Owning rental properties may seem like an easy way to make money. However, being a landlord is anything but easy! From common financial pitfalls to terrible tenants, you aren’t maximizing your profits unless you are minimizing expenses and avoiding costly problems. Here are five landlord secrets that will help you make the most out of your rental property year after year.
1. Check references for all your potential tenants
If you aren’t able to confirm a potential tenant has a good track record, think twice about handing over the key. Even a first-time renter should have some references to provide. It could be a teacher, a past landlord, an employer – anyone who can attest to the fact this person is honest, reliable, and responsible. It’s a good idea to invest in a complete background check, too. There are online tenant screening services you can use to view credit history, eviction records, and any other legal problems to make sure that the person who wants to live in your rental is who they say they are. No matter how well you manage your business, one bad tenant is all it takes to go from making good money to losing a ton of it thanks to legal fees and lost rental income. In many cases, landlords have had to hire private investigators, litigate in court, or forfeit missing rent money just to get rid of a bad or non-paying tenant. Do your due diligence beforehand to avoid costly headaches down the road.
2. Inform yourself about tax benefits
Landlord tax benefits can vary by state so be sure to do your research and check with a certified accountant in your area to get all the details on what is available to you. You may be able to save money every year using the interest on your mortgage as a tax deduction, or by deducting a certain percentage of your rental losses. Some states will also allow you to deduct insurance premiums, maintenance costs or utility fees. You could be saving thousands of dollars annually, increasing your profit margins.
3. Learn how to do repairs yourself
Calling a professional repair service every time something breaks is certainly going to cost you a pretty penny. Depending on the size of your income property or the number of tenants, repairs can be an almost daily issue. If you can learn to repair things on your own, you’ll save thousands of dollars a year in labor fees alone. It’ll cost you less, in the long run, to invest in proper training from a licensed trade school. Plus, as a licensed general contractor, you’ll also gain access to lower pricing from hardware stores in your area.
4. Avoid empty apartments
Every day an apartment sits vacant is a day of money lost. As the property owner, you are still paying the taxes and fees for that property whether it is rented out or not. If a tenant advises you they will be leaving, create an online rental listing right away and get to work on finding a new renter. It will take time to vet someone before they can sign a lease so give yourself as much time as you can. If you don’t have advanced notice of a departure, you can try options like Airbnb for short-term occupancy, or you can consider renting your place out for weeks at a time until you find a long-term tenant to move in.
5. Do your homework before you invest
One of the most common misconceptions of owning a rental property is that it is easy money, requiring little to no effort. This couldn’t be further from the truth. Don’t invest in an income property without crunching actual numbers and informing yourself on all the expenses you can or may face. Speak to other landlords in your area (state apartment associations are a great resource), find a lawyer you trust who is well-versed in landlord-tenant law and ask them how the law protects you and what the usual course of action is when something goes awry. Owning an income property is real work and the only way to maximize your profits is to understand exactly what’s expected of you.