What does every real estate investor want? The answer: to make money. But even if your investment is already making money, it’s important to prepare yourself in case the market fluctuates (which it will, at some point). That said, proper money management can help you guarantee that you’ll have enough money to continue running your rental. Remember, your rental property company may be doing well now, but who knows what the future will bring? It’s best to be prepared – or as they say, prepare for a rainy day. Read on for our money-saving advice and straightforward strategies to increase your property’s money-making potential.
#1 Separate Your Accounts
One of the worst things you can do as a landlord is to combine your personal and business accounts. Even if you’re running only one rental, you shouldn’t put the money you make from it into your personal account. Not only can this cause confusion during tax time, but you’ll likely run into legal problems, as some states require security deposits to be stored in separate bank accounts.
The same practice should be applied to your debit and credit cards – you should maintain separate cards for rental-related expenses. If you were to use the same card to, say, pay for repairs, you may end up spending more money than intended. Maintaining a card exclusively for your real estate investment will make it easier to track your expenses.
#2 Claim All Applicable Tax Deductions
Unarguably the best money-saving tip for investors is to take advantage of all available tax deductions. As a rental property owner, you’re allowed to deduct certain expenses including property interest, depreciation, insurance, property management fees, repair costs, etc. from your yearly tax return. Don’t forget to claim these deductions to save a significant amount of money.
It’s worth mentioning that you may not be allowed to deduct travel expenses. This is particularly true when you traveled to tend to your rental and take a vacation at the same time. To determine what you can and can’t write off, consult a property management company or a real estate tax expert.
#3 Update Your Financials
It’s always advisable for investors to begin their investing “journey” with a solid budget. It should take into account the expected income and expenses, as well as allocate a certain amount of money for unexpected circumstances Without this budget, you may be tempted to spend more than what’s ideal. You may become loose with your finances if you feel that your property is making money, when in reality, you’re spending the same amount as what you’re making. In other words, you’ll likely be spending your money as you make it.
Be sure to update your books and maintain your property management financials. This way, you can see where your finances stand. Remember, as a landlord, your goal is to grow your wealth, not to throw it away. It can be helpful to hire a professional property management firm or bookkeeper to make sure your books are in check.
#4 Find Ways to Cut Daily Costs
Whether or not you’ve partnered with a property management company, it’s important to review how much you’re spending, as you may be able to cut down on ongoing costs. For instance, if you’re paying your current vendor $200 per month for pool cleaning services, however, another vendor offered their services for $150, you may want to replace your vendor. Or, if you’re spending too much money on fairly simple repairs, consider DIYing them (as long as you’re confident, of course).
Furthermore, if you’ve availed yourself of services like cleaning services, do your due diligence and check if there are any hidden costs. These costs can amount to hundreds of dollars, which may seem small, but can actually build up if you pay for them monthly.
#5 Review Your Mortgage
Mortgage rates tend to be higher for people who purchase properties intended for rental use instead of residential use. That, however, doesn’t mean your mortgage rate has to be excessive by default. Be sure to shop around to see if you can get a more reasonable deal on your mortgage. Lowering your mortgage (including fees and other charges) can be a great way to boost your cash flow.
#6 Review Your Rental Rate
If you want to treat your rental like a business, you need to be able to find ways to make more money. As a landlord, not only do you need to set a competitive rental rate, but you also need to ensure it remains competitive. Ask yourself, “How does my rental rate, considering my amenities, stack up against my competition?”. You may be losing money if your rental rate is made-up or if you haven’t reviewed it in ages. As a rule of thumb, you should increase your rental rate yearly.
Partner with a property management company to check the current market rates in your region, and compare your property with similar ones. You can then determine if you need to modify the rental rate. Remember to strike a balance between what’s profitable and what’s reasonable, as a rate that’s too steep will deter tenants. Vacancies can cost you more in the long run.
#7 Hire a Property Management Company
Successful businessmen are smart – instead of running their businesses on their own, they get someone else to do it. That way, they can sit back, relax, and wait for their money to roll into their bank accounts. Take a page from their book and partner with a reputable property management firm. When you let pros take care of things, you won’t have to deal with your daily obligations such as rent collection, tenant screening, repairs, and so on. The best part? Property management fees are tax-deductible.
At Luxury Property Care, We Run Your Rental Like a Business
Be a proper businessman by partnering with Luxury Property Care, where our experts will make sure to maximize your investment. With us by your side, you can be certain that your property will make money and that it’ll stay profitable for years. With us, you can guarantee that your wealth will grow. Call (561) 944 – 2992 or fill out our contact form to learn more about our property management and financial property management services.
