Successful landlords aren’t cheap, but they are definitely cost-conscious. In other words, they understand that costs add up over time, so they make smart choices to maximize revenue. There’s a time and place for spending money to set yourself up for success. However, there are also ways you can limit your expenses to maximize your revenues. Here are some expensive mistakes to avoid.
INVESTING IN THE WRONG PROPERTIES
You make your money when you buy a property. Repeat that out loud: You make your money when you buy a property.
The biggest profitability problem landlords have is created by investing in the wrong properties—or overpaying for the right ones. If you make either of these mistakes, you’ll find it nearly impossible to generate a profit that’s worth your time and energy.
Bad properties have slim margins and a tendency to need lots of work. While you won’t find a perfect rental property, you should practice greater patience and seek out ones that have the opportunity for greater gains. This will provide more margin for error.
POOR TENANT SCREENING
After selecting the right property and making a smart investment, nothing matters more than tenant selection. And if you don’t have the right screening processes in place, you could seriously impact your long-term profitability.
A bad tenant will cost you in multiple ways, including:
- Late rent checks and/or missed payments
- Lack of care for property (frequent maintenance issues)
- Violation of lease agreement terms
- High turnover
- Failing to leave the property in good condition upon moving out
The list could go on and on. If you aren’t carefully screening tenants, then you’re taking a major risk.
Should you end up with a bad tenant who has financial issues and a lack of regard for your property, it could cost you thousands of dollars. By enhancing your tenant screening, you’ll minimize these instances and maximize profitability.
OVERPAYING FOR INSURANCE
In the pursuit of efficiency, a lot of landlords make the mistake of quickly accepting whatever insurance or personal loan products they’re offered. However, in their haste to move on, they end up overspending.
It’s easier than ever to shop around and compare rates. Services like GoBear allow people to analyze and compare hundreds of products from dozens of providers in a matter of minutes.
Landlords who are conscientious about saving in this area will enjoy meatier profits.
SELECTING THE WRONG FINISHES
Be smart with the finishes you choose for your rental property. You want designs that look good yet don’t require expensive replacements after every tenant moves out.
Carpet, for example, is cheap and easy to ruin. Stains, rips, and snags often mean landlords have to replace it between each tenant.
For a little more money, you could purchase vinyl plank flooring and get a better look with greater durability and longevity.
In the end, there’s a very fine line that separates successful landlords/investors from the average ones. It comes down to purposeful cash flow management and intelligent, proactive decision-making.