Almost every landlord is into the real estate business to earn more income. However, there is no guarantee that you will make more money once you own a rental property. The amount of income you can generate from your rental property depends on how you manage it.
Although real estate is among the most lucrative businesses, several things can kill rental property profit and destroy your source of income. Here, we will discuss four things that can hurt rental property profit.
1. Poor communication with tenants
To be successful in any business, you need adequate communication with your clients. The same thing applies to real estate investment. When you own a rental property, you are providing services to renters. That is why you need to provide decent customer service; else your tenants will seek it elsewhere.
Adequate communication is crucial because you need to let your renters know what you expect from them. Doing this will prevent confusion or misunderstandings between you and your renters. It is essential to set these expectations at the onset of their tenancy.
Examples of things you may communicate to your tenants include:
- Rent expectations – The amount of rent you will collect, how you will receive it, when to pay it, and the penalties for late payments.
- Lease terms – Your tenants need to know their responsibilities, what is acceptable, and the prohibitions in the property.
- Maintenance – How to report maintenance issues, when they should inform the landlord or property manager, etc.
- Communication routes – Let the renters know how they can reach you at any time. Provide easy access and set up a direct communication route. Find out which method will work best for your renters: phone calls or text messages. Remember that your renters have the right to quiet enjoyment of the property. So, avoid intrusion and respect their privacy.
2. Misalignment of goals and strategies
Some investors acquire rental properties without having clear goals and strategies to help them achieve their aims. That is one of the primary things that kill rental property profit, and you should avoid it. Real estate investment requires adequate planning and strategizing.
Set your goals and know the kind of rental property that will help you achieve this. You cannot use the same strategy to manage a commercial rental property and residential apartments. Also, techniques for multi-unit properties differ from single-unit apartments. Avoid mismanaged situations that can turn the rental property into a money pit or prevent you from achieving your goals.
3. Poor maintenance
Rental property maintenance is expensive. However, it will help you earn more income. Even when you want to cut down the expenses and increase profit, we do not advise you to neglect essential repairs.
If you fail to maintain your property, it loses value and becomes outdated. When this happens, your tenants will vacate and it will be arduous to get new ones. Nobody wants to stay in a poorly maintained property.
Poor maintenance of the rental property leads to a high vacancy rate and kills the income. Always ensure that you comply with specific standards according to the implied warranty of habitability. Your rental property should be hazard-free, safe, and compliant with the building codes of the neighborhood.
Below are some essential maintenance tips:
- Ensure proper weather protection/weatherproofing of the roof and exterior walls.
- Perform regular maintenance of plumbing and gas facilities according to the guidelines.
- Conduct proper maintenance of the heating system.
- Provide an adequate number of trash bins.
- Treat all pest infestations and set up measures to prevent them.
- Install safety measures such as fire extinguishers, carbon-monoxide, and smoke detectors.
- Ensure regular cleaning and sanitation.
- Maintain and service all your appliances regularly.
- Ensure that your water supply is compliant with the regulations.
When you perform all your responsibilities according to the law, your tenants will have no right to withhold the rent. We advise that you always respond to maintenance issues on time.
4. Missing out on tax credits
There are several tax incentives for landlords. These incentives can help you earn more income. Some landlords do not know this and they miss out on the benefits that can maintain or boost their profit margin. Below are some standard tax deductions you should not miss:
- Repairs
- Travel expenses
- Home office allowance
- Interest
- Insurance
- Employees and contractors
- Depreciation
- Professional or legal services
It is advisable to seek the services of a tax professional that will guide you on how to benefit from these tax incentives.
The bottom line
Although the real estate business is lucrative, it is common for landlords to lose their investments if they do not manage them with reasonable care. It will be best to follow the above tips, have the appropriate insurance, collect security deposits, do regular inspections, prioritize tenant screening, and hire professionals where you encounter difficulties.
