Are you a landlord/rental property owner and you’re not sure where all of your projected cashflow is going? Did your property pencil out to be a Winner on paper but instead year over year the profits just aren’t adding up? If those are some of the questions or concerns that you’re facing then this post is for you.
In business theirs usually a difference between projections and Actuals when it comes to financials; and Rental Properties are no different. With Rental Properties there’s always a risk of a random repair popping up at any given moment and to combat that, as a rental property Owner you should have adequate reserves set aside. But outside of the one off random repair, as a Property Management company, we’ve found that there are also a few common mistakes that can cause projected cashflow to stray from projected targets. In this video I’m going to cover 5 of those mistakes with the goal of helping you better protect your Cashflow and ultimately make your experience as a rental property owner a Profitable one.
To start the List off 1st we have:
1. Over pricing Apartments that leave them sitting vacant too long
In an attempt to hit a possibly over stretched target for cashflow, some landlords actually accomplish the opposite by over pricing their available rentals, By doing this you extend the number of days vacant and of course every day vacant equals cashflow lost.
To avoid this, Before listing your apartment for rent Check for properties with the same bed/bath count that have been rented recently in the neighborhood and view the pictures. Sometimes there’s a noticeable price increase for Newly Renovated apartments. Don’t fall for the bait. If your apartment isn’t newly renovated most likely it won’t rent for the same amount. Price it competitively but if time is of the essence be cautious.
2. Underpricing Apartments
Renting out your property without checking market rents can also be in the sense that you can end up renting out your property for far less than market rents. Make sure you take the advice that was mentioned in #1 and check for the sweet spot, not too high and not too low.
If your property is local to Essex County or Union County and you need help with pricing an upcoming property for rent, reach out to us at CapitalStreetPM.com/analysis. We’ll check for comparable rents and give you an idea of what you should be able to get for rent.
3. Never raising rents
As a PM, we have taken over management for properties and found that there are apartments rented for far less than market rents. Usually the tenants have been there for a while and rents were either never raised or seldom raised. As a landlord I can understand the perspective of wanting to keep your tenants happy, especially if you have a good one.
However, look at it from this perspective: Think about inflation, just about nothing stays the same price over time. Specifically, think of your fixed expenses like property taxes. If they haven’t increased recently how long do you think they’ll stay the same going forward? What will you do when they actually do increase? Raising rents a few hundred dollars per month might be unlikely? Instead, gradual fixed increases are ideal.
4. Not thoroughly screening tenants up front,
We’ve all heard the horror stories of tenants who move-in, pay a couple of month’s rent, if that, and never pay again. The stress of filing notices and following through with the tedious eviction process can be more than enough to make you regret getting into the business altogether.
To steer clear of this, make sure that you thoroughly screen your applicants. Make sure your checking and verifying their employment information, Rental History, Credit history, and criminal background. The better of a job you do upfront with this the easier your experience as a landlord can be,
Last but not least to close out the list:
5. Not enforcing late fees –
Now this all depends on your lease. If there’s no mention of a late fee you probably won’t be able to enforce one. But if there is mention of it, don’t be afraid to enforce it. Once your Lease is signed, it’s law. Sometimes you might get a tenant who pays late out of the blue and they might have good reason to. If you charge that tenant a late fee is solely at your discretion. But on the other hand, there are also Tenants who pay chronically late and even show no intentions of paying on time. Not charging these tenants a late fee might condone their paying behavior.
In all these are just 5 ways that we see Cashflows taking a dip, there are others that as a Pm, we specialize in handling and we would be happy to implement them on your behalf.
If you’re curious about how we can help your specific situation or you need help with your rental properties, click here to schedule a consultation call. We’ll discuss your needs and figure out if we’re a good fit to work together. I’m Albert with Capital Street Management, thanks for reading this post.