If you notice that your earnings are lower due to unexpected expenses, then it’s time to analyze what costs you’re absorbing as a landlord. Though expenses can vary when operating a rental unit, you need to monitor where your heavy spending goes. Doing this can help you eliminate unnecessary expenses on things that won’t add value to your rental property. Here are common costs that landlords overlook:
Property Maintenance Expenses
A common expense for landlords involves maintaining the condition of their rental units. While property upkeep is essential in managing your property, you need to ensure that your expenses are reasonable. You cannot ignore the tiny issues, such as leaks since it could naturally lead to major water damage. If left ignored, you may end up wiping out your budget for repairs since small issues can graduate to bigger problems, which can be costly to resolve.
A great way to avoid property emergencies is by performing regular inspections of the rental units. When renters report a maintenance issue, be quick to address the complaints since your goal is to earn a consistent income and this requires staying on top of things. Tenants also choose to stay in rentals where property maintenance is prioritized and their safety is guaranteed.
Legal Fees
Partnering with a legal expert protects your rental property business. This extends to ensuring compliance with landlord-tenant laws and following the proper process when performing evictions.
As a landlord, you need to make sure the legal fees you’re paying are reasonable and your partners deliver value. If you have access to a lot of legal services and you’re paying for a set fee without making use of them, then this can be costly for you. In other words, make sure the fees you are paying align with the legal services you’re receiving.
Another tip is to choose a legal partner whose expertise lies in real estate to get maximum service value. You may also want to review your operational processes, like tenant screenings if you need frequent legal support due to evictions.
Tenant Selection
Pressure on landlords can rise when a rental space has been empty for some time but taking in tenants that don’t meet your standards can result in more headaches. For instance, accepting sub-par residents can be costly since you can end up with unpaid rent, property damage, or vacant rental units from evictions.
While tenant screening can require extra effort for landlords to perform since they need to verify employment and income details, conduct calls to former landlords, and evaluate the rental history of a tenant, they can greatly reduce future problems.
A landlord can save time in the long run by conducting basic screening as they won’t have to deal with as many delinquent renters or stressful evictions, so we recommend focusing on performing extensive tenant screenings from the start.
Longer-than-Average Property Vacancies
When your rental space sits empty for far too long, you can end up draining your budget. A vacant rental unit still generates expenses to maintain its condition and needs consistent advertising to draw potential residents. That said, you don’t have incoming rental payments to help cover these costs.
Landlords must, therefore, allocate a budget for vacancies since one cannot always predict the sudden breaking of leases or a slowdown in the rental market. It will be costly to hire cleaners, create ads, and stage the unit, this is crucial to attract more interest. On top of that, utility bills, including HOA fees and taxes need to be paid out even without renters.
To cover these expenses and reduce vacancy periods, landlords need to perform strategic marketing and assign the optimal rent rate that matches the value you offer to prospective renters. What’s more, even if your rental is vacant, avoid rushing through the screening process. You want to end up with high-quality renters who will take good care of your rental unit and pay the rent on time.
Vendor and Contractor Payments
Landlords also need to watch out for fees that contractors and vendors charge, since they can accrue if left unassessed. It’s essential to build a network of reliable maintenance specialists and accounting experts to run a rental business successfully.
You don’t want to encounter property emergencies with no contractors or vendors to rely on. You also don’t want to risk renters leaving because of unattended property repairs. But this said, you still need to carefully evaluate how much you’re spending on contractor services.
Find time to check if the charges are reasonable and if there are no hidden fees included in the invoices handed to you. You also want to see how much the service fees have increased so you can find substitutes when the costs run a little too high without delivering solid value for your investment property.
Conduct research and study reviews to find the best service providers. If you have a strong and reliable team of contractors, cultivate good relations with them. As a long-term client, you may also be able to negotiate good rates and ask for additional free services.
Hire a Property Manager
An effective way for landlords to protect their budget is to work with a property management company. These companies can help lower maintenance costs and negotiate fees with vendors and contractors on your behalf. Another benefit is that a property manager can conduct effective marketing and tenant screenings to add further legal and financial protection to your rental business.
Bottom Line
Landlords are faced with high operation costs and accruing charges from different areas of managing a property. By taking the time to plan out your annual budget and reevaluate expenses you can save money long-term. Choosing to partner with a reputable property manager committed to minimizing costs and delivering value is also vital. If you’re looking for one, contact KRS Holdings today!