As a landlord, it can feel as if the bills just keep piling up. There are mortgage payments and insurance premiums to be paid, and then there are repairs to the property that need to be addressed right away.
While there are significant costs that come with being a landlord, there are some ways to cut down on expenses without sacrificing the condition of your property or the quality of the tenant’s living situation. Here’s what you need to know about rental property expenses and how to cut them down smartly.
Largest property owner expenses
After you buy a rental property in Washington, DC and pay off your closing costs and brokerage fees, you will still have bills to pay, even if you paid for your property in full or in cash.
Here are some of the more common expenses to help you manage your expectations:
- Mortgage: In most cases, your monthly mortgage payment will be the largest payment you have to make. If your unit is priced correctly though, then you shouldn’t have a problem covering your mortgage, and then some, so long as you have a tenant.
- Property taxes: A necessary evil, property taxes need to be paid annually, and in Washington, DC, they’re not cheap. If you set up an escrow account with your mortgage, then your mortgage will already cover property taxes, and you won’t need to readjust your rent.
- Home and landlord insurance: For property owners, having good insurance is a must. You can never predict what tenants might do on your property, so it’s best for landlords to protect their interests.
- Home repairs: Nothing lasts forever, even with the best building materials. Refrigerators will need to be replaced, and pipes will leak. Home repairs vary drastically from month to month, but you should be budgeting so that you’re covered should the roof collapse.
- Property management company fees: If a property management company, like Atlas Lane, handles the day-to-day work of running your property, then you will pay them a monthly fee.It may seem like an unnecessary fee, but property management companies like Atlas Lane handle property marketing, tenant screening, rent collection, move-in and move-out inspections and property maintenance — a massive job. Having an expert handle this work can actually save you money in the long run and ensure you always have a good tenant.
- Upgrade and renovation expenses: If you want to attract high-paying clients, then you need a property that provides them with great amenities and a well-designed property.
These are just some of the fees you’ll likely encounter each month as a landlord. If you don’t hire a property management company, then you’ll have to spend money marketing the property and attend to every repair yourself.
There’s also the cost of time. How much is your time worth? Finding and keeping a good tenant will take a significant amount of time. If you’re already working a full-time job, then landlord work will feel like a second more-than-part-time job.
How to make smart investments & save money on your property
It is possible, of course, to cut down on all of these expenses, even the ones that feel fixed like a mortgage or unexpected like a broken pipe. With a little planning and some smart moves, you can cut down expenses on your rental property without investing a ton of money into it or scaling back costs so much that your property falls apart.
Here’s how to make smart investments and save a little green on your rental property in Washington, DC.
Consider refinancing your rental property
When interest rates go down, it’s time to take a look at refinancing. A better interest rate can cut down your monthly mortgage payment, which means you can keep a little more from your rental income.
What you do with that money is up to you. You can put it towards upgrades or renovations to the property, or you could defer a rent hike to give your tenants a break and possibly encourage them to renew their lease. You could also save the money for a rainy day when a major repair needs to be done.
Whatever you decide to do, talk with your bank and discuss how refinancing your rental property can set you in a better financial place.
Handle all repairs right away
Has this happened to you: Your tenant calls you early in the morning. A pipe appears to be leaking into the basement of your rental property, but the tenant has no plumbing experience and doesn’t know where the leak is coming from. You plan to go look at it that evening after work, but after a long day, you tell your tenant you’ll be there over the weekend.
Unfortunately, the leak gets worse over the next few days, and by the time you get there, the pipes need substantial work and the basement ceiling and floor now have water damage. What might have been a $500 repair will now cost several thousands of dollars.
When not repaired fast enough, breaks and leaks can cause massive damage in rental properties. Not only will that cost you a lot of money, but it will also cost you a tenant or two. No one wants to live in a property that’s falling apart, and if your property falls into such terrible repair, then tenants may have the legal right to break the lease.
But doing all of those repairs yourself and in a timely manner may be too much for you. If so, sign on with a property management company like Atlas Lane. Our company employs home pros who are available 24/7 to all tenants, and when tenants move in, our property asset managers show tenants how their new homes work — how to set the thermostat, how the security system works (if there is one). Having tenants who know how to make minor repairs themselves can save you money, and knowing a team of professionals will be all hand at hours of the night will help you sleep at night.
Screen tenants thoroughly
What many landlords underestimate is the cost — in time and money — of finding and keeping a good tenant. To find a good tenant, you need to market your property, respond to interested renters, schedule walk-through tours, vet the tenant after he or she has turned in an application and then go through the process of moving them into your property.
It sounds like a lot of work because it most certainly is. Just following up with tenant references can be an all-day job if you have a lot of good candidates. You also need to know where to look for tenants (Zumper? Zillow? What about through a nearby university?) and how to attract good ones with amenities they find valuable.
All of this will take a substantial amount of time, but it is far more expensive to skimp on the work and then need to find and screen a new tenant when the lease ends. It is far less expensive to do the work upfront so you find a good tenant who will stay for several years. You won’t have to worry about paying your mortgage, and you won’t have to go through this difficult process again.
Remember, cutting down expenses can help you save money on your Washington, DC rental property, but if you cut too much, then your tenants will learn to treat your property about as well as you treat it — and they won’t be renewing their leases.
At Atlas Lane, we specialize in helping landlords find savings without cheapening the property. To find out more, contact us here.