Until your mortgage is paid off, it’s crucial to save as much money as possible to cover your expenses in case you don’t generate rent for a few months. Are you maximizing your savings? Are you stuck for additional ideas to save even more?
Being a landlord is expensive
Owning rental property isn’t cheap. Your expenses can include a long list of things like mortgage payments, mortgage insurance, water, sewer, garbage, energy, internet, property taxes, repairs, maintenance, renovations, road maintenance, landscaping, legal fees, and more.
Although, at some point, it can seem like there isn’t anything else you can do to save, there’s always something – you just have to find it. For instance, many property investors choose to hire a property management company for peace of mind.
One of the cost-saving benefits is having access to cheaper repairs and maintenance. Property management companies usually have well-established relationships with local contractors and get better rates than you can get on your own because they provide them with plenty of business. In short, they’ll be better at marketing your property.
If you choose not to work with a property manager, you can still save money. You’ll just need to get a little creative.
Learn how to negotiate with contractors
You won’t get the massive discounts property managers get, but it never hurts to learn how to negotiate with contractors to get better rates for repairs and maintenance. Depending on the job you need, you could save hundreds or even thousands of dollars.
Call around for better rates
If you can’t negotiate a better deal with your go-to contractor, try calling around for better prices. If it’s been a while since you’ve shopped for deals, there’s probably more competition in the market and someone is sure to have lower rates.
Countless landlords can attest to saving thousands of dollars on jobs like roof repair and plumbing installation just by calling around. Consider that if you can save $3,000 on a job, that’s money you can put into your savings account or roll into purchasing your next investment.
Refinance your mortgage
If you qualify to refinance your mortgage, this might be a good option for you. Refinancing can lower your monthly mortgage payments, reduce the amount of interest you pay, and help you pay your mortgage off sooner. You can even draw from your home’s equity to get some cash if needed.
Screen your tenants to high standards
In addition to saving money on unavoidable expenses, you can also save money by eliminating the risk of losing money to bad tenants. For example, if a tenant doesn’t pay rent for two months, that’s going to be a major expense. If a tenant damages your property, you sue, but they don’t have the money to pay a judgment set by the court, you’ll have to cover it all out of pocket.
To avoid bad tenants as much as possible and increase your chances of getting long-term, high-quality tenants, start screening applicants to high standards. For instance, a credit score of 600 is good, but 650 is better. Don’t approve anyone with an eviction on their record, people who don’t meet your income requirements, or people whose employment you can’t verify.
It’s smart to raise your income requirements to three times the rent. Many landlords only require applicants earn twice the rent to be considered, but considering all the bills and debt people are paying off now, that may not be enough to be confident they’ll pay the rent on time and in full.
Thoroughly screen applicants
In addition to holding high standards, have in-depth conversations with your applicants. While sticking to fair housing requirements, ask questions that matter, like why they want to live in your unit, where they are living now, where they work, if they’ve ever been evicted, etc. Even though some questions are already on the application, asking in person allows you to see their body language. Bad tenants are expensive and will cost you more than unpaid rent; screening is the best way to avoid them.
Never procrastinate on evictions
Last, but not least, never procrastinate when you need to evict a tenant. The longer you wait to take action on a lease violation, the more likely the problem will escalate into unpaid rent and intentional property damage done in retaliation. The moment you feel an eviction is warranted, start the process.
You’ll save the most money by avoiding major expenses
The key to saving money is both finding better deals and avoiding costly situations, like prolonged vacancies and bad tenants. Handle repairs quickly before they become a bigger issue, and do everything possible to prevent bad tenants from slipping through the cracks.