Being a landlord can be challenging.
It often takes some time to figure out the best ways to deal with everything from tenants to taxes.
But, you don’t have to figure everything out on your own.
All experienced successful landlords have habits that eliminate many of the risks of real estate investing while making sure their rentals continue to generate solid returns for them.
Below are seven things successful landlords do.
1. Treat Your Rental Property as a Business
Even if you have just one rental property, you need to treat it like a business from the outset. This means you keep careful track of your revenues and costs. It also requires that you think about the property in the long term.
Treating the rental property as a business is essential if you want to take full advantaging of tax deductions generate a decent return on the investment. If you don’t treat the rental as a business, you will end up with an expensive and time-consuming hobby.
2. Remain Consistent
Successful landlords are consistent with tenants. This means following the lease every time.
Charge late fees when they are due. Don’t allow special treatment for one tenant. This doesn’t you mean you cannot be compassionate, but failing to treat all your tenants the same way opens you up to business and potential legal trouble. Being consistent also means your tenants and neighbors know they can depend on you to keep your word. This makes them more likely to keep their word with you in return.
Landlords who are making the kind of returns on their rentals you are aiming for know that investing is a long-term strategy. When you stick to a strategy, you will see property values increase over time and cash flow on rental units improve. Remember it was the slow and steady tortoise that won the race.
3. Reinvest in Your Business
You have to spend money to make money.
The nature of rental properties is they often take a lot of wear and tear. If you want to keep properties rented you have to reinvest in the units.
This means more than just putting on a fresh coat of paint every once in a while. Successful landlords look for ways to consistently add value to the property by investing small amounts in everything from improving the landscaping to adding small amenities.
Reinvesting in your business can also mean acquiring more rental units. Once you get the hang of your first rental, it may make financial sense to grow you inventory. Often the riskiest rental investment is only having one unit. If your tenant moves out you have a 100% vacancy rate and no income.
4. Always Know the Break-Even Point
Part of running any type of successful financial enterprise is knowing what your break-even point is.
How much do you have to make every year or month before all your costs are paid?
If you know your break even point you make better choices. This requires that you not only have a firm grasp on your expenses, but that you also understand the difference between revenues and profits. It’s easy to bring in a lot of money without turning a profit.
The higher your break-even point is, the harder it is to run a profitable business. Landlords that are doing well have mastered keeping costs low and predictable, while keeping rental income growing.
5. Know the Neighborhood
Whether your rentals are in Baltimore, Silver Spring, or Chevy Chase, you need to know what is around your rental.
Knowing the neighborhood means understanding the direction development and property values are trending. It also means being able to better target tenants who will be a good fit for your property.
Successful landlords know they have to do more than just sell renters on the idea of their unit. They have to sell renters on the idea of living in a particular neighborhood.
The more you know about the schools, businesses, and community your rental is in, the better you are at explaining the benefits of your rental to potential tenants.
Landlords that understand the neighborhood know how to attract ideal tenants instead of just finding anyone willing to sign a lease.
6. Have a Cushion
Rental properties are a great source of income, until they are not.
There will be times when the property is vacant or some unforeseen expense wipes out a month or more of rental income. Landlords that have thrived in the rental business for years have set aside a cushion to see them through the tough times.
Poor financial decisions are made out of desperation. You are much more likely to rent to a questionable tenant if you are in a tight financial bind. But, if you have a few months cushion, you can wait to find the right tenant that will pay you on time for years to come.
Developing a cushion is toughest at the beginning. But with careful budgeting, a small amount can be set aside every month until you have grown a cushion to see you through any rough patches without ruining your business.
7. Have a Property Management Company
However you came to be a landlord, you likely don’t want to be on-call 24 hours a day for questions about everything from when the rent is due to what should be done about the leaky dishwasher.
Hiring an excellent property management company allows you to spend your time more efficiently and letting someone else take care of much to the day-to-day tasks of running a rental. A good property management company also helps you make wise choices that will maximize the value of your rental.
Maryland is a great place to be a landlord. But, it takes more to be a successful landlord than just finding tenants. If you copy what successful landlords do differently from everyone else, you will be ready to take your place tomorrow among the happy successful landlords you envy today.