Landlording & Rental Properties

The 2 Biggest Problems Buy & Hold Investors Face (& How to Solve Them!)

Expertise: Landlording & Rental Properties, Real Estate Investing Basics, Personal Development, Business Management
29 Articles Written
landlord-solutions

Maintenance and vacancy are the two biggest hits to an investor, and they are the two largest time requirements for a property manager. So if you could get maintenance under control by having a maintenance plan in place, you would be able to avoid a lot of hassle.

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When your property first goes into service, i.e. when you first clean it up and put a tenant there, amongst many other things, you would have put in new light bulbs. I’ll use the light bulb example here to explain how the maintenance plan helps.

Let’s say you’ve set up a light up front that’s got five light bulbs. Seven months or a year from now, when that first light bulb goes out, more than likely, the rest of those light bulbs will start going out in the next couple of months. So, you might just replace them all at one time. It’s a very low cost replacement, and it definitely ensures you’re not going back four other times in the next six months to change one light bulb at a time. The more trips you (or your handyman) have, the more cost it will entail. It is all about being efficient.

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Related: 4 Foolproof Steps to Painlessly Resolve Tenant Complaints

Setting Up a Yearly Maintenance Plan

Just having a written maintenance plan of what’s going to happen can help you save tons of money. You should set up a yearly maintenance plan. This serves two purposes. One, it keeps the property running smoothly through preventative maintenance and it gives you frequent access to the property to see how the tenants are caring for the property. I can’t stress enough how preventative maintenance makes a difference.  It seems without fail that the preventive repair that could have been made ends up being a middle of the night phone call emergency.

An example of this is yearly maintenance of furnaces. We send our HVAC repairman out to service all of the units. The owners that don’t do this always seem to have a no heat call on a Saturday night at 9:00 p.m. And anyone who has rental properties knows that your HVAC guy has different rates for during business hours and off hours. The difference in cost could be many hundred dollars.

The Problem of Vacancy

The other major problem faced by the owners and property managers is vacancy. I work really hard to keep tenants and to prevent vacancy.

Vacancy is really expensive for a residential unit. If a unit goes vacant, you're going to more than likely lose a month of rent. You'll need to spend money to turn over the unit, which could generally equal a thousand bucks if you're painting. You might have to redo some flooring, and you'll be adjusting this and that. In the end, you'll end up with a thousand dollar bill, and then you'll have to pay commission to a real estate agent to find a new tenant.

Basically, your 3-4 months of rent out of pocket that you’re giving up is hurting the cash flow of the rest of the investment properties or hurting your reserves or whatever it might be. On the other hand, if you could find a way to keep that tenant, you generally know when a lease is going to end. This will allow you to figure out what you need to do next.

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Related: Why Good Maintenance is the Best Way to Retain Tenants

If you aren’t interested in keeping the current tenant, you can start looking for new ones 60 days before the lease will end. If you want to keep the current tenants, which is much more profitable and hassle free, you can find ways to entice them. You can give them incentives or tell them you’ll update their carpet or replace their cabinets or give them $300 towards the utilities next year. Money talks.

Just spending $500-600 on improving a unit and keeping a tenant is a far more efficient way to operate than to let the tenants go. Tuning in to the tenants' needs might do the trick. If your tenant pays $900 and you know they find it difficult to pay that, you can drop the rent for $25 in order to retain them. This will cost you $300 in a year, but believe me, it's far less than what it costs to turn that unit over. Three hundred dollars to the tenant versus $1,800 or $3,000 to your contractor or real estate agents is a way better deal.

Do you face these problems often? What are your proposed solutions?

Leave your comments below!

Mark Ainley is an investor, managing broker, and property manager with almost two decades of experience in real estate. Mark found his way into real estate by purchasing and flipping condominiums prior to the great recession, and since, he has built his own portfolio of rentals alongside co-founding GC Realty & Development LLC (GCR&D), a full-service real estate brokerage, property management and investment firm, and GC Realty Investments (GCRI). He has rehabbed and stabilized over 450 properties and currently manages over 900 investment properties throughout the Chicagoland area. Mark was featured on CNBC’s TV show The Deed, which chronicled one of his rehabs. He has also been featured on podcasts like The BiggerPockets Podcast, The Real Estate Mogul Podcast, Joe Fairless, REI Diamonds, and Positive Phil.

    John Van Uytven Property Manager from Oconee, IL
    Replied over 3 years ago
    Nice article and very true. Turn over is expensive, then you have to get a new tenant and recoup the cost.
    Casey Murray Investor from San Diego, CA
    Replied over 3 years ago
    I love the idea of having a written maintenance plan into the lease. Quick question regarding vacancy. Does the condition of the unit impact your decision of retaining the tenant? It seems a unit in need of paint, flooring, etc will be expensive and the landlord has a larger incentive to keep that tenant in place to avoid huge cash outflow compared to a unit that just needs a few minor repairs.
    Mark Ainley Developer from Roselle, IL (Chicago Suburb)
    Replied over 3 years ago
    We have a couple of these in our portfolio which we chose to “kick down the road”. These were/are larger units or homes combined with a rougher tenant that it is well worth it to wait another year.
    Gabe Sanders
    Replied over 3 years ago
    Excellent advice, Mark. Thanks.
    Larry
    Replied over 3 years ago
    Good reminders. Here are some additional things to think about. . We now buy nothing but LED lightbulbs. Forget the high cost. Think about no maintenance for 15 years. Even get rid of old fluorescents and get LEDs when the opportunity is there. Our HVAC tech, whom we trust, inspects every furnace every fall. It would be rare to even find a clean filter. Even so keep four DeLonghi electric heaters for emergency. They will do fine until a furnace man can get to the job. Any good landlord that takes care of business has a few potential tenants in their notebook. These are friends and relatives of tenants , and previous callers that look great. They ask for a call when something opens up since they know you run a good ship.
    Roy N. Rental Property Investor from Fredericton, New Brunswick
    Replied over 3 years ago
    @Larry For the past three years, we’ve been installing LED fixtures (no bulbs) in our student properties (LED bulbs will sprout legs and walk away) and in the common areas and harder to reach places (i.e. over stairwells) in all our properties.
    Mark Ainley Developer from Roselle, IL (Chicago Suburb)
    Replied over 3 years ago
    I like the LED fixtures as well.
    Jerome Kaidor Investor from Hayward, California
    Replied over 3 years ago
    I have one complex with central ACs. We hand out filters to all the tenants every 60 days. My HVAC guy inspects the roof units during the off season. One year I had him go around and replace all the CFMs ( condenser fan motors ) with noisy bearings.
    Deanna Opgenort Rental Property Investor from San Diego, CA
    Replied over 3 years ago
    LEDS have gotten dirt cheap around here in the past few months (Costco $6 for 4 40w equivalent). I’ve got almost all LEDs in the rental, and there have to be bulbs in the fixtures when the tenant leaves. No problem yet, as no one seems interested in putting the effort into taking out bulbs for $2 (AND they’d have to have something else to put in – can’t claim the LED “burned out” LOL!). Side note is that I’ve replaced virtually all the lights at home too, and with 5 adults we just got a notice that we were top-ranked #5 out of 100 households in our area for power conservation (no big screen TV all day may be the other “secret weapon”). Most households around here are 2-3 persons, so we kinda patted ourselves on the back.
    Jason Slater Investor from Dedham, Massachusetts
    Replied over 3 years ago
    This article is spot-on. In the past I kept a good tenant for an extra year by replacing the fridge and stove in the last month of their lease. The appliances were at the end of their useful life anyway and I was already anticipating the outlay. I asked them if they would like new appliances and basically framed it as an upgrade because they were great tenants. They felt valued and I got another solid year of on time rent, win-win. Sometimes it’s just how you present and time things, and I always try to make small upgrades with needed repairs so tenants can see the property constantly improving.
    Karl B. Rental Property Investor from Los Angeles, CA
    Replied over 3 years ago
    This is an excellent article and the comments are helpful as well. Awesome!
    Stephanie W. from Roanoke, Virginia
    Replied over 3 years ago
    Those were great tips. I’m going to give the utility rebate for my units right now! Thanks!
    David C. Investor from Hillsboro, Oregon
    Replied over 3 years ago
    Just a thought, one thing I do on a new property is have my hvac install the cartridge for a once a year furnace filter setup. I only have sfh, but this makes it a once a year filer replacement instead of a reminder text every 90 days. It’s been a good investment for me
    Kalonji Mitchell Specialist from Chicago, IL
    Replied over 3 years ago
    Great advice. This reminds me of customer retention. It’s must more cost effective to maintain a current customer than to market for new ones. Thank you for your wisdom.