I’ve blogged before about why single family rental landlords struggle [link to post] to achieve the financial success they are looking for. Below are additional “gotchas” that you can easily avoid once you know that they are out there.
Be sure that you don’t:
- Fail to treat your rental as a business.No doubt you got into single family rental real estate to generate a revenue stream, make a profit and build equity and wealth. Unlike most investments which perform primarily based on external markets and factors, your active management of the property will determine your single family rental returns. With that in mind, you need to operate your property as a business. For example, decisions driven by your desire to make the property “nicer” are not wise if they go beyond a well-thought out business strategy to increase revenue.
- Fail to look for cost savings.In investment properties, identifying even small savings today can lead to better long-term financial performance. Should you replace cabinets or would it be more cost-effective to refurbish them? Can you get services such as tenant screening, landscaping and handyman/repair for less? Are you paying for larger garbage bins than you need, etc.? You need to keep your property safe, up to code, and as visually appealing as necessary to generate interest, but you should do so at the lowest reasonable cost.
- Fail to emphasize the positives in your property.How you portray your single family rental to a prospect can have a big impact on their opinion of it. If you focus on acknowledging the flaws (and every rental has some) rather than pointing out the positives, it will hurt your ability to keep the property rented for maximum dollar. Be honest but upbeat.
- Fail to refinance when it is advantageous. Some property owners ignore opportunities to get a better rate on their loans, or free-up equity to leverage into investments to acquire additional properties, because they dread going through the process. But a little bit of time and effort can create a significant financial return in the long run. Keep an eye on rates and opportunities to grow your portfolio.
Paying close attention to the management of your investments and learning to navigate the potential pitfalls in single family rental property ownership can help ensure that you maximize the return on your investment and build wealth.