Increasing prices of home ownership make renting more attractive for both those looking for housing and those who are looking to make money off a major financial investment. Becoming a landlord isn’t without its ups and downs, so these first-time landlord tips are essential to maximizing profit.
Landlords can increase their profit by running a well-organized operation. That means performing regular inspections, documenting everything, doing the accounting in-house, making timely repairs, and screening all tenants.
- How Landlords Can Save Money & Increase Profit
- 1. Perform Regular Inspections
- 2. Document Everything
- 3. Do Your Accounting
- 4. Handle Maintenance and Repairs Swiftly
- 5. Have Maintenance Assistance on Standby
- 6. Don’t Skimp on Insurance
- 7. Establish a Maintenance Fund
- 8. Perform Basic Legal Steps Yourself
- 9. Strive to Keep Tenants
How Landlords Can Save Money & Increase Profit
1. Perform Regular Inspections
Inspect your rental unit before transferring it to a new tenant and at regular intervals. Be sure to follow any state or local laws about inspection notifications for existing tenants. For example, landlords in Washington state need to give written notice at least two days in advance of an inspection unless there’s an emergency.
Landlords have a responsibility to maintain their properties in an acceptable condition for their tenants. This includes regular inspections to ensure that all necessary repairs are being made and that the property complies with building and fire codes.
Regular inspections can help landlords increase their profits and keep their tenants safe. By taking care of small repairs and checking for code violations early, landlords can avoid expensive damage or fines down the line.
Can a landlord enter without permission?
The answer to this question depends on the state in which you reside. In most states, landlords have the right to enter their property without consent if they believe that there is an emergency situation or if they have been granted a key by the tenant
2. Document Everything
In an ideal scenario, you won’t have to go to court to handle landlord issues. Life rarely matches up to ideals, so having a bevy of supporting evidence will help prove or disprove any claims in court. Record every time you perform an inspection or maintenance on the property, and record transcripts or store digital communications from any interactions with the tenant.
With the prevalence of smartphones, taking pictures as supporting evidence should be fast and easy. The pictures will help with insurance claims, whether the damage is caused by the tenants or some other incident.
Store everything in the same place, which might be easier with a Cloud-based storage service like Google Drive that can host documents and pictures.
3. Do Your Accounting
Making money off of a rental unit is ultimately about balancing the numbers in your favor. An accurate projected cost of keeping up the recurring and incidental property bills will help you set a proper rental price. Those numbers will also be needed when it comes to tax time since most landlords will benefit from an itemized report.
Can you use QuickBooks for property management?
Yes, QuickBooks can be used for property management. Landlords can use QuickBooks to track their finances, including rent and expenses. This will help landlords to increase their profits.
4. Handle Maintenance and Repairs Swiftly
As a landlord, the responsibility for any repairs will fall on you. It’s not immediately apparent, but quickly handling the issues will likely result in lowered costs over time. A plumbing issue will likely cause water damage to the surrounding area, electrical problems may cause fire hazards, and pests can cause structural damage when left unmanaged.
Preventing further damage may mean paying upfront to repair problems caused by the tenant. Even if you can prove that they are liable for the damage, don’t wait to fix the issue.
Rental property maintenance checklist
1. Check the smoke detectors and replace the batteries as needed.
2. Check the heating and cooling systems and make sure they are in working order.
3. Check the sprinkler system and adjust as needed.
4. Check the windows and doors for signs of wear or damage.
5. Check all light fixtures for proper operation and Replace as needed.
5. Have Maintenance Assistance on Standby
Issues like a leaky pipe, faulty wiring, or pest infestation all become much more difficult to manage as they’re allowed to fester. Unless you are especially handy and have lots of free time, speedy maintenance for a rental unit will need an array of professionals ready to handle tasks as they crop up.
At the very least, you should have a plumber, electrician, carpenter, pest control, and landscaping service in your contact list. All of these services can be expensive, but a working relationship with a steady service provider may get you preferential treatment over time. They’ll be more motivated to keep your business if they know more is coming in the future.
6. Don’t Skimp on Insurance
Having landlords’ insurance is not an absolute requirement by law, but you will need it unless you own the property outright. Landlords’ insurance is usually pricier than homeowners’ insurance. Paying extra on the insurance bill can feel like a drain, but a robust landlord insurance policy can really save your profit margin when disaster strikes.
In some areas, it may be wise to purchase additional coverage like flood or earthquake insurance. Since these disasters can strike a large number of homes at once for significant damage, typical insurance policies do not cover them.
Landlord insurance costs can vary significantly based on the type of property and the landlord’s claims history. For example, landlords in high-risk neighborhoods may be required to pay more for insurance than those in less dangerous areas. Additionally, landlords with a history of filing claims may be forced to pay higher premiums than those who have not filed claims in the past.
7. Establish a Maintenance Fund
Putting all of the rental income into your checking account may feel good, but some forward thinking will save you from a sudden drop in profit margins. The benefits of swift repair and maintenance assistance were established above, but both require funding.
The exact amount of the fund will depend on the cost of the services, but you should have enough to cover both routine maintenance and an occasional hiccup without waiting for the insurance company to get back to you. Having a working relationship with your service professionals can help you produce a more accurate estimate of service costs.
8. Perform Basic Legal Steps Yourself
A good lawyer may be necessary for enforcing a tenant agreement, but you can set up a decent barrier of legal protection using premade forms like the ones at EZLandlordForms. Most landlords and tenants need the same sort of agreement, so filling out the small details like how much time to give for notifications and inspection intervals in these templates will legally cover you without bringing in a lawyer.
9. Strive to Keep Tenants
One of the most underutilized landlord hacks is a good relationship with the tenants. Tenant turnover is also a significant source of lost income. You’ll need to clean out the unit and go through the rental process again, including advertising, walk-throughs, legal fees, and so on. All while the unit may not be generating rental income.
The exact amount of lost profits will vary, but many landlords lose the equivalent of two to three months of rental income. For a two-bedroom apartment, that averages out to more than $2,590 in damages using rental data from early 2022.
You don’t have to be best friends with a tenant, but you can be amicable and true to your word as a landlord. Doing so will keep the best tenants in place for as long as possible.