Get yourself a rental property and retire to the French Riviera. That is the dream, but the reality tends to be something else altogether. If you are not chasing down past due rent payments, then you end up losing money on either finding tenants or making repairs. But it doesn’t need to this way and here are some ideas on how to save money when owning rental properties.
- Eliminate Vacancies
It’s quite simple, if you are not renting out your units, then you are not making money. It’s even worse if you have a mortgage as that empty room is costing you money. So, if you want to save money, then look at ways to bring on long-term tenants. I am not talking about one-year leases either. Instead, shoot for multi-year leases, even if you need to offer a slight discount on your base rent the long-term rental will be like money in the bank.
Another trick to minimize vacancies is to keep close to your tenants, this way you will know of any planned moves well before they happen. Doing so will give you time to find a new tenant and will help you to keep the cash rolling in.
If you are not convinced, then think about this. Every month that a unit is not rented, it costs you just over 8 percent of the annual revenue for that unit. So, by two months, you are so deep in the hole that even a rent increase won’t help you to get you. In fact, you’d be better off taking on a long-term rental with a slight discount in the first year if it helps you to rent out the unit faster.
- Keep Maintenance Costs in Check
This might be one of the most overlooked aspects of owning a rental property. But the reality is if you want to save money, then you need to make sure that your properties are always in tip top shape.
A big part of this means setting up and following a planned maintenance schedule and then investing in quality replacement parts. Don’t take short cuts either. Sure, you might save a dollar or two here, but in the long run, you will end up paying 10 times more as the bills from contractors begin to pile up.
In addition, to setting up a schedule, another trick to keeping maintenance costs in check is to perform regular inspections of your property. In this way, you can spot small problems that could become very expensive to fix down the road.
One final way to save money is to only rent to tenants who will respect the property. Doing so will help you to attract more high-quality tenants and this will create a virtuous cycle. It doesn’t matter if your property is on Nob Hill or the other side of the tracks. Make it a practice to rent to tenants who will help you to take care of your property.
- Keep Turnover to a Minimum
As mentioned, you want to have most of your units tied up in long-term rentals and you want to make sure that you aren’t wasting months to find new tenants when someone moves out. But another piece to the puzzle is to keep your turnover to a minimum.
Besides savings on the obvious costs to clean up and re-rent an apartment when someone moves out, the other advantage of keeping turnover to a minimum is that you can create a sense of community and this will help you to keep maintenance costs in check.
Now, keeping turnover to a minimum is often easier said than done but the best way to make it a reality is to foster good relationships with your tenants. While this is easier when the property is owner occupied, it is not impossible to achieve if you are not there all the time. Just remember the golden rule – do unto other as you would have them do onto you. Simply put, treat your tenants with respect and they will be more likely to stay with you for a long time.
- Be Strategic
With your rent increases that is. You don’t need to get into the trap of having to raise rent by ‘x’ percent every year just to break even. Instead, look at the market and figure out what is the right amount of rent increase based on what is going on. Then make sure you give your tenants enough time to adjust to the new rate.