Business 101 says that if a business owner wants to increase profits, they must reduce expenses.
As a landlord, in order to reduce your expenses you must be in the habit of anticipating maintenance problems, understanding the gravity of repairs before they are needed, and developing possible solutions before repairs elevate in costs. A landlord’s ability to efficiently strategize around the mitigation of maintenance issues by lowering the costs of maintenance and repairs can have a tremendous impact on profits.
Below, are3 key strategies that will help you reduce your expenses and better manage costs.
1. Preventive Maintenance – Regularly service your heating and cooling units and sewer lines, clean gutters, trim tree lines over the house, invest in regular pest control, and quickly handle other maintenance issues.
First, this helps because it forces you to continually view your property on a regular basis in between any regularly scheduled walk-throughs. If you are continually working on your property and staying on top of maintenance, you will learn to quickly spot problems and notice potential issues before they become problematic.
Secondly, it allows you to stay ahead of repairs and minimize the headaches of maintenance issues. Preventive maintenance doesn’t stop the headaches, but it certainly helps ward off the severity of them. You can’t prepare for every maintenance situation, but you can get a good jump on them and lessen the damage they cause.
Finally, this decreases the probability of maintenance issues piling up. Every neglected maintenance issue greatly enhances the potential of another, more costly, maintenance issue arising. For example, not cleaning the gutters can lead to soffit repairs or costly foundation issues, or neglecting hanging tree limbs can lead to a damaged roof, which can lead to water damage and ultimately carpet damage. A $300 repair can quickly and easily balloon into a $3000 repair. Preventive maintenance is paramount to helping lower the cost of repairs, especially over the life of your property.
My suggestion: Develop a regular maintenance schedule for each of your properties, and stick to it. Treat your property like you should be treating your car where you get in the habit of catching problems before they balloon out of control.
2. Risk Transfer – Make your tenants are responsible for certain "reasonable" maintenance items and be sure this is in writing on the lease.
This includes such items as broken windows, torn screens, clogged drains, appliance repairs, lawn care, and others. The tenants responsibility should be reasonable and should you not require that tenants be responsible for normal wear and tear, but give them ownership of items they are responsible for, and make it clear on the lease. On my lease I list 15 items that the tenant accepts as working and in good order on day one. The tenant must initial each item as a part of the lease. If those items are damaged as a result of the tenant, then the tenant is responsible for repairing them. You always want to give your tenants a feeling of ownership in hopes that the tenant will take good care of your property if they know they will have to pay for certain items over and above regular rent. By transferring some of the risk in this way you are allowing the tenant to share in the responsibility for maintaining certain aspects of the property maintenance, and, at the same time, you are holding them accountable.
My suggestion: Do an initial walk through of the property with the tenant, go over the lease thoroughly with the tenant at the time they move in and again at renewal, and be sure the tenant understands fully what items they are responsible for. Be sure this is spelled out in the lease. Remember, a lease is a contract and all parts of a lease are admissible in court. Be sure it’s clear and concise, and follow it to the letter.
3. Find a Good Handy Person – There are two choices here. Either become a fantastic handy person yourself, or find a good, fair, and AVAILABLE one!
This is a very big deal and it’s often overlooked by many landlords, especially newbies. It’s also the most difficult thing to do because it takes time and plenty of landlord seasoning. As a landlord, you need to fully understand that the cost of employing the services of the big well-known local plumbing company with the fleet of trucks, fancy uniforms, highly advertised commercials, and big well stocked warehouse, is ALWAYS transferred to you as a consumer. It’s called overhead. As a landlord you need to spend a tremendous amount of effort and time, locating quality fair minded maintenance people that do not carry the overhead that will destroy your profits every time you need a repair on your property. This will take patience and trial and error, but it’s worth the effort and will undoubtedly save you thousands of dollars. There are large repairs that you may need where you may feel more comfortable, with the services of a large reputable company, but those should be few and far between. For the vast majority of the work you need, learn to do it yourself, if you like, but if not, employ the services of a good solid INSURED handy person. Do your research by checking the internet, call around and get referrals from friends, read flyers and business cards on poster boards at local businesses, etc. The people that do the work you need done are all around you without the overhead associated with the big companies. As a landlord you MUST learn to identify research, properly check references, and use these resources.
When you find a good handy person, don’t hesitate to tip them or provide them a bonus for work well done. Twenty extra dollars can go a long way towards lowering repair costs on subsequent work. If nothing else, it shows great appreciation for good work, and every good fair handy person deserves to feel appreciated.
My suggestion: Always have a backup available. A good honest hardworking handy person does work for a lot of people, so they are not sitting around waiting on your call. If their good, they may not always be available. Also, it’s ok, and advisable, to have a good handy person for different types of repairs. I have two separate plumbers, two separate electricians, and two different handy people. A great plumber may not know anything about changing the capacitor on your AC Compressor, and vice versa.
One of your main goals as a landlord is to lower your maintenance expenses, which, in turn, increases your profits. Following these 3 simple strategies can greatly enhance damage control and help mitigate costly maintenance issues.