It’s Easy to Make Money When Everything is Going Up — Can You Keep It Up As Things Turn Around?
Neon Vacancy sign in the darkness.Vacancies rose by a tenth of one percent last quarter — which might not seem like much at first, until you notice that it’s the first time that the overall rental vacancy rate has risen since 2009. After five solid years spending less and less effort to fill all of your units, it’s getting harder again, even if it is just a little bit. That’s something that should cause us all to stop and take a look at how we can keep our profits up even if a space or two stays empty a little longer than we’d like. Here are our top five ideas:
Double-Check Your Rents
If your rents are low, you’ll fill a space fast — but if you’re undercharging by just $25 and that tenant signs a three-year lease, you just committed to a loss of $900 compared to the guy next door that charged the ‘right’ amount for the neighborhood. And remember that location is the primary factor for determining rent, but you can also influence the price a tenant is willing to pay by presenting them with a clean, fully-functional unit with up-to-date décor and appliances.
Streamline Your Processes
Landlords have a lot of processes — applications, screening, move-in checklists, maintenance requests, late-rent followup, property checkups, move-out checklists, advertising, and more. A clever landlord can save themselves a lot of time by putting as much of each process as possible on ‘autopilot.’
Using a property management service like PropertyWare to keep all of the relevant information in a single online place can help significantly, but there are always more opportunities to streamline. Try taking a ‘how to’ video for the tenant’s side of each of your major processes and then putting them up on YouTube and hosting them on your site, and you can save yourself a lot of repeated explanations and failed paperwork.
You can then reinvest your time saved into filling your vacancies!
Track All Your Tax Breaks
Tax breaks abound for a clever property manager. Record absolutely every penny that leaves your company’s coffers, and at tax time carefully check every expense and keep all of the tax-deductible ones on your list. That includes mortgage interest as well as money spent acquiring new properties (if relevant.) Just be careful because properties are considered an asset, which means you can’t deduct the entire cost in a single year; you must depreciate them appropriately.
Because you can tax-deduct all maintenance and repair costs and you can charge higher rent for well-maintained, modern-looking space, there’s pretty strong motivation for you to put in the work you need to fully update each property between each tenant.
Determine And Target Optimal Tenants
Every property has an ‘optimal tenant’ that it will be perfect for; the tenant that has the highest probability (nothing is guaranteed!) to pay on time regularly and keep the property clean and well-serviced. Granted, for some properties ‘most likely’ still means ‘not entirely likely,’ but it’s a numbers game: the better the client, the better the results, even if better is far from perfect.
Put in a bit of effort to figure out what each property’s ‘ideal’ tenant looks like, and tweak your ads to match that profile (keeping them well within the Fair Housing laws, of course.) The more optimal tenants you have, the more smoothly your entire operation will run, and that will save you more than just the extra repairs the wrong tenant could cost you.
Eventually, if the vacancy rate keeps rising, your profits will start to decline — but there are plenty of things you can do to offset the effects of the trend for years to come. Start by recognizing the need; until you do that, the motivation to make the cost-saving changes will never crop up in the first place.