The landlording business is a great way to build wealth, get out of the rat race and take more control of your life. But…
…developing and running the business will not be without many speed bumps along the way.
As a landlord the old adage “it’s always something” could not be more accurate. Something unexpected will always pop up out of the blue. In the financial world, these unexpected items are sometimes called black swans.
Black swans are unexpected events that tend to shock the system, rock markets and cause lots of people lots of headaches. I think the term is fitting to the landlording business as well. Back swans in our business, items such as a fire, lawsuit or major repair, can appear out of nowhere when everything else seems to be running super smooth. They can cause a lot of stress, major outlays of cash and a complete shift in priorities.
While these so called black swans may be unpredictable and unexpected, that does not mean that you, as a landlord, cannot take steps to prepare for them, as well as reduce and minimize their potential impact.
What can you do? Here are some basics every landlord needs to have.
9 Tips for Preparing for Landlording Catastrophes
1. Have Reserve Emergency Funds
Things are simply going to break and wear out; there is no way around this fact.
Plus, they will often break at the worst time.
Some things will be fairly inexpensive, such as a dryer or refrigerator. Others will be expensive such as a roof, ac condenser or sewer line. You need to have funds to repair or replace these things so you can keep your property cash flowing.
Do not spend all of your cashflow. Put some aside. Nothing takes the burden off of a black swan like an emergency fund.
2. Have Trusted Contractors
Having a good set of contractors available is key.
And not just to repair things, but also to provide advice. Who should be listed in your smart phone? At a minimum you should have an HVAC contractor, a plumber, an electrician, a carpenter, a general handy man, a lawn service, a tree service and someone who can clean up and haul away trash and debris.
To be really safe, have a set of backup contractors in case your first choices are busy, on vacation or otherwise cannot help you.
3. Have the Proper Insurance
Insurance is another key in this business. Just like an emergency fund, insurance is there to help you when things really go wrong.
A fire can rip your world apart and unless you have a fat bank account, insurance will save the day. A slip and fall can also potentially take you to the cleaners.
Good liability insurance is a must for any landlord.
4. Have A Trusted Lawyer
There is no way around it: as a landlord, at some point you are going to need the services of a lawyer.
Tenants will need to be evicted, property titles searched and law suits defended. A trusted lawyer can also be very helpful with a wide array of other questions that may arise such as code issues, tax assessments, etc.
5. Have The Keys Accessible
Having access to your properties is one of the best ways to deal with black swans.
I like to keep a keybox on my properties because I guarantee you that a tenant is going to lock themselves out while I am unavailable. Having the keys accessible also allows your contractors the ability to assess and fix anything that pops up quickly with minimum hassle.
6. Have Tenant Names, Numbers and E-mail Addresses Easily Accessible
With technology today, this is an easy one: program these items in your smartphone.
Many problems can be avoided or quickly smoothed over if you can get in touch with your tenants at any time. A text or an e-mail freeze warning can save you thousands in busted pipes while a text about a water outage and repair can calm frayed nerves.
7. Have A Cloud Based File System
Keep your data in a trustworthy “cloud-based” storage system (like Google Drive.) Then, put everything up there. Scan receipts, tax returns, tenant applications, property pictures, everything you might need and have it available from your phone or tablet.
There is nothing like having your entire office with you and being able to instantly look up a document when you most need it.
8. Have Rental/Tenant Policies
You never know who is going to walk in and apply to live in one of your properties. If it is someone you do not wish to rent to, like a convicted felon, sex offender or deadbeat, do you have the policies in place to be able to reject their application?
Once they apply… it is too late. You never know who will file a fair housing complaint and you never know who might have the resources to fight you.
9. Have A Stiff Drink
At the end of a hard day dealing with black swans, a stiff drink can be a real life saver.
I say this somewhat in jest of course. Perhaps the best thing to have is a good attitude about the business you are in.
If you are a landlord, something is always going to happen. Sometimes these will be bad and expensive things that you are just going to have to deal with. As these black swans appear, just remember another adage, if it does not kill you it will make you and your business stronger.
What black swans have affected your business and how did you deal with them? Please share with your comments below.