Landlording & Rental Properties

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

Expertise: Landlording & Rental Properties, Real Estate Investing Basics, Flipping Houses, Business Management, Personal Development, Mortgages & Creative Financing, Real Estate News & Commentary
210 Articles Written
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As a landlord and a business person, you should always be striving to improve the bottom line.

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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 up front 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 up front here can go a long way later on.

tenant-funnel

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.

flipping supplies

Related: The Top 8 Mistakes Made by Rookie Landlords

5. Refinance

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.

[Editor’s Note: We are republishing this post to help landlords who are newer to the site. Let us know what you think with a comment!]

So how do you spend money to save money?

Let us know with your comments.

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.

    Matt
    Replied over 5 years ago
    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
    Replied over 5 years ago
    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
    Doug
    Replied over 5 years ago
    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.
    James
    Replied over 5 years ago
    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
    Replied over 5 years ago
    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
    Eric
    Replied over 5 years ago
    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.
    Kevin Perk
    Replied over 5 years ago
    Eric, You are right on point! That “other investor” is often you and me. Thanks for reading and taking the time to comment, Kevin
    Dave Tanner
    Replied over 5 years ago
    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.
    Kevin Perk
    Replied over 5 years ago
    Good points Dave. Let us know how your savings add up. Tanks for reading and commenting, Kevin
    Jason
    Replied over 5 years ago
    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
    Replied over 5 years ago
    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
    Jordan Thibodeau
    Replied over 5 years ago
    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.
    Kevin Perk
    Replied over 5 years ago
    Jordan, Me too! Don’t get nervous and lower your standards. The right one will come along. Thanks for commenting and for the kind words, Kevin
    Tanya Jackson Accountant from Jamaica, New York
    Replied about 3 years ago
    Great article. My tenant complained of the pipe under the sink leaking. I got a quick fix repair guy to patch it but decided (after reading this article) to get it repaired properly.
    Kevin Perk Rental Property Investor from Memphis, TN
    Replied about 3 years ago
    Good move. Quick can be costly. Thanks for reading and commenting, Kevin
    Julie Marquez Investor from Seattle, WA
    Replied about 3 years ago
    I am reading the republished version, but why are florescent bulbs still being used? What about the long lasting, low energy LED lights? These are the name of game in today’s era.
    Kevin Perk Rental Property Investor from Memphis, TN
    Replied about 3 years ago
    Julie, Love them! Thanks for reading and adding to the discussion, Kevin
    Rodney Kuhl Rental Property Investor from Fishers, IN
    Replied about 3 years ago
    Say you have several properties and a few of them have tax assessed values that are probably low, so in your favor. Would you challenge one that may be high and risk them looking at your other properties and potentially raising the assessed value of the others while lowering that one property?
    Kevin Perk Rental Property Investor from Memphis, TN
    Replied about 3 years ago
    Rodney, It is unlikely they would look at all of your properties. The staff is busy, overworked, and the left hand does not always know what the right hand is doing. Unless….. Your properties are all in very close proximity to each other. Then they may start looking at similar properties as comps and take notice. But otherwise, I doubt anyone would notice. Thanks for a great questions, Kevin
    Jerry W. Investor from Thermopolis, Wyoming
    Replied about 3 years ago
    Kevin, Great advice then, great advice now. Thanks for sharing. Another trick I am trying is doing vinyl plank in Kitchens instead of laminate flooring. A tiny bit more expensive, but water will not damage it.
    Karl B. Rental Property Investor from Los Angeles, CA
    Replied about 3 years ago
    Number 3 YES! Hardly anyone talks about having their taxes reassessed. It’s simple and saves me hundreds of dollars per year on my home alone. It’s been my experience the assessor comes unprepared – often with three comps he or she quickly selected. If you show up with your comps, lots of photos and a solid case you will likely win (or at least settle on a lower percentage). It’s a bit scary the first time you do it but from then on it becomes fun. And the money you save on taxes adds up when you have multiple properties.
    Kara Haney Investor from new york, nj
    Replied about 3 years ago
    Kevin and Karl and everyone – great comments – thanks!