The following is a guest post
Real estate investing has common benefits and challenges. Time and money are common barriers. Even with property managers, you must often approve requests. Low money down financing may overlook needed renovations and upgrades. Once a tenant has moved in, home repair expenses must be considered.
Meanwhile, real estate investment offers potential for:
- Capital Appreciation
- Passive Income
- Tax Benefits
First time landlords, in particular, may be surprised by challenges after renting out their properties.
So, how can we become better and more profitable landlords?
Here are some things to consider for newbies or current landlords:
Review How You Handle the Tough Stuff:
Are you a big softie? Collecting past due rent, handling tenant concerns and fixing things are not favorites for landlords. Even with a property management company (PMC), you will approve or deny requests.
It is important to manage landlord-tenant relations. Tenants must feel comfortable with both the home/condo and their landlords. However, property owners must present a credible threat in cases of late rent or irrational requests. How do you respond to evasive answers about past due rent?
‘Pay or else’ ultimatums are not so simple. If you lose the tenant, the home may be unoccupied for months to come. You or the PMC must consider longer term effects of short term solutions, such as evictions or collections.
Know your tenant beyond a rent check: The circumstances surrounding an issue should be considered. Did an otherwise stellar tenant lose their job but just start a new one? Was there a medical emergency? (Verify these)
Working with good tenants over a month or two of hardship may be preferred to rolling the dice on a new renter. It is important to strike a balance between forceful and accommodating.
Get it in writing: Much like leases, short term arrangements should also be in writing. ‘Half now, the rest on a certain date’ agreements must be signed upon.
Focus on ROI:
Each landlord decision should be made with return on investment (ROI) in mind. ROI is not always apparent. Goodwill often has the highest ROI. For instance, new kitchen appliances for a long term tenant may ensure your home is rented for years to come. Investor Elliott Broidy showed how this approach works overseas with cross border investments in Israel.
Evaluate and Track Tenant Feedback:
How rational is the upgrade or repair request? There is a big difference between ‘The washer/dryer is kinda small’ and ‘The washer/dryer doesn’t work. ‘(Or very well) The latter comment can lose a quality tenant, whereas ‘wishing’ an appliance was bigger is not likely to cost you a rational renter. In either case, make notes of tenant comments.
Why? Their likes and dislikes may be similar to future renters. Your tenant may comment about great light exposure or how the neighborhood is really improving, etc. For off-premises landlords, this may be insight they’re not aware of. You can leverage the feedback to better advertise for renters in the future.
Negative comments that are rational should also be considered. For instance, were you indeed unresponsive to voicemails or emails?
Best Practice: Consider a tenant survey, even for renters who have renewed. You will build trust with current renters and receive candid comments from those moving out. You can use the feedback to improve your landlord skills.
Review your Business Relationships:
Our renters are perhaps the best ‘eyes and ears’. This is ironic given the PMCs and extensive screening landlords use to track their tenants. Your renter will know if the pool service is regular or the handymen work efficiently. A tenant survey or casual conversation will provide you with information to trim expenses on inefficient services.
Here are relationships to review:
Property Management Company: Evaluate the performance of your PMC, as well. Yes, collecting rent is first and foremost, but what is the tenant satisfaction? You should also track the quality of tenants a PMC is attracting. While surefire screening is difficult, a history of problematic tenants may be cause for concern. Is the PMC responsive to your needs/concerns?
Other Relationships: The same review includes handymen, pool guys and landscapers.
Managing your investment property is more profitable with a broad perspective. Consider how your decisions have value in ways not readily apparent.
This post was a guest post. The content of this guest post is the sole responsibility of the sponsor of the post and not SAFTM.