As much as landlords want to keep expenses minimal, exceeding the budget can happen. If you overspend a few times, there’s no reason to worry. But if you find that you often end up with negative cash flow or just breaking even, you need to take a close look at how you’re managing your money.
While some costs can vary from month to month, you can often make a good estimate of them. Tracking your expenses is vital to ensure you end up keeping your profit intact. We’ve highlighted some common areas where you may be overspending to help determine how to reduce overall costs.
Spending on Property Maintenance
It’s true that landlords must keep their rentals in top condition to ensure that they meet all necessary habitability. It also leads to happy renters who are likely to renew their leases and stay for the long term.
One of the ways landlords can reduce maintenance expenses is to plan their property upgrades well. It’s essential to check the budget and avoid spending on frivolous items that are not part of the plan. You can also create an additional fund in case there are unforeseen repairs.
When it comes to reports of property damage, it’s recommended to address them right away. For instance, if there’s a small leak, it’s best to act quickly to avoid water damage or mold growth. The damage can intensify the longer it’s left unaddressed, and lead to more costly repairs.
To guard yourself against property maintenance issues that could be avoided, include regular property inspections in your tasks. This lets you notice potential damage early and find solutions, which leads to long-term savings. What’s more, failure to attend to property problems can also lead to tenants breaking the lease early. Now, you’ll be faced with a vacancy, and no rental income.
If you lack the time to handle these maintenance tasks, engage the services of a property management company to streamline your inspections. You’ll gain peace of mind knowing that professionals are conducting consistent evaluations of your rental unit.
Paying for Legal Fees
It’s essential that landlords have legal consultants to navigate evictions and lease drafting. Despite these services being costly, legal mistakes can eat away at your profits.
What you can do when budgeting for legal help is carefully analyze the services your partner offers and what they’re charging. Do they have solid experience in real estate? How much of the services provided are critical? Are you billed per hour or are you paying a set amount each month? These are important questions to think over.
Aside from legal assistance, you can also see if there are gaps in your tenant screening process. With a more effective tenant screening you can reduce the need for evictions. In turn, you can reduce your legal fees and tenant turnover rates.
Accepting Low-quality Tenants
There may come a time when you agree to let someone who isn’t the right fit rent out your unit. When your rental space has been empty for some time, you may feel the pressure to have it occupied and overlook certain red flags in the process. You might not perform a thorough tenant screening, so you can earn a rental income right away and increase your return on investment.
This decision can backfire since problematic tenants lead to spending more long-term. Bad tenants can damage your property, delay or skip paying the rental dues, and lead to costly evictions.
You must, therefore, be vigilant in checking their employment records, reaching out to former landlords, and evaluating their credit history. You want to prioritize superior-quality tenants who treat your property well and pay the rent on time.
Facing a Long Period of Property Vacancies
Aside from not providing a monthly rental income, vacant rentals can pose added risks and use up your available cash. Even with no renters around, you still need to conduct property inspections and ensure home systems remain functional. Fixed expenses, such as property taxes, HOA fees, and utility bills, will also still need to be paid.
Your priority is, therefore, to attract new occupants right away. Analyze your marketing approach to avoid mistakes and ensure you’re targeting the right demographics. Check if your rental rates match the current rental demand and compare them to the competition.
Paying for Vendors and Contractor Fees
Another area landlords take for granted is the amount they’re paying vendors and contractors. It’s important to build the right network to ensure your rental space is at its best and your property is free from risks and damage. But make sure that the costs of the services are reasonable.
Like screening your renters, it pays to evaluate the services you’re receiving from the vendors and contractors you’re working with. This includes plumbers, landscapers, and bookkeepers. Prior to hiring the services of vendors, assess if the work quality is excellent. Determine if there are price increases and changes in fees, and assess their transparency in pricing, so you won’t be paying for unnecessary items.
Hire a Property Management Company to Control Property Spending
Engaging the services of a property management company can help streamline your tasks. It’s less costly to work with a trusted professional team who have expertise in marketing, tenant screening, property maintenance, lease drafting, and more.
Typically, property managers also have a network of vendors they rely on for their clients, so you won’t need to screen each provider, unlike DIY landlords.
Paying attention to potential hidden costs can help you achieve your financial goals and protect your investment. On your own, the costs of managing a rental can multiply, since you don’t have the advantage of economies of scale. Property management companies help you save since they have extensive resources and efficient systems already in place. If you’re seeking a dedicated property management company, contact KRS Property Management today!