Increase Your Rental Property Return on Investment With These Tips.
Owning a rental property is task like no other! Well, maybe there are a few other things in life that are harder! =) But, for the most part, it’s a full-time job and also full time, constant expenses. The point of this article is to elaborate on what those expenses are, and some ways to trim them so your monthly costs can be minimized without lessening your tenant’s experience + amenities offered!
Don't Throw Money In The Trash!
Lurking quietly in the background of most profit and loss statements is your ‘garbage’ or ‘debris removal’ expenses. These usually don’t receive much attention, because hey, who wants to talk about garbage? Or, even, haggle with the guy or gal that’s picking it up? Most recently here in Rhode Island we were looking at a 7 unit property to help purchase with one of our Nvest® clients and we saw that the property owner was spending $500 a month for a 6 yard dumpster emptied weekly! Holy cow! That’s a lot of money! The issue here is that no 7 unit property should be filling up a 6 yard dumpster weekly, that would be quite a feat. In situations like this we would suggest getting a 2 yard dumpster emptied weekly. 2 cubic yards of trash is a lot, and likely would still have a little room left over at the end of the week. The cost for that is $98/month.
Boom! Savings of $402! Think about this if you own a property with a dumpster or tote cans you pay for. You can always increase pickup frequency or the can size, but you can’t get back unused space!
Excessive Insurance Results In Less Capital To Invest.
Next up is the big bear of bad news; insurance! Most people are in the wrong mindset when it comes to insurance. They feel that they have to take what is given to them, and none of it is negotiable. This isn’t entirely true. The great thing about insurance is that you can shop around, as well as adjust your coverages to change the price. Insurance agents will do what you tell them; you are the customer! For example, most property owners insurance their property for the ‘replacement cost’. The replacement cost is usually triple what you paid for the property, and it is the amount it would cost to rebuild the same structure you have currently. We don’t know about you but if the property burns down do you really want to become a project manager and construction supervisor? Our advice is to insure the property not for the replacement cost, but rather the purchase price. The purchase price, like I mentioned previously, is usually a third of the replacement cost, so your insurance premium will be reduced drastically. The only difference here is that if the property burns down the insurance company won’t pay you the amount to rebuild it, but rather the amount you insured it for. So, our suggestion is to take that money to pay off the note, sell the land, and use those proceeds to buy your next property!
Energy Efficiency Powers Your Returns.
Last up is your common area utilities; something that most of us forget about! Plain and simple, tenants do not care about the hallway or basement lights! So, our suggestion here is to install motion sensor lights in the hallways and basement. They will pop on when someone is there, and turn off shortly after they leave. If you keep track of all the wasted energy you pay for at the end of the year it turns into hundreds and even thousands! In addition, if you are providing standard (free) laundry machines for your tenants to use you should seriously reconsider this. Tenants will abuse anything that is free and not monitored, so what you have to do is either remove them, or install coin operated machines. If you leave the free machines the tenants will rack up your electric, gas, water, and sewer bill constantly. Now, multiply that by each load of laundry for a year. It adds up quickly!
The goal of this article is not to teach you how to be a cheap, slumlord, but rather how to be a thrifty and savvy investor. There are ways to cut costs without lessening your tenants experience or removing amenities. If you follow these three simple steps you can save hundreds of dollars per month very quickly, and with little to no effort. What is better than that?
If you have any other tips or pointers on how you have saved money as a landlord feel free to reach out to us on our website! We would love to hear from you!
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Gregory Rice is the Vice President of franchise sales for Nexus Property Management™.
Nexus Property Management™ is a National Property Management Franchise that manages all types of rental property from single family homes or condos to large apartment buildings and complexes.
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