For landlords, the buying price is only the beginning of the cost of investing in a rental property. One of the most significant financial decisions property owners can make concerning their properties is investing in its upkeep to maximize its rental value. You can capitalize on your rental profit through cost-saving strategies such as keeping tenants for longer, minimizing financial risks, and getting the right management help when you need it.
As a landlord, a significant part of your monthly budget will be the cost of managing your properties. Before we proceed any further, let’s keep in mind these essential facts about rental investment properties:
- There are several tax advantages in rental investment
- The value of the property is consistent with its monthly cash flow
- Rental property usually appreciates in value annually
- Location of the property is critical
The success or failure of any rental investment depends on a variety of factors. Fortunately, almost all of these factors are within the control of the landlord or individual investor. To ensure that you reap the highest financial benefits from your rental property, pay attention to these important areas.
Find and Keep the Right Tenants
No landlord wants to deal with a difficult tenant. High levels of noise, consistent failure to rent on time, and destruction of property are some of the consequences that you may run into if you have bad tenants, just to name a few.
On the contrary, the right tenant will save you money by paying their rent on time, minimizing damages to property, and sticking around—all these will reduce time spent without having a paying tenant.
This is why it is very important to get to know your tenant before they move in. Start by screening applicants and obtaining necessary information about their rent and housing history. Pay attention to well-documented tenants, as documented rental history can help by giving you an idea of how long they’ve stayed in other locations. It’s also a good idea to ask for references from past landlords.
Candidates that are open to background investigations can be very good tenants. However, a landlord must be careful not to turn away an applicant unjustly as a result of their race, disability, sexual orientation, nationality, marital status, sex, religion, or color, as this will go against The Fair Housing Act of 1968.
Get Landlord Liability Insurance
Renting out a property will be risky if you don’t have the proper protection for yourself and your property. This is because, without the right commercial property insurance, a disaster or even a lawsuit can be enough to reduce your investment to nothing. Commercial general liability insurance is a necessity, as it will help protect you against some kinds of liability claims, such as third-party bodily injury or property damage claims.
Not having general liability insurance could expose you to the risk of settlements, judgments, and expensive legal defense costs and court fees if a tenant files a claim against you.
However, when it comes to building owners’ insurance, you’ll also likely need to get property insurance and crime insurance to protect all aspects of your property against damage, theft, and other liabilities. Bethany Insurance can bundle these policies together with the specific coverage you need to protect your investment.
Form an LLC
As a landlord, you can position yourself and your business in a way that reduces financial risks.
Aside from property insurance, you can also form a limited liability company (LLC). Creating a limited liability company is the easiest way of protecting your personal assets in case of a lawsuit. It separates your personal assets from your business proceedings so that, even if you are sued as a landlord, a claimant can’t come after your other possessions and money.
Forming an LLC is relatively easy. To do it yourself, you’ll simply select the state where your property is located, choose a name for your LLC, select a registered agent, file or submit the necessary documents, file the articles of organization, and then create an agreement for your operation.
Work With A Property Manager
Another solution some property owners use to maximize on rental investments is working with a property manager. This may seem counterintuitive to some, as it does cost money to hire a property manager; however, if you have a very large property or a chain of properties, or if it’s simply not worth your time to manage maintaining the property and communicating with tenants, working with a property manager can be very helpful and even save you costs in the long run.
A property manager will relieve you of the burden of the day-to-day maintenance and management of your property. But aside from that, the strenuous work of finding and screening potential tenants will also be taken care of. A good property management team will also handle all the legal aspects of your rental investment, which may include handling your insurance, tenant contracts, and other legal issues that may arise.
Use Your Tax Breaks
Don’t become a victim of paying more taxes on your rental income than you have to. Many landlords are unaware of all the tax deductions available to them, but this can make the difference between earning and losing money. For example, you may be able to deduct mortgage interest payments on the loans you used to improve or acquire the property.
You can also deduct all travel expenses that result from your rental activity. Thus, every journey to the hardware store for a repair material or to the property to respond to tenant complaints can be deducted from your taxes. Insurance premiums that you pay for any insurance for almost all activities related to your rental investment can also be deducted.
If you’re in need of insurance solutions, then you can trust Bethany Insurance Agency to help. Our team consists of qualified experts ready to aid landlords, property managers, and property owners with getting the insurance coverage they need to protect investments and assets.
