When you buy your first rental homes in the Houston area, it may take a while to learn the ropes. Through trial and error, most landlords eventually master how to make money in the rental property business.
But there’s no question there will be bumps along the way, especially when you first get into the business. If you want to save money as a landlord in Houston, keep the tips in this article in mind!
Keep Rents Low
Wait! Shouldn’t you set your rent as high as you possibly can, to make more money? That’s not necessarily how it works.
By keeping your rent a bit below what similar houses are charging in Houston, you will increase your occupancy rate. You’re more likely to receive several applications any time you have a vacancy, so you’ll have less turnover.
You want to sustain as little turnover as possible because that costs money. Usually, you’ll have to go into the space, paint the walls and shampoo the carpet, and address minor maintenance issues.
Also, you’ll have to market the place for new renters. If the space is vacant for a month or two, you lose more money.
This doesn’t mean you should set the rent well below market rate, because that invites trouble. But if you make your monthly rent 5 to 7% below market, you should increase your occupancy.
Buy Smaller Homes
Some landlords buy larger Houston homes because the rents are higher. But it also costs quite a bit more to perform upkeep on a large house versus a small one.
Many landlords are successful with 1,000-square-foot homes, because they can keep the cost down for painting, shampooing, roofing repairs, HVAC issues, etc. If you have 2,000-square-foot rental, costs for adequate upkeep and repairs become substantially higher.
It might be wise to buy smaller homes at first. Once you are making a regular profit, you’ll be better prepared to buy and maintain larger ones.
Apply For Contractor Accounts
Being a landlord isn’t cheap. That’s the case even when you own the property outright. In addition to mortgage and insurance costs, you also have to absorb repairs and upgrades. If the roof goes, that’s a massive expense!
One way to lower maintenance costs is to make your material purchases at one or two retail outlets that offer contractor discounts. For example, some landlords only purchase materials at the Home Depot contractor counter because they can save up to 10% per order.
Also, look for coupons and sales discounts for landlords and contractors. For example, one landlord in Houston bought appliances for several houses. He stacked a sales price, rebate, coupon, and credit card deal to save more than $3,000!
Check Your Insurance Policies
You can save yourself money in the long run by taking out a good landlord insurance policy. These can help you lower your costs if something nasty happens, such as significant property damage or injury.
If you don’t have landlord insurance, an incident on your site could result in a massive loss. But you should carefully review how much the policies cost because they can be pricey.
Get several quotes and review the policy each year to see if you’re still getting a bargain.
Say No When Necessary
Many tenants will take your Houston rental as is. But you might run into tenants who want upgrades and changes. They won’t hesitate to ask if you’ll put in a new kitchen sink, and you might comply.
If you continue to replace things that don’t NEED replacing, however, you’ll deprive yourself of money, obviously. This comes down to learning how to say no.
It can be challenging; most of us prefer to be agreeable and say yes. But if you don’t watch out, you can say “yes” to too many things, and before you know it, you’ve lost ¼ of your annual profit on the property.
One way to deal with such tenants is to say yes to some of their requests, but only at their expense. If they turn out to be agreeable, the upgrades have to stay when they leave.
If the tenant is handy and can do the work themselves and pay for materials, you might find it worthwhile to say yes sometimes. But make sure they do solid work, or you’ll have to pay for a do-over later.
Choose Paint and Flooring With Care
If you own multiple rental properties in Houston, it’s cheaper and easier to use the same color of paint and identical flooring in all of them. That enables you to purchase these materials in bulk and save money.
When a tenant moves out, you can paint and repair flooring with the same materials each time, and that will save a bundle in labor and material costs over time.
It’s also smart to avoid wall-to-wall carpeting in your rentals. Carpet wears out and collects stains. It’s an ongoing expense and headache. Look for rentals that have tile flooring in as much of the space as possible.
Do Your Own Maintenance Whenever Possible
If you own a few Houston properties and have the skills, you can save considerable labor costs by doing repairs and maintenance yourself. It also helps you stay in touch with your tenants and your properties and ensure all is well.
Boost Energy Efficiency
Air conditioning bills can cost a ton in Houston. If energy bills are your responsibility, you should invest in energy-efficient HVAC systems. They certainly cost more up front, but the savings can be substantial over time.
Use Rental Property Tax Savings
Owning Houston rental homes means you can reduce your costs by applying rental home tax deductions. Be sure you know all the repairs and expenses a landlord may claim in your state. It’s wise to review your taxes with a CPA every year to identify every break you can obtain.
Maintaining a rental property business can be expensive, but knowing how to reduce your costs along the way will make it work. Use some of the above tips to ensure you save as much money as possible while operating your Houston business!