We all know that real estate can be an excellent investment. Tenants help you build your nest egg while you sit idly by and collect all that passive income. If you own, or in our case, work on any rental properties, you know that that is not the case. Rental management can be a chore if you don’t have the right partners to help you along that path. Let’s talk about some of those concerns and how to try to minimize them.
Bad Renters
Nothing is a good substitute for qualifying your renter. Whether it is the horror stories of the renter changing their Harley oil in the living room or kids that seem to live to tear things up, as an investor, we have to do all that we can to see the warning signs. That means following up on references, running and looking at their credit check, and making sure you are getting a top-notch tenant. Do make sure to follow all of the fair housing regulations. Take the extra time upfront or even let the property sit vacant for another month before you put someone in the home who is not going to take care of it.
Bad Cash Flow
Cash flow is king in any investment, and you need to make sure when you purchase a property to make the numbers work. Ensure you can charge enough in rent to cover any debt on the property and maintenance issues (we’ll get to those issues too). Not only do you have to cover the cost of the mortgage, but you have to cover upkeep, taxes, and anything else that might come up. Think back to when you were renting and all the things you didn’t worry over. Now you have to worry about those things for your tenants and likely also for your personal property. One strategy is to purchase a property with a few small things to update to increase rent. You can even do these things over time as the unit turns.
Maintenance and Upkeep
If you’re just getting started or only have a couple of rental properties, a property management company may not be a good fit. If you are considering one, we can connect you with some great ones, but for most, it doesn’t make sense yet. The good news is that you have a couple of options when it comes to maintenance and upkeep. You can partner with a great handyman, like Handyman on Purpose, to set up a maintenance plan or have them on retainer when something goes wrong. You should be able to negotiate rates and a process upfront to make it as painless as possible when a need arises. What you don’t want to be doing is trying to find someone who is professional and reliable when there is an issue in your tenant’s home. A maintenance plan can also be a great option to keep a check on the house. The Handyman can go in regularly and change filters, check on a predetermined list of items and report back any issues. This service is a great way to catch small things before they become more significant issues, knowing that a renter is not going to look after your investment like you would. Staying on top of maintenance also shows your renters that you care about and take care of their homes. This attention to detail will allow you to continue to increase rents and still keep the tenants happy.
Renter-Proofing
I know that you think “renter-proofing” isn’t possible, but hear me out on this one. You can choose to make strategic updates and use specific materials to make life easier as a landlord. The stereotype here is that a landlord will use the cheapest materials to replace or repair rather than quality materials. What I am suggesting is to strategically use higher-end materials so that they will last longer, leading to increased rents and, eventually, your re-sale value. In a bathroom, think of ways to protect the home using waterproof flooring and maybe even PVC planks as wainscoting rather than cheap roll vinyl and MDF wainscoting or just sheetrock. These materials will stand up to more use and last through multiple tenants and cleanings. Maybe look at a lower end but strong tile instead of the cheapest laminate you can find for the kitchen. In the bedroom, go for a quality carpet that will stand up to the traffic and have it cleaned rather than replaced between renters. I’m not suggesting to go in and rip everything out and replace it all with the highest-end materials that you can find, but as you are updating and replacing things in the home, be strategic about what you are putting back in. It might save you some of that nest egg in the long run.
We all know that rental properties can be a great way to build wealth over time, even if they are not the most passive investments. A good buy, good renters, good cash flow, a good maintenance plan, and strategic investment in the home will bring you a long enjoyable time as a landlord. If you only have a dream of a rental or fifteen, let Handyman on Purpose be your partner in protecting your investments in the long run.