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If you are thinking about investing in a rental property, a short analysis of the pros and cons of this decision will definitely show that it’s a great way to make money. However, when you go through with it, you will face another important question. How can I be a “good” landlord?
Finding that answer is essential. Because how good you are determines how profitable your real estate investment will be. Therefore, you should carefully the amount you are investing in your property, like improvements, maintenance, repairs, protections, and insurance. A good landlord must think long-term, and if you look into the future, you’ll see that being stingy at the beginning will cost you more in the long run.
For example, using a home warranty is one of the most effective long-term solutions available to landlords. The right plans, in particular, provide a great way to cut your long-term costs while boosting your property now. The best time to use this plan is after you install new appliances or do some major work on home systems that will boost the value of your property, thus giving you an opportunity to charge higher rent. In essence, the warranty will protect your investment. This review explains the offering that can make a big difference for you as it will save you from one of the biggest rental business risks, which is tenant-caused damage.
The plan will not only cover a part of the repair cost, which means you won’t have to pay for it all out-of-pocket. It will also help you make sure that the repairs are carried out fast and professionally, which means happy tenants.
It’s things like this that allow you to be a “good” landlord while still making a lot of money off your property. Other important factors that define your “goodness” include but aren’t limited to:
- Being flexible, as in ready to negotiate terms and conditions of your lease when necessary.
- Being respectful and kind to your tenants.
- Being forward-thinking enough to be generous with your home improvements and prompt with repairs.
- Creating an environment that your tenants proudly call “home,”
If you think you are up for this challenge, it’s time to think about money.
Why a “Good” Landlord Can’t Be Stingy with Money
Do you know what they call a cheap landlord? A “slumlord.”
That’s because a slum is what your property will quickly turn into if you don’t properly maintain and invest in its betterment and protection. For example, consider a situation when you need to do some plumbing work. Will you install a new and better system or do a cheap patch-job repair on the one you have? The same goes for electronic appliances, like washing machines, dish washers and fridges. Will you get new ones, which is a more expensive option, or use cheap second-hand pieces you can find on sales?
It’s extremely tempting for a landlord to choose the cheapest route because why should you cut a portion of your profit for something that tenants will ruin quickly anyway, right? Unfortunately, it’s true that even with good tenants, the “survival rate” of appliances and house systems in rental properties isn’t high.
However, if you consider the long-term situation, you’ll see that being that cheap and stingy landlord is one of the biggest mistakes you can make. The main problem is that it will rob you of that same profit that you are trying to hold onto so desperately by making cheap choices. That’s because the quality of your property will deteriorate fast with such subpar treatment. This means that the quality of your tenants will deteriorate along with it. And quite soon, you’ll be running a slum that will cost you more to manage than you receive in profit.
The worst thing about the situation is that you won’t be able to fix it fast when you realize your mistake. At that point, your whole property will require fixing and upgrades, which is a huge investment. Even if you manage to secure funding for it, you will lose a lot of money over time to pay off the credits.
How to Be a “Good” Landlord Without Cutting Your Profit
Don’t take the aforementioned facts as an initiative to splurge on some unnecessary things. You can still be a “good” landlord and money-savvy at the same time. To achieve this, you should invest your money wisely and use specialized services that will help you cut your costs.
First of all, invest in good insurance and a comprehensive home warranty package for your rental property. These policies will prevent you from making huge emergency payments if something happens to the property.
Next, you need to consider upgrading your property at every opportunity. It’s not enough to maintain it in a good state. You need to make it better constantly to attract and retain good tenants. It’s essential to do this in order to avoid the main issue that costs landlords a ton of money — tenant turnover.
Always aim to create a rental property that is designed to retain your tenants for the long term, eliminate the frequent headaches commonly associated with landlording and that generates a strong and consistent profit year-to-year.
Bill Manassero is the founder/top dog at “The Old Dawg’s REI Network,” a blog, newsletter, and podcast for seniors and retirees, that teaches the art of real estate investing. His personal real estate investing goal, which will be chronicled at olddawgsreinetwork.com, is to own/control 1,000 units/doors in the next 6 years. Prior to that, Bill and his family lived in Haiti for 12 years as missionaries serving orphaned, abandoned and at-risk children.
