can to repair things on your own, it pays to have a set of “handyman” skills. If you can do just one repair yourself per year, you could save a few hundred dollars on the cost of calling out a dedicated repair specialist. If you grow sufficiently skilled, you might even be able to improve your property to the point where you can resell it for a massive profit someday.
- Raise rent prices when it’s appropriate. Charging the same rent forever isn’t going to be a profitable strategy. You’ll want to stay in line with rent prices in the neighborhood, so pay close attention and raise the rent gradually over time to cover your expenses (and fluctuations for property taxes and insurance).
- Follow up on missed payments. If a tenant misses a payment, it’s not the end of the world … but don’t lose sight of that money. Follow up on any missed payments, and if push comes to shove, impose late fees and penalties to make up for the lost income. If consistent payments become a problem, you may need to escalate the matter and work on finding a replacement tenant. You can’t afford this kind of serious blow to your incoming revenue.
- Plan for the long term. Remember that you’ll probably be selling this property eventually, so make all your decisions with the long term in mind. Don’t take shortcuts or make patchwork fixes; play the long game with a focus on maximizing your return.
Bonus: Enlist the Help of Property Management Services
Though it’s not a way to increase the profit you can make on one property specifically, enlisting the help of property management services can be an effective way to increase your overall profitability—especially if you have multiple properties.
For a minimal monthly payment, you can have a professional handle the responsibilities like tenant screening and basic repairs, so you spend less time on each property yet keep collecting the money. If you’re interested in learning more about these services, be sure to contact us at Green Residential today!