Successful rental owners follow these guidelines to ensure the success of their rental, and maximize their owning experience.
1. Treat your rental property like a business… because it is a business!
2. Have a financial reserve set aside for the “unexpected.” Placing 3-months rental income into a separate bank account can build a safety net around your rental property.
3. Expect the “unexpected.” At some point, something will happen that disrupts your monthly cash flow. It’s inevitable – whether it’s a major repair, capital improvement, or a tenant that loses their job. If you’re financially prepared, with funds set aside, it’s not a big deal.
4. Savvy investors put 10-15% of the annual rental income back into the property. Think of it as investing into your retirement account. Except in this case, it’s upkeep, maintenance, tenant turnover, etc.
5. Plan on maintaining the property. Attractive well-maintained properties allow your property manager to quickly place high quality tenants and keep them happy. Long-term tenancies and low vacancy rates are simple ways to maximize income and eliminate expenses that occur each time a property is turned over to new tenants.
6. Pay the mortgage a month ahead of collecting rent. If there is an underlying mortgage, use June’s rental income to pay July’s mortgage payment. Staying a month ahead is simply financial common sense. Being setup on “Full-Month Accounting” is a great way to follow this guideline.
7. Maintain a good rental liability insurance policy that additionally insures your property manager. A homeowner policy does not offer the protection you need. Oftentimes, insurance premium discounts are available for having a professional property manager in place.
8. Keep landscaping simple. Remove anything that’s a hassle for tenants to maintain. Flower and vegetable gardens can be replaced with bark or rock. This simplifies turnovers and reduces costs for you and your tenants.
9. Leave a Washer and Dryer. Vast majority of rentals in the Triangle area include a washer and dryer, so not including one can make your rental less marketable. They do not need to be new, only functional, but the nicer they are the more attractive the property will be as a whole to prospective renters.
10. Disconnect emotionally from the property. This can be difficult if you have lived there at some point. In order to make the best financial decisions, remember that your former home is now a money-making business.
11. Allow your property manager to do their job. Keep an arm’s-length relationship with your property and allow the professional you hired to make day-to-day decisions on your behalf. Micro-managing your property manager is a recipe for a failed management strategy. Remember why you hired them in the first place.
12. Focus on results – not details. As the owner, you should know the key financial and performance metrics. Let your property manager handle the rest. Learn to be okay with not knowing every detail.
13. Remember that your property is subject to Fair Housing and other laws. Professional property managers cannot discriminate against protected classes. The same set of qualification criteria must be used to screen all applicants for your property.