3 Low-Stress, High-Profit Tips for the Investor/Landlord
Some people choose to be landlords; others have landlordship thrust upon them. The first group tends to embrace the challenges of landlording — they’re playing the game to achieve peak profit margins. The second group often simply wants to make a little side money without having to put a lot of effort in. These two things might seem to be mutually exclusive — and in many ways they are…but not all ways. Here are a few clutch tips for landlords that will both improve returns on investment and quality of life.
Tip 1: Put Your Best Work in First
The very nature of an investment is to take a lump-sum of something and turn it into a larger amount over time. This is just as true of real estate as it is in stocks and bonds. There will always be ongoing costs (in both time and effort), but if you put in as much time, energy, and money in as you can handle up front.
In particular, there are a few initial decisions that you want to make with as much information, education, care taken, and if possible expert advice under your belt as possible. They include (but are not limited to):
- Which specific property(ies) you invest in,
- What the clauses and details of your lease agreement will be, and
- How you intend to screen your potential tenants.
Making a significant mistake in any of these areas will magnify your stress levels exponentially in the future, so take the time up front to get them as right as you can now. Your future pocketbook — and blood pressure! — will thank you.
Tip 2: Overestimate your Outgo (& Save the Difference)
Outgo, if it isn’t obvious, is the opposite of income. If you’re a landlord, outgo takes the form of marketing expenses, repairs and maintenance, insurance premiums, various fees and taxes imposed by your city and/or state, disaster funds, capital expenditure funds, and more. Go through all of the expenses that show up on a regular cycle (i.e. weekly, monthly, etc.) and multiply them by 110%. Every time your estimates of future expenses change, make the same ‘miscalculation’ anew and learn to have a little more in the bank every month than you actually need.
At the end of every month, transfer that extra 10% into whichever of your accounts is the least flush. This kind of regular discipline makes a huge difference between surviving an unlucky confluence of disasters and going ‘out of business’ as an investor. And because the rule is easy to use and totally autopilot once you’ve used the system for a few months, it’s low-effort, too.
Tip 3: Build a Killer ‘Between-Tenants’ Plan
The times when a property moves from asset to liability are easy to predict — they’re the times after one tenant has left, and before another tenant moves in. Not only are these the times when you have to spend money assessing, repairing, potentially renovating, and cleaning these properties, but they’re also not making any income during these times, either. That means that it’s on you to plan ahead. You should know, the moment that a tenant gives you notice of their intent to move out, what will happen.
As soon as you get notice:
- Get in touch with your contractors of choice about any work that you know will need to be done, and ask about availability for work that you don’t know about yet.
- Look at your previous advertisement for the property (if you have one), and determine if you can reuse it. Does the text still apply? Are the pictures still accurate? If it’s good, put the ad up 2 weeks before the planned move-out date.
- Send the tenant a packet explaining the move-out process, including cleaning expectations, move-out inspection process, and security-deposit handling laws.
- Schedule the move-out inspection.
As soon as the tenant is out:
- Get a lockbox on the door.
- Get the utilities shut off.
- If you need new marketing, can you take new pictures yet? If there’s no major cleanup, get the pictures taken immediately and get the ad up ASAP.
- If there are no major repairs or renovations, schedule a cleanup crew to get out there ASAP and marketing pictures to be taken the next day.
- If there are major repairs or renovations, get your contractors started on them ASAP. The day after those contractors are done, get the cleaners in, and the day after they’re done, get the pictures taken and the advertisement up.
Yes, the between-tenants period is higher-stress by nature than the rest of the landlording experience — but if you have a plan you can follow and people you can trust to work with, you can minimize the fuss and the time in the ‘liability’ column in one move.
If you haven’t noticed, the thread that links all of these tips together is forethought. The further ahead you can look, and the more successfully you can take actions now to prevent future problems and/or meet future needs, the easier it is to be a low-stress, high-profit landlord.