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 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.
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.
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.
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.