As a Houston landlord, you’re in the game of generating cash on your cash. In other words, you’re in the ROI business. But are you really doing everything you can to set yourself up for maximum returns? This a question that you need to analyze through a critical lens.
Are You Wasting Money in One of These 8 Ways?
You might consider yourself a fairly savvy person when it comes to finances and investing. (After all, you’re wise enough to invest in an income producing property.) But it’s entirely possible that you’re bleeding money in areas where you could be doing better.
Don’t believe us? Consider the following problem areas that we most often see:
1. Keeping a High Interest Rate
You might have a historically low interest rate, but in today’s market conditions you can probably still save even more. If you have a rate in the 3s or 4s, it’s time to think about refinancing while you still can.
For example, let’s say you have a 30-year mortgage and you’re paying 3.25 percent. If you’re able to knock that down to 2.5 percent, you could save somewhere in the neighborhood of $200+ every single month. Sure, you’d have to cover the refinancing costs, but as long as you plan on holding the property for another three to five years, you’ll almost certainly come out ahead.
If nothing else, go ahead and call your lender (or a broker) and test the waters. They should be able to give you some good ballpark numbers to work with.
2. Overpaying for Insurance
Insurance is another area where landlords often waste money. And because these payments are usually “out of sight, out of mind,” it’s easy to forget about them. But if you’re willing to take the time to shop around, you could save hundreds of dollars every year.
When shopping for insurance, make sure you’re comparing apples to apples. You need adequate coverage with the right terms. (Proper insurance coverage should, at a bare minimum, account for property insurance and liability insurance.)
3. Paying Utility Bills
If you’re paying all of the utility bills at your rental properties, you might want to reconsider. When you cover the electric, gas, and water bills, you’re basically giving tenants free rein to use as much of it as they want. After all, they don’t have to foot the bill!
While every market has its own standard practices, consider what would happen if you required tenants to pay the bills in their names. Or, at the very least, what would happen if you mandated tenants pay 50 percent of all utilities? You’d probably see smarter usage.
4. Choosing Sensitive Finishes
Be smart when renovating and upgrading a rental property. What looks good isn’t always the most cost-effective option. Carpet, porcelain tile, and white, glossy paint should all be reconsidered. If renovating in between tenants, cost-effective yet durable options like vinyl flooring and flat or matte paint are solid choices. You’ll find that they hold up longer over time and require less cleaning.
5. Not Charging for Pets
If you’re banning pets from your property or letting pets stay for free , you’re missing out on a cash cow. Roughly 68 percent of U.S. households own at least one pet, which means you could potentially increase your monthly revenue rather significantly (depending on how many properties you own). Here are some ways you can profit:
- Charge a non-refundable pet fee. This amount should cover the entire amount that it will cost to deep clean your rental. Somewhere in the neighborhood of $200 to $450 is not unreasonable (depending on the market).
- Charge a monthly pet rental fee. You’ll want to keep this number low, but even tacking on $20 per month will net you an extra $240 per year per property.
Don’t scare away pet owners, but do make it clear that they can cause damage. So in order to compensate, you must charge these fees. Most renters are accustomed to these charges and will understand.
6. Excessive Landscaping
Landscaping and curb appeal can help you rent your property, but there is such a thing as going too far. Some landlords get so caught up landscaping that they end up wasting money. They do so much on the front end that they have to constantly water, fertilize, and pay for professional landscaping. Before they know it, the investment in curb appeal actually produces a negative return.
7. Failing to Work With an Accountant
We’re living in a day and age where you can do your own taxes with a few clicks and swipes on an app. But think twice before doing your taxes on your own. Though an accountant will cost you money, they more than make up for it in the value they return.
A CPA has a thorough understanding of tax law and can easily find tax deductions that you were never aware of. They can also make sure you aren’t breaking any laws or rules (which could cost you thousands of dollars in the future).
Feel free to continue doing your own taxes, but do so at your own risk!
8. Doing Everything on Your Own
It’s easy to fall into the DIY trap where you attempt to do everything yourself. Whether it’s a leaky toilet, a lawn that needs to be mowed, rent that needs to be collected, or an eviction, your decision to absorb all responsibilities isn’t saving you – it’s costing you.
Yes, you might be able to save a few bucks on any one of these tasks, but that’s only one side of the coin. You also have to consider what you’re costing yourself in (a) time, and (b) lack of expertise. Hiring a property management service may generate a higher ROI.
Hire a Houston Property Management Service
Tired of doing everything on your own? Worried that you’re bleeding money in areas where you could be saving? We’d love to help.
At Green Residential, we provide premier property management services for Houston-area landlords who are looking for reliable, white glove service. Want to learn more? Please don’t hesitate – contact us today!