5 Smart Ways to Spend More NOW to Save Big LATER as a Landlord

13

As a landlord and a business person, you should always be striving to improve the bottom line.

Doing so however is not always easy and can actually require you to spend time and money up front for a return later on. For some, spending upfront can be hard to do, it can seem counterintuitive. But I have learned over the years that spending the money and time now really does save in several key areas.

1. Find and Keep Good Tenants

Turnover is a killer. Reducing turnover will significantly reduce your expenses and save you money. Think about it, when tenants move out there are all sorts of administrative and rehab expenses, often running into the hundreds if not thousands of dollars. Finding tenants who will stay long term is one of the keys to this landlording business.

It begins with screening. Watch out for frequent movers. Pay for a credit and criminal history background check. Spend the time to check all references before giving them the keys. Then work hard at keeping them happy. Respond to their requests. Fix any problems quickly and keep your properties neat and tidy. A little upfront here can go a long way later on.

Related: Tenant Screening: The Ultimate Guide

2. Install Energy Saving Devices

Utilities are another major expense. Usually, unless you rent single family homes, the landlord has some utility payments. In my part of Memphis for example, it is common for the landlord to pay for water. Thus, low flow faucets are the name of the game during rehab.

I have also been amazed at how much less electricity those new fluorescent bulbs use and how much longer they last. These things do cost a little more, but over the long term, they are worth it for the reduced utility costs

3. Challenge Your Property Tax Assessment

I do this on just about every property I purchase. I have found that the local property assessor’s values are often tilted towards the high end.   After all, their unstated goal is revenue. If you buy properties at a discount like I do, you can use your purchase prices to significantly reduce those assessed values, thus reducing your property tax bill and increasing cashflow.

Be forewarned, this is a time consuming, bureaucratic process, but it can be very rewarding as the new value will likely be in place for several years.

4. Maintain

Small problems can turn into large ones very quickly. It is best if you catch and fix these small problems early. The old saying is true about maintenance; it costs money because it saves money. Don’t let a little problem like a sink leak turn into a major ceiling repair. One way to do this is to regularly conduct inspection of your properties. Tenants for whatever reason will not always tell you when there is a problem. You have to stay on top of things.

5. Refinance

Interest rates have never been lower. Commercial loans as of this writing are hovering somewhere around 5.5 to 6.5 percent. That is incredible! There really is only one way rates can go, and that is up. Refinancing and lowering your borrowing costs now can really save you money if you plan to hold a property for any length of time. Yes there will be closing costs, but remember to look at the bigger long term picture.

So how do you spend money to save money? Let us know with your comments.

Subscribe to our mailing list

* indicates required Email Address * First Name Last Name
Share.

About Author

Kevin Perk is co-founder of Kevron Properties, LLC with his wife Terron and has been involved in real estate investing for 10 years. Kevin invests in and manages rental properties in Memphis, TN and is a past president and vice-president of the local REIA group, the Memphis Investors Group.

13 Comments

  1. Thanks for the practical post. Any other tips for challenging the property tax assessment? We will be challenging ours when the period opens up this June. According to a phone conversation with our assessor’s office, assessments in our county (Knox, TN) are only done based on exterior improvements to the property. The only “improvement” we’ve made is replacing our garage door with the most basic model available, so we hope we can successfully challenge the $70/mo. increase to our tax.

    • Kevin Perk

      Matt,

      You can. I will write my next post about my reducing my property tax assessments. Hope you can wait that long :)

      Thanks for reading and commenting,

      Kevin

    • I use a tax protest service for all my properties in Houston. They charge a percentage of the savings they achieve off the proposed assessment each year. I have seen several of my property assessments to be 25% to 50% less than similar properties.

      My biggest challenge is finding good tenants. I have several now but it has been a long road getting there.

  2. Kevin, another great article.

    I increased my cash flow by doing all of the things that you have listed. Some of them are ongoing like keeping good tenants and regular maintenance (both are directly related).

    I challenged my tax assessment on two properties last year for a net savings of $1,100. It’s great to get a mortgage request for payment that goes DOWN. You are right, there is a lot of bureaucratic paperwork, you have to meet the tax assessor at the property to do a walk-through and I helped my case by doing a bank property value assessment, which I included in the paperwork. I then turned around and used those property value assessments to refinance my loans for further savings.

    • Kevin Perk

      James,

      Thanks for the kind words and for validating my points. The tax assessment is so important because it stays in place for years. Challenge it people if you feel you are being over charged!

      Kevin

  3. Eric D.

    Your first point is the best.

    Often, landlords mistake deferred maintenance for profit. When the new tenants come in, they look for well maintained buildings. If you cannot get top-notch tenants, you cannot get top-notch profits, and you begin the slide. Top-notch tenants look for the best value, as they can go anywhere.

    Once the property deteriorates, some other investor gets a chance to buy yours, at a great discount.

  4. Kevin, Your article is great advice to the masses (myself included). If you haven’t replaced a toilet lately they have all gone to a 1.28 gallon/flush high efficiency model. Just last yr they were all 1.6 gal/flush. I have a tri-plex I’m putting the new ones in (I pay water). Some of the really old toilets I’m taking out have a swimming pool worth of water per flush! Can’t wait to see what it does to the bill. I also shut off their outside faucet to discourage wasteful use of water in the summer.

  5. Kevin,

    I also agree point 1 is the most important while points 2 and 4 can supplement 1.

    It is often said that vacancy is a landlords #1 expense. I say vacancy pales in comparison to the expense of a bad tenant.

    Jason

    • Kevin Perk

      Jason,

      Bad tenants are a nightmare. That is why I write so much about tenant screening. It really is one of the most important things a landlord can do.

      Thanks for taking the time to read and comment. I appreciate it,

      Kevin

  6. Jordan Thibodeau on

    Great article Kevin! #1 is my #1. I much rather have my property sit vacant a little longer in order to secure the right tenant.

Leave A Reply

css.php