Being a real estate investor is a business and it can be a lucrative one. But while being a landlord is an excellent way to build wealth, being a new investor comes with its sets of challenges. Here are a few insights from lawyers, landlords and contractors that might help you win at the investment property game.
Treat being a landlord like a business
Let’s get real: owning investment properties isn’t a hobby. Rent is your income and everything else, such as property management fees, repairs and taxes are all your expenses. It’s fine to have empathy for your tenants, but sob stories don’t pay the bills.
If you treat being a landlord like a business from the beginning, it will be easier to separate your emotions from the business goals.
Technology is your friend
Remember. This is a business. And one lost repair receipt can be one less tax deduction, and one misplaced lease can cost you months in eviction court. The last thing a busy landlord needs is to be bogged down with excel spreadsheets and hard copy documents, wasting time and potentially money.
Management and accounting software, and other technology can help landlords streamline necessary tasks like listing their property, screening tenants, signing leases, collecting payments and handling maintenance requests.
Document your property’s condition
Take pictures and a video of your property before renters move in or out and compare the two videos for proof of damages (if any). Document (and keep receipts) of all repairs. Have clear records of invoices, receipts and job descriptions.
Get repairs done promptly
Tending to repairs promptly saves money in the long run. If you fix a leak before it worsens, mould won’t have time to spread and the leak won’t damage other parts of the property. On-time repairs also let the tenant know that you’re serious about taking care of your property. Having a network of reliable contractors to call on in case of repairs is also essential.
Screen tenants thoroughly
Tenant screening can often be overlooked during tenant turnover. Many landlords don’t realize the true cost of tenant turnover which is likely their biggest expense right after mortgage interest and property taxes. Inexperienced landlords panic when they receive a lease termination notice and they rush to get any tenant in place instead of a qualified tenant. Little tricks like having a 60-day notice clause in all of your leases and having a re-keyable lock system for all of your properties can save money on turnover costs.
Make renters insurance a MUST
Requiring tenants to have renters insurance is another often-overlooked necessity that helps cover your butt in the event that a tenant does more damage than the security deposit covers. For example, if the tenant leaves the stove on or floods the dwelling by leaving the faucets running, your insurance may not cover the cost of the damage, but compensation can be sought through your tenant’s liability coverage.
Your tenants will also benefit by protecting themselves with policies that cover losses to their personal belongings.
Add a Pet Clause to your Rental Agreement
Pets are members of the family for many renters. However, if you’re going to allow them in your property you need to have a strict pet clause as part of your rental agreement. The clause needs to indicate how much the pet deposit is, what the pet owner might be liable for, if it’s refundable and if an additional monthly pet rent will be charged.
It should also clearly define what types of pets are acceptable and if there are any breed restrictions.
Don’t rent to family or friends
Don’t mix family and friends with your investment property business. No matter how wonderful it may be in the beginning, those close to you may expect more for less when renting from you. If a friend can’t afford to pay rent one month, it eats into your cash flow and might put you in a financial and personally awkward predicament.
Let inquiring kin know it’s nothing personal, it’s just business.
Take advantage of rental property deductions
Rental properties provide a good opportunity for investors to take advantage of tax benefits and deductions. Rental property owners can write-off mortgage interest, loan fees, utilities, maintenance, and more. In fact, even credit card interest assessed on property purchases can be deducted, all of which reduces your annual tax burden and saves you money.
Being a real estate investor is a business and it can be a lucrative one. Being organized and knowing the local and provincial by-laws and regulations, can put you well on the way to having a successful long-term investing strategy.
Want an expert advice on how to invest in real estate? The Merenda Real Estate Group has successfully invested in rental properties in California, Florida and Italy. We can help you do the same. With our 20+ years of industry knowledge and a client-forward approach, we’ll get you the results you want and the experience you deserve. Contact us today to learn more.