While rental houses are a great line of business to get into, in order to make consistent cash flow and long-term wealth, there are a few survival strategies to consider. This is particularly true if you are managing them yourself. There are all kinds of reasons that rentals are a good, solid investment for most who are interested in investing in the real estate business. However, it doesn’t come without a few potential drawbacks, not all of which are financial. It would be wise to consider the following survival strategies.
Avoid Management “Slavery”
You will or have probably elected to manage your first few rentals yourself, unless your first property is a big multi-unit building. Thus, you will or have quickly discovered that your life is no longer your own. You are literally on-call 24 hours a day, seven days a week to handle problems that may arise from pipes bursting, heating going out, electrical issues, noxious fumes, leaky roofs and window sills and countless other complaints that may erupt at odd hours of the day or night.
Your tenants will or may already have your phone number and expect you to always take their calls. This scenario happens to most amateur landlords who don’t take the time to plan out their business model. Here are a few suggestions to avoid this headache:
- Encourage tenants to email or text you unless it is an emergency
- Don’t give your home or cell number. Instead, give out a voicemail for tenants to call that will forward a message to your email.
- Have a handyman on call for emergency issues.
- Have a lease clause that allows them to get a rent rebate if a repair is not fixed within X days after the tenant notifies you. That way, the tenant won’t keep complaining. In fact, he’ll be HAPPY to pocket a few days of rent!
Be “Mr. Nice GUY” But Always Do Your Job
You don’t have to be nasty or scold tenants who don’t pay. Be nice, lend an ear to their problems, but whatever you do, keep the legal process going. You can serve a notice of non-payment and start an eviction and tell them you are sorry, but it’s your job to post notices. Don’t get nasty with them in the meantime and don’t let sob stories delay you from doing your job.
Don’t Let Them Know You’re the Owner
I often recommend using a LLC or land trust to own title to your rental, thus you are just the “property manger”. This dynamic is completely different when they think you are a working slob like them and not the “greedy landlord”.
Inspect Your Properties Often
You should physically inspect your properties at least once, if not twice a year. Change the furnace filters, check the smoke detectors and have a look around. While some tenants will complaint about any little repair needed, any will let the problems pile up and cause long-term damage to your property. Getting your eyeballs on the house from time to time will help you avoid such a mess.
Owning rental property an be financially rewarding but it is a lot more work than many people give it credit for being, in light of other careers within the real estate investment field that may require more work upfront. Rental properties require a long-term commitment to keeping the property in good working order and making it a profitable venture for many years to come. If you own rentals and the above things are a deterrent for you, it might be a good ideal to obtain the services of a property manager.
Six Keys for Getting 100% of the Income
Whether you have a few rentals or many units, the good news is that getting 100% of the expected income does not mean you never have vacancies. For me, getting 100% of the expected income simply means that by one cash flow way or another, I will generate over the course of the year (at a minimum), the total amount of income a landlord would traditionally expect to receive.
In other words, say the normal rent is $1,000 a month. At the end of the year, getting 100% of the expected income means my goal is to receive at least $12,000 connected to that property, even if I experience a vacancy during the year. In fact, I view a vacancy as an “opportunity” that can actually help me INCREASE my total income for the year.
Here is what I believe are six of the main keys to getting and maintaining 100% of the income:
- Resident Screening
Choose people who have a much higher probability of living in your place longer and are more likely to be cooperative.
- Resident Retention
Create a mindset within your residents through a customer loyalty program that encourages residents to stay far longer than average so that you have fewer vacancies.
- Systematic On-Going Communication with Residents
This helps have far less “unexpected” vacancies or disappearances. For example, send a resident newsletter regularly by email.
- Encourage Resident Referrals
Do this throughout the year, not just when you have an upcoming vacancy. By having systematic referral promotions, I continually have inquiries (and a short waiting list) that is so helpful when a “short-notice” vacancy occurs.
- Preventative Maintenance Throughout the Rental Term
One of my goals is to repair and improve the property while the resident is still paying for rent and repairs. Therefore, repairs at the time of the actual turnover are a bare minimum. When a resident finally moves out, any final prep can be quickly handled by a specific contractor and ready with a 24-hour turn using a plan/checklist that he follows to make sure the place is move-in ready for the next resident.
- Total Cooperation from Your Vacating Resident
Offer them a bonus if the home is re-rented quickly. This encourages cooperation and a fast turnaround.
Jeffrey Taylor is the founder of www.MrLandlord.com To receive a free Rental Owner newsletter, call 1-800-950-2250 or visit their web site at www.mrlandlord.com where you can ask landlording questions and seek the advice of other rental owners 24 hours a day.