Any investor knows that property is one of the most surefire ways to make big money. While you won’t be raking in millions by renting out one apartment, once you build a portfolio at scale you can start seeing tremendous financial gains. However, you need to make the right financial decisions along the way, and these include how you conduct your business as a landlord.
To help you with the ins-and-outs of being a financially-savvy landlord, here is what you need to know to make the best decisions.
Calculate repairs and maintenance into your rent
There is a fine line between asking for too much rent to attract actual renters and asking for too little. Unfortunately, many first-time landlords make the mistake of only calculating rent against mortgage payments and rates. However, the reality is that by doing so, they almost guarantee low income.
Repairs and maintenance are part-and-parcel of owning any home, and when you are renting a place out you cannot leave these things for later. You need to take care of any problems immediately, as part of your role as a landlord.
The amount of money you can expect to spend on repairs and maintenance will depend on the size of your property and particular issues that arise in its location. You can find out a ballpark figure from other homeowners and property investors in the area. Include this figure when calculating how much you need to charge in rent to make money.
Get landlord insurance
As a landlord, you cannot rely on basic homeowners insurance. Rather, you will need to get landlord insurance to cover your specific situation. Landlord insurance will protect you against situations that are out of your control, considering you are not the one residing on your property.
This includes things like loss of use of the property – landlord insurance will cover the income lost in this scenario. It can also provide liability protection, which will cover damages caused to the tenant or their possessions by accidents on your property.
Of course, it also covers the basics like the cost of repairing or rebuilding your home in case of disaster, as well as damage to your possessions within the property.
Require renters insurance
While your landlord insurance covers your property and possessions therein, it does not cover your tenant. This can be a problem for you for a couple of reasons. Firstly, you will need to pay any deductibles when it comes to property damage they have caused. Secondly, any losses they incur may make it difficult for them to pay rent.
You can require them to get renters insurance as part of the lease. Renters insurance can cost as little as $5 a month, and will cover their possessions. It can also include personal liability cover, which may pay when they damage your property and possessions.
Hire a property manager
As you build your portfolio, you may assume that you can continue to take care of all of your properties even as you work a full-time job. This is a trap many landlords fall into.
The reality is that owning rental properties can itself become a full-time job. At the least, it will take hours from your week, and your hours as a professional are valuable. You end up working a second job for far less than you are worth.
Hiring someone to manage your properties may seem like a waste of money at first, but you’ll soon see it pay off. Instead of stressing about taking care of all your tenants even as you work a full day, there is someone dedicated to doing so who will manage your tenants’ needs far more effectively. This may well save you money in the end, as they can spend time organizing the most affordable contractors for maintenance and repairs when something goes wrong.
Owning property can be incredibly rewarding on a financial level. But you have to be savvy in how you go about managing your portfolio. Make sure you get all the right insurance, and take everything into account when calculating rent. Most of all, you should not do it all yourself if you do not have to. Your time is worth money, and you will be a far more effective landlord when you get help.