Rental property management can be rewarding and profitable in a strong economic environment. When the economy isn’t strong profit margins shrink and the only way to stay afloat may be to cut costs. With creative cost cutting strategies you can continue to run a profitable property management business without skimping on quality or sacrificing your portfolio.
In these uncertain times it is imperative that property owners don’t over-spend unnecessarily. Examine your business with a critical eye and identify areas where you can cut costs and make your business more efficient and profitable. Here are ten ideas to help improve your profit margins and get you started on effective cost cutting strategies.
1. Choose The Right Rental Property
The best way to cut costs is to not incur them to begin with. Be wise when choosing your investment properties and steer clear of buildings that are likely to be a drain on your finances. Avoid old and dilapidated buildings which are sure to require a lot more maintenance than newer units. Building amenities can add costs too so be particular and make sure you’ll be getting a good return on your investment.
2. Do Your Own Maintenance
Some repairs and maintenance are best left to the professionals but there is plenty that the average person can do on their own. If you mow your own lawns, do your own painting, and perform minor repairs by yourself, you can save hundreds if not thousands of dollars. Don’t be afraid to get your hands dirty and cut costs on your rental property upkeep.
3. Understand Your Accounting
Accounting records for a rental property management company can be complex. Use good accounting software designed specifically for property management to keep useful records of your finances. This will allow you to pinpoint issues and identify opportunities to cut costs. You can’t understand what your money is doing if you don’t have access to useful data about your finances.
4. Review Your Mortgage Regularly
Financing can be a substantial expense especially on a big ticket item such as a property. Even a small difference in your interest rate can translate to big savings on your mortgage. You should make time to regularly review any and all mortgages that you may have to ensure that you are getting the best deal that you possibly can. Don’t be afraid to shop around and refinance if you find a better deal.
5. Be A Good Property Owner
You can catch more flies with honey than vinegar. A landlord that is insensitive, distant, and ill tempered is likely to have a negative relationship with tenants. Happy tenants who have a good relationship with their landlord are more inclined to treat the property like their own, pay their rent on time, communicate issues, and renew their lease. Be pleasant, kind, and handle requests in a timely manner to avoid the costs of disgruntled tenants.
6. Choose The Right Tenants
Bad tenants will cost you. They can damage your property, not follow the rules, skip out on the rent, and cost you in legal fees and evictions. The best tenants are low cost, trustworthy, follow the rules, pay their rent on time, and take care of your property. Avoid bad tenants with thorough tenant screening and improve your chances of ending up with quality tenants that won’t end up costing you in the long run.
7. Make Your Property More Energy Efficient
You can cut costs considerably and save on your energy bills by making your rental property more energy efficient. Small and simple changes such as LED lights and smart thermostats can add up to a substantial difference. Replacing the seals around windows and doors will help reduce your heating and air conditioning bills. You can even save by investing in alternative energy sources and installing solar panels.
8. Take Advantage Of Rental Property Tax Deductions
As a rental property owner there are many expenses which you can use to offset against your income and reduce your tax bill. Cut costs by maximizing your deductions and keeping more of your money. Speak to an accountant to better understand your options and ensure that you understand all the expenses that you can claim. Make sure you keep a good record of your expenses and keep all of your receipts.
9. Communicate With Tenants
Keep the lines of communication open and encourage tenants to let you know of any problems that they discover. Taking care of issues early can prevent bigger problems such as water damage, mold, pest infestations, and more. Make sure tenants are educated as to how to operate and maintain the equipment on the premises and how to properly take care of the rental property. Open communication can end up saving you a lot of problems and money.
10. Keep On Top Of Maintenance
Preventative maintenance is one of the best ways to cut costs. Keep a record of when maintenance was performed on major systems such as HVAC and major structures including roof, gutters, and landscaping. It may be tempting to forgo regular maintenance if there are not apparent issues but this can end up causing bigger problems and costing much more in the long term.
Have you been overspending? Make your rental properties more profitable with some simple tricks to cut costs and stay on budget. You need not skimp on quality to cut costs. Use your money wisely but not frivolously to maximize your income and reduce unneeded expenses.