Rental properties are an attractive investment because they promise an almost guaranteed flow of passive income. If a rental is located in an area with steady demand from renters who can afford it, it is easy to profit from that investment.
But this is if you don’t do anything to sabotage the rental. As the Blanket Homes team warns, landlords can make decisions that destroy the profits from an otherwise viable investment. What are some of the things a landlord can do to kill the profits from their rental property?
1. Ignoring tenant maintenance requests
Nothing annoys tenants more than when a landlord fails to respond to maintenance requests in time. Landlords who do this violate their obligation to provide a safe and habitable dwelling for their tenants. They deny tenants their right to quiet enjoyment of the property. Tenants who suffer this way can rightfully withhold the rent until the problem is solved. Such tenants can sue the landlord if they have been harmed out of negligence. If tenants refuse to pay rent or terminate their lease because you didn’t maintain the property, you will lose money.
2. Inadequate communication with tenants
The needs and expectations of tenants often clash with those of the landlord. The number one reason for these conflicts is a misunderstanding of the lease terms. If a landlord does help renters understand the meaning of the clauses in the lease agreement, they will have avoidable clashes with those tenants. Issues often arise over allocating financial responsibility for maintenance, repairs, pest control, and cleaning. Arguments also happen if tenants don’t understand the rules regarding pet fees and late payment of the rent.
3. Increasing the rent too quickly
Raising the rent too high too fast will cause problems with tenants. Tenants look at the rents for similar properties in their area to determine if they are getting a fair deal from their landlord. Landlords can only find tenants if additional amenities in the home can justify higher rents. Before raising the rent, check the market trends and ensure increments are done at the right time. Focusing on improving tenant retention rates is better than making money quickly from rent increases.
4. Trouble filling vacancies quickly
A vacant rental is a shortcut to investment property failure. To sustain your rental income, you must be able to find quality tenants for an empty unit quickly. This partly depends on the efficiency of your turnover process, which depends on how well the property has been maintained. It also depends on the effectiveness of your marketing systems: how far-reaching the message is and how efficiently you can screen prospective tenants. A focus on minimizing vacancies is crucial for the survival of your investment. Once again, this problem highlights the importance of prioritizing tenant retention and a good relationship with the tenants in your property.
5. Failing to manage your operational expenses
There are two types of costs in a rental property. There are recurring expenses like mortgage, interest, taxes, insurance, utility bills, professional fees, salaries, etc. There are periodic expenses such as maintenance and vacancy costs. Maintenance costs mount when landlords fail to do preventative maintenance of their buildings. The result is an inability to manage wear and tear issues, leading to avoidable downtimes and spiraling repair costs. Proper planning and record-keeping can help you control the operational expenses for your property.
6. Working with the wrong kinds of people
Some landlords need to consider hiring an expert as an expense rather than an investment. Other landlords try to cut costs by hiring the cheapest person. Both of these approaches will make you lose money in the long run. When hiring an expert for your rental, you want to pay attention to their past successes with other similar rental properties. You also want to talk to their past clients to get an idea of what it is like to work with them.
7. Not taking advantage of tax deductions
To compensate them for their services, the government permits landlords to deduct taxes from many of the day-to-day expenses of their rental properties. These deductions add up to a lot of money when summed up. Tax deductions are one of the ways landlords boost profits from an investment property. You need to learn how to make these deductions or have an experienced accountant to guide you, or else you will leave money on the table.
If you are making any of these mistakes in managing your rental properties, we can work with you to fix them. To solve these problems and other issues affecting the financial health of your rental property, call us today or send an email…
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