Being in the multifamily rental property business does not mean collecting rents only. You have to do a lot more to make more profit from your rental property business. To earn more from your units, you will need to manage your property and your tenants properly regardless of your property being your primary or secondary source of income.
Many new landlords are looking into making cash on the side from the rental property business because it looks really simple to make money from the rental property business. But it is a lot harder. Just like any other business it needs a lot of work and getting well organized with your tasks. A better way to do it well is to start learning from the people who have done it and done it well.
To be a profitable landlord, you will have to be on top of everything. From late fees to managing the property you will have to pay attention to details and avoid making mistakes and paying close attention to these things.
Eight Things You Need to Do to Become a Profitable Landlord
Here are 8 things that will help you make more profits from your rental property business.
Knowing Your Numbers
Majority of the people, who are new to the rental property business, think that the only numbers they need to run are mortgage, rent and profits. But as mentioned, the rental business is not as simple as it may sound, and so are the numbers. There are dozens of numbers you need to consider while calculating your profits. A few of them are HOA dues, City tax, Insurance, property tax, Vacancy rate, maintenance and repair. In case you are managing many units, you would want to include the property management cost as well as you will need to hire a property manager or a property management company but that is not recommended for a few units.
Finding the Right Rental Properties
A savvy landlord is able to differentiate between a good and a cheap property. He keeps his emotions and greed out of business. He doesn’t buy property that he falls in love with, instead he buys the one that is better for his tenants and for long.
To earn a considerable and consistent profit from rental property, one has to have really good knowledge of the properties in the neighborhood. Landlords need to be well aware of the area and the rents other people are paying. Furthermore, knowledge of the facilities available in the neighborhood is also important. For example, schools, transport, grocery stores and other stores.
As we discussed, knowing your numbers is very important when you are running any business. Successful landlords don’t wait for the IRS to knock at their doors and tell them how to cut down their taxes. They are well aware of their expenses and know how to reduce expenses and earn more profit.
If you are looking to earn more profit, study your state tax laws or get professional real estate tax advice to find out what you can possibly deduct. Effective cost cutting is the best way to increase your profit. It is recommended that you hire an accountant to guide you through the tax process and stop you from making costly mistakes. Your accountant will help you save money on your tax returns.
They Aren’t Looking to Make Friends
A landlord needs to know the boundaries between being friends with tenants and being a reasonable landlord. It is good to be respectable, reachable and kind. At the same time the landlord needs to avoid dropping in for a chat over coffee.
Being too close with tenants makes them feel that it is fine for them to delay the rent payment or call you any time of the day or night because you guys are friends. Another complication with being too friendly is increasing the rent. It’s a challenge for friendly landlords to increase the rent as they don’t want to upset the tenants.
The landlord keeps a balance between being friendly and being a good landlord. It is not advisable to be an unreachable landlord because it is not good in the long run especially if you are running a multifamily rental business.
A successful landlord doesn’t take on any tenant that sends an application just because the unit has been vacant for a while and he needs to fill it. He/she won’t rush in filling the vacancy which may end up in eviction and that makes it a costly mistake. That is why landlords believe in extensive screening to avoid costly mistakes.
Majority of the application received looks promising but landlords need to run a quick background check to find out if the applicant is being honest. The most important things the landlords need to check are credit reports, references and tenant’s insurance.
If you wish to run a successful rental business and you are not organized, forget about it. You won’t be able to run it successfully. Being organized is crucial for running a successful rental business. No matter if you have one unit or more than a thousand units, make sure you are well organized. Design a system that lets you scale up your business gradually.
As an organized landlord, one has to keep a record of certificates and inspections, rent with due dates and late fees, insurance policies, signed agreements, taxes and insurance.
Invest in Organizing
Managing the paperwork of a few properties is fairly easy. But when you start scaling up, it starts taking considerable time and becomes hard to keep up with. That is when you need to hire a property manager to take care of your property and to keep everything documented. Your property manager will also take care of the maintenance, repairs, marketing, filling and rent collection.
Landlords also invest in software applications and software that help streamline the rental business. The software available in the market keep track of everything, helps collect rent, check credit reports and help screen new applicants etc. etc.
Are you looking to learn more about multifamily property investment, click here to more on our blog. Become a member of our exclusive community for Free.