Reduce the Stresses of Landlording and Grow Your Portfolio
It seems pretty easy at first glance, right? Buy an apartment building, run an ad, fill it with people glad to have a nice place to live, rinse and repeat. Of course, if it were that easy, everybody would be doing it. The fact of the matter is a number of the aspects of operating a rental property can make it a difficult process. Here, we’ll identify a number of things that cause landlords stress and how they can be avoided.
By far, the most stressful aspect of being a landlord is dealing with tenants who are late, or behind on their rent. After all, rent payments are the lifeblood of the business. What’s worse is that it often makes more business sense to keep the late payers in the property until the end of the lease to avoid eviction and vacancy costs.
So then the question becomes, how does one eliminate the informal grace payment period their renters have bestowed upon them without? We’ll get to that in a minute.
These people can have your phone ringing off the hook between their illogical demands and your other tenants complaining about them. Having a thorough screening process will give you an opportunity to learn what experience other property owners have had with potential renters before signing them, but you will never know for sure how they’ll act until after they move in. For all you know the previous owner could have written them a strong letter of recommendation just to get them out of their own unit.
By and large, most people have a great deal of pride in the place they live. These are the people who understand caring for their home brings tremendous comfort and joy. Unfortunately, there is also a certain crowd out there that doesn’t seem to get the correlation. Holding annual inspections can serve to reduce the amount of damage they inflict. Also, requiring a healthy security deposit will insulate you from potential damage, as you’ll at least have some funds to repair anything that comes up broken or disfigured.
Among the things that cause landlords stress, deferred maintenance is one that gets more expensive the longer you allow it to go on. While it might seem prudent to wait when a need is discovered, damage has a tendency to get worse, and therefore more expensive to fix the longer it goes unattended. In theory, the best way to avoid this stress is to get things repaired immediately whenever they malfunction. Unfortunately, actually getting things fixed in the real world is much more work than it is in the “drag and drop” virtual world. People need to be coordinated, and the cheapest option might involve dealing with a company’s poorly structured warranty redemption process.
You have to keep track of tenant applications, rent paid and rent outstanding, maintenance schedules, taxes due and other property concierge tasks. Implementing a system for keeping track of expenses and rental income saves landlords a great deal of stress during the tax season. Skimping on paperwork, or putting it off, increases the possibility something will be overlooked and cost you money. When it comes to paperwork, the golden words to live by are, “Do it now.”
The whole point of acquiring an investment property is to have it work for you—not the other way around.
If you aren’t mindful of the time you spend on it, you’ll soon find the needs of the property consuming your days and nights. Set up specific hours for dealing with the requirements of running the property. Rather than succumbing to the temptation of working around the clock, establish office hours for yourself and stick to them.
Ignoring Business Education
The world is a constantly evolving place. What was yesterday’s best practice can be an exceptionally cumbersome method when compared to today’s solution. For this reason, keeping up with your education in the area of property management is of paramount importance when it comes to maximizing the return on your investment. If you’re going to stick to your business plan, then you need to know what the best practices are and how to enact them consistently.
Think about how many systems are involved in the proper functioning of a rental unit. Electrical, plumbing, heating and cooling and large appliances are but a few of the things that can fail unexpectedly. Maintaining a repair account based upon a set percentage of your rent receipts will ensure you have cash on hand to deal with unexpected situations when they arise. Most experts recommend setting aside between three and 10 percent of your monthly income for this purpose. Having that cash on hand brings with it a lot of peace of mind. If something goes wrong, you simply write a check against the account and move on.
While the things that can cause a landlord stress are many and varied, there is one foolproof tool you can use when it comes to how these things can be avoided.
Outsource the stress, so you can focus on the important matters. In more direct terms, hire property management. Investors with large scale portfolios don’t only use property managers because they own too much for them to manage themselves. They do it to stay focused on what’s important to them – growing their portfolio. Sure, you can handle the leasing process on your own, but that doesn’t make it the best long term business decision if it costs you time that could be spent closing more deals.
Afterall, you’re likely investing time and money into real estate with the intention of receiving the largest long-term economic benefits.
No matter who you are, there are going to be some tasks associated with managing the property that are simply beyond your ability to do well.
Whether it’s for a lack of training, or the lack of a piece of seldom required equipment, if you’re constantly “winging” things you don’t fully understand, you will ultimately cost yourself way more money than you would have spent to bring in a specialist.
Yes, you’ll pay a bit for the service, but the stress relief you’ll enjoy and growth your business will experience will easily outweigh the expenditure.
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