4 Things That Will Destroy Your Rental Property Income
Not everyone who purchases an investment property makes money immediately or ultimately becomes a successful real estate investor. Admittedly, the real estate investing business is challenging, and a lot of things can go wrong that can harm your rental property business.
Below I will discuss the top 4 mistakes that can kill your rental property income.
When you own a rental property, there is a responsibility on your part to make certain that you are keeping a habitable and safe property for your residents to live in. This is both a moral and legal responsibility pursuant to Iowa building codes and state laws.
Overall, you should repair things as needed. You can’t simply let your tenants reside in a property that is unsafe or uninhabitable unless your goal is to be a slumlord.
Additionally, some real estate investors and landlords make the expensive mistake of turning a $100 issue into a thousand-dollar issue by not fixing the problem when it’s small. Keep in mind, small repair issues rarely, if ever, go away; instead, they just get bigger. As such, if there is repair work to be done, plaster fixes or minor mold damage, it is best to address them immediately.
Overall, maintenance is the biggest property income killer that you will handle when it pertains to owning a rental property.
Poor communication is a major problem when managing a rental property. Most landlords forget that they are in the business of customer service.
In most cases, your renter has the ability to take their business elsewhere and move into your competitor’s building right down the street. From the moment your tenant moves in, you should set clear expectations and communicate with them. Your tenants should know what to expect from you, and they should likewise know what you expect from them. Your primary goal is to ensure that both parties are happy with the arrangement so that the tenant continues to pay rent and has a place where they enjoy living.
To that point, setting clear expectations is really important, with both your tenants and your contractors/vendors as well as your key building employees. Anybody that is involved with your business should understand your expectations thoroughly.
Lastly, everything should be in writing, particularly in your lease agreement. You have to be prepared for the possibility that you may end up going to court or end up being in a legal battle with your tenants or even your vendors. Never do something out of feelings and emotions. Sit back, think about it, and then respond to the interaction, possibly with the guidance of your legal counsel, if appropriate.
- Unprepared for Vacancy
Vacancy in your apartment building is incredibly stressful, annoying, and rarely planned. At times, a 2-week vacancy turns into a 2-month vacancy. This leaves you in the position where your property is losing money instead of making it, contrary to what you originally planned. However, you can’t let the stress of a vacancy drive you to make bad business decisions. Therefore, you shouldn’t rush to lower the rent of your unit significantly below the fair market value. Also, don’t start accepting risky tenants in order to hurry up and get someone in the unit. This will cause much more stress in the long run!
The best way to be prepared for vacancies is to put some cash aside so that you are not forced to make bad financial decisions because you need the money. Overall, as a savvy investor and landlord, you need to pre-plan and financially prepare for vacancies.
Likewise, you should ensure that you have contractors lined up when or if your unit unexpectedly becomes vacant. The sooner you can repaint, and make repairs, means that you can turn a unit over faster.
- Unclear Goals
There are numerous reasons why investors purchase properties. Maybe they believe they are getting a bargain, or the investment calculations look promising. However, purchasing a property because it’s a good deal without understanding your plan and goals for the property is a disaster waiting to happen.
Whenever an investor is considering purchasing a property, they should constantly be considering how the property fits into their investment portfolio. Furthermore, investors should have a strategy for that property.
Overall, as a diligent real estate investor, you should make sure that your expectations are lined up with your financial objectives.
Likewise, not doing enough due diligence when it concerns your market is something that can kill your chances of generating the rental income that you desire. The easy and fast way to decide if a property is right for you is to scrutinize the numbers. The numbers are an objective way to make investment decisions.
With that being said, these top 4 mistakes will undoubtedly limit your rental income. These are the primary factors that hinder investors from getting the earnings they need from investing. Making mistakes is inevitable and part of the journey in real estate investing. Still, new investors can avoid some or all of these obvious pitfalls by becoming informed and being prepared.