When it comes to investment property strategies, every investor has his own idea of how he or she wants their portfolio operating. The more seasoned the investor, the more set in his routine he or she may be. The one thing that can be agreed upon across the board is that everyone wants their income property to provide as much income as possible. Here are a few ideas of what to look for when you want to trim expenses on your investment property.
Review Your Rental Property Financing
Take a moment to review your loan. Check to make sure your rate is low and that you are on a long-term plan. When dealing with investment property, security is always key, and the 30-year fixed loan product is always a landlord’s favorite product. It allows you the security of knowing that your loan terms will be unchanged for the life of the loan. So, if you pay on time year after year, your loan balance will decrease, and ideally, your rent will rise.
Many investors who used hard money or high rate short-term rental property loans to buy their rental property may find themselves in a situation where they need to refinance to a lower rate or longer terms. Keep in mind that we have numerous stated income loan products with rates starting in the low 5 percents with 5, 7, 10, and even 30-year terms.
If you find that you are paying a high rate or that your loan will be coming due within the next few years, then now maybe a time to look into getting a new loan with better terms. You could save hundreds of dollars monthly with a refinance on your investment property.
Review Your Monthly Expenses
Next, go over all of your monthly expenses, such as landscaping and any property management fees, etc. If you are paying for utilities, then maybe evaluate which utilities you are paying for to see if you can find any savings. Typically, most landlords pay for trash or water, but there are some who won’t even pay for any utilities. So, it usually is your choice in what utilities you will and will not pay for, and on your next lease term you may want to make that a negotiating point with a tenant.
Landscaping on an income property is another expense that you can look into. Maybe you find that the tenant can take on this burden, but a lot of landlords like to keep up the landscaping themselves to insure that the property maintenance does not fall behind. Another way to save on landscaping would be to remove lawn and replace it with synthetic grass and to add water friendly plants and flowers that would save on monthly watering and landscaper fees.
Keep Your Connections
As you navigate your career investing in rental properties, you will find that items, such as appliances, fixtures, and various other repairs, are always going to creep up and surprise you. The best thing to do is to handle them quickly and use good, reliable people to complete the repairs.
Many repairs involve minor issues, such as paint, appliance breakdown repairs, and etc. For these minor issues, it is at times beneficial to have a good handyman on your rolodex or to take care of minor repairs yourself. For larger issues, always get at least 2 to 3 estimates from licensed contractors so that you insure that you are not overpaying. And always try to get the work covered by a warranty that will help protect your repair for a longer term.
Try to keep a log of who has worked on the property, the type of repair they did, and how much it cost. By keeping tracking like this, you can always refer to the log when you need a similar repair or only have to call about warranty coverage on a previous repair.
Make Sure You Are Charging Market Rents
Another very important step to trim rental property expenses is to make sure that you are charging as much rent as your market allows. With websites such as Zillow providing local rent prices in the surrounding markets, today’s landlords have more analytical data sources in which to do that research.
Use these tools to study properties in the same area where you own or are buying an investment property to insure that you are charging full market value on your income property. Another option is to order an appraisal from a licensed appraiser and to ask for a rental survey, but this will be a bit more costly depending on the type of investment property you own.
The key to operating a successful investment property is to keep cost down and always try to have a tenant. Maintaining the property at a high standard will help to keep the property rentable when you are vacant and enjoyable to the tenant when it is actively being leased.
Try to take care of small problems before they get larger, and always review your numbers. Income property performance should be evaluated at least once every quarter to insure that everything is running smoothly, and keeping the property in top condition will go a long way in making sure that your property is generating the most possible income while keeping your expenses minimum.