Having a rental property can be a great way to generate income, especially if you still have a mortgage on the property. Your tenants essentially pay your mortgage and anything beyond that is pure profit.
People all over the world generate large streams of passive income from multiple rental properties. Many of them have turned renting out properties into a lucrative business, and you almost never hear these highly successful people complain about disruptive or destructive tenants or having to chase down rent checks. And they’re certainly not spending all of their time fixing broken toilets and answering calls about busted water pipes at 2 am.
Whether you’re a new landlord or have been around for a while, if you’re not making the money you expected to make on your rental property, and you’re burned out from handling tenant issues, it’s probably time to rethink your strategy.
Highly successful landlords don’t lose money, they make money. And if you want to be among those who turn their rental properties into streams of income and live life on your terms, here are ten tips to help you bring up your bottom line and get your weekends back.
Hire a professional property management company
If renting out property is so easy for some people, why do so many property owners fail to generate a decent income without having to be on call 24/7 and practically take their tenants to court over unpaid rent, evictions, and serious property damage?
The short answer is that most of the people who seem to have it easy have a professional property management company handling everything from collecting rent and managing difficult evictions, to handling those unexpected late night emergencies that require immediate repairs.
Don’t be best buddies with your tenants
When you’re a landlord, you want to be cordial and friendly but not too much of a friend. Your relationship with your tenants is best to remain a professional business relationship.
Remember back in high school when that friend borrowed fifty bucks from you and still hasn’t paid you back? That’s the tone you set with your tenants when you become their buddy up front. But that doesn’t mean you have to be mean or cold. It just means you need to set the tone of the relationship and establish that you’re in charge, setting expectations with your tenant for following the rules. This includes paying rent on time and in full.
Develop a tough skin
Being a landlord isn’t going to work if you’re a “nice guy.” You’re going to encounter situations where you’ll need to make swift business decisions without consulting your emotions. Like evicting a tenant who hasn’t paid rent in months, or turning down an applicant with really bad credit, despite their sob story that they’re about to be homeless.
If you’ve been a landlord for any amount of time, you already know how frustrating it can be chasing down late rent checks. Not only do you get hammered with a bunch of excuses, but it takes up your time and can be absolutely exhausting. You didn’t take on being a landlord for fun. You did it to generate income from your assets. And you need to develop a tough skin so you can set strict expectations to protect those assets and your income.
Don’t set low rent just to reel people in
It’s tempting to set low rental rates for your properties just to get people in. And you may get plenty of interested people. But this almost always fails as a long-term strategy because the kind of people you attract by offering really low rents aren’t always going to be the most reliable tenants. And if you want your property to make money, you need reliable tenants.
Also, sometimes setting really low rent in an area with rent control can put you in a position where you’ll end up losing money. With rent control, you can’t just raise the rent back to a normal rate when the market moves. So if your tenant signs a lease for a year to pay really low rent, at the end of that year, depending on local rent control laws, you may only be able to increase the rent by a small percentage unless your tenant moves out and another tenant moves in.
Set late fees and collect on them without exception
As a landlord, you’re the one in charge and you need to establish that fact from the start. And although you may not like the idea of collecting a fee for late rent, it’s actually one of the best ways to eliminate late rent. Once a tenant has to pay a late fee, they’ll quickly figure out how to better manage their money and not wait until the last minute to send in their rent check.
Keep in mind that regardless of what they tell you, tenants don’t always pay rent late because they don’t have the funds available. Sometimes it’s simply a matter of a lack of responsibility. Many tenants have money in their accounts but just have a bad habit of procrastination. Or, they don’t want to part with their money and wait until the last minute. It’s highly unlikely that a tenant will develop a habit of paying rent late when they have to pay a late fee.
And when you have multiple properties, your late fees can add up to a significant amount of money that you can spend on things like groceries or fun activities for your kids.
Always know your housing laws
Knowing your Federal, state, and local housing laws is the best way to protect yourself from a potential lawsuit that can wipe you out financially (and emotionally). Many of the landlord/tenant laws are designed to protect the tenant, and you can’t risk making a wrong move, no matter how much of a problem tenant you’re dealing with.
For example, in many states, even if your tenant has destroyed the property and hasn’t paid rent for months, you can’t just turn off the electricity or change the locks. To remove someone from your property, you have to go through the formal eviction process, which could take weeks or even months.
Professional property management can help
If you’re struggling with your rental properties and ready for relief, it’s time to contact a property management company. Green Residential is a professional property management company in Houston that specializes in helping landlords handle the stressful aspects of being a landlord.
We have a team of experts who can help you find solutions and make your life easier. Call us at 713.395.9700 today to find out how we can help.