The rental property business is growing rapidly. With many home seekers searching for their dream homes and the prices of rental properties skyrocketing, if you play your cards right, you are bound to make a hell of a profit from your rental property business.
However, your ability to reel in substantial profit and keep your business afloat depends on how well you avoid mistakes that have sunk others like you.
In this post, we’ll offer you 10 important tips to help you avoid common mistakes that ruin many rental property businesses and make management difficult.
1. You run a business
You don’t need to open a big mall downtown to identify as a business owner. As a real estate investor, you are a business owner. The goal of your business is to generate extra passive income. On the other hand, your duty is to provide a service to customers (house seekers) and make cool profits.
So, do your part by reading up on the rules and regulations. Also, treat your customers well. Finally, focus on the goal—which is making a profit. The earlier you understand these rules, the better for you and your business.
2. Track your income and expenses
Your income is important to your business, so ensure you track and record it. The same applies to your expenses—you want to know where money is going and where it is coming from.
Also, you need to project the gross income you’ll collect. To do this, you’ll need to factor in rental income lost to vacancies or bad debt. Having a birds-eye view of your income and expenses will help you stick to your budget.
Common tools to help you track your income and expenses are:
3. Carry out comprehensive rent analysis
Rather than set your rent via guesswork, why don’t you carry out a comprehensive rent analysis? First, determine what other landlords in your area are charging for similar properties. By doing this, you get to know the starting point; then, you can adjust your price based on other factors.
Don’t set your rent price impulsively. You may end up chasing renters away. On the other hand, you may end up cheating yourself should you eventually charge lower than you suppose to. You can conduct thorough rent analysis with tools like Rentometer or Zillow.
4. Offer an easy rent collection method
Many landlords use rent collection methods that make it hard to access their money pronto. Some use methods that frustrate their tenants. While many rent collection methods are being used today, using property management software to collect rent remains the best solution.
Property management software allows tenants to pay their rent using their mobile phones. And with this method, you get to receive your money within minutes. Plus, the software keeps payment records online, making it easy to keep track of payments from the individual tenant.
5. Read up on your local landlord-tenant laws
All rental property owners are required to adhere to local and state landlord-tenant laws and fair housing laws. If you have no idea of these laws, it’s best to figure out how to read them up.
You won’t be spared if you go against the law, regardless of whether it was a mistake. The result could cost you thousands of dollars in fines.
So, ensure you talk to a real estate attorney or reach out to your local property manager to make sure that all the actions you take regarding your property are done according to the law.
6. Consider making your rental property pet-friendly
Did you know that around 90% of renters are pet owners? Imagine installing pet-unfriendly floors in your rental home. How many potential tenants do you think will consider your property? A few, which translates to 10% of renters without pets. That’ll hurt your business.
However, by making your property pet-friendly, you can accommodate many qualified tenants. Plus, If you make your property pet-friendly, you can charge an extra fee (pet fees and deposits), thus increasing your income.
7. Use rental listing services to promote vacancies
Gone are the days when you advertised vacancies by placing “for rent” signs and then sat by your phone anticipating calls. Today, there are many effective and easy ways to advertise vacancies. One of them is via rental listing sites.
Rental listing websites like Zillow, Avail, and Rentometer have millions of visitors. By advertising your vacancies on these sites, you raise your chances of finding qualified tenants quickly and easily.
8. Conduct tenant screening
How do you know if your new tenant isn’t wanted for a crime? How do you know if the individual was kicked out of their former residence due to bad behavior?
How do you know if the individual is employed as they claim? Unless you have psychic abilities, you cannot figure these out by merely looking at the individual or asking questions.
So to ensure you aren’t renting out your apartment to the wrong individual, you must conduct thorough screening. The process should include a credit report, criminal background, rental history, and employment verification check. If possible, try to speak with the potential tenant’s past landlords.
9. Carry out regular maintenance
As a landlord, the responsibility of maintaining your property falls on your shoulders. So when tenants make maintenance requests, ensure you attend to them as fast as possible. Plus, try to conduct regular inspections to determine minor issues tenants may fail to notice.
If you, a landlord, maintain your property well, your tenants will likely do the same. However, if you don’t, you can imagine what will happen. How often you carry out general maintenance will depend on the wear and tear on each unit.
However, professional property managers recommend carrying out maintenance (e.g., carpet replacement, interior painting, etc.) once every three years unless required sooner.
10. Ensure that your property is safe
In addition to making your rental home clean and pet-friendly, you’d also want to ensure that it’s safe. And how do you do that? There are many ways!
First, ensure your property has functional outdoor lighting. You also want to ensure the landscaping isn’t unkempt to discourage thieves who may want to lurk. Furthermore, you can install smart locks to boost the security of your home. And always change the door locks each time a new tenant arrives.
A little mistake can spoil your reputation, thus ruining your rental property business. To prevent mistakes from happening, you need to be serious about handling your business.
Do your due diligence before taking action regarding your property. And if need be, talk to a real estate attorney or property management manager for help.
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