It Pays To Remember The Small Things As A Landlord
By JD Esajian on February 3, 2014
From the outside, it would appear that all a landlord has to do is find the right property and sit back and wait for the checks to roll in every month. As any landlord knows, it is never that easy. Between keeping your property rented, collecting rent, dealing with repairs and a dozen other tasks, renting real estate is filled with prospective pitfalls. It is easy to look at the big things that are needed to be done to thrive, but there are many little things that have to be remembered. If these smaller items aren’t done or done right, your once smooth business will quickly become a nightmare.
Most landlords look for positive cash flow, focus on writing a strong lease and finding the best tenants. These are three great areas that need to be addressed, but these alone will not keep your rental business running smoothly. Anyone that has rented real estate knows that things can happen to your property even with the best tenants. If you don’t have ample reserves available when repairs are needed, you are setting yourself up for trouble. The rule of thumb is 10% of all rents collected every month should be allocated to your repair budget. Between appliances breaking, toilets clogging or bigger issues every few years you will dip into that account more than you think.
This fund can also be used to brace for the inevitable vacancy. No landlord ever thinks the rents will stop coming in, but it can happen to anyone. Without a reserve budget in place, you will be forced to scramble to find money or take it from other accounts. This starts a cycle that can be difficult to get out of. It can eventually lead to late payments or foreclosure.
In a best case scenario, you don’t touch this money over the course of the year and have it for a rainy day. Roofs, furnaces and other big ticket items will eventually need replacing before you know it. It is also recommended that you perform seasonal maintenance on your fireplace, furnace, water heater and other items at least once a year. The small minded investor will look at this as wasted money, but the more you defer maintenance, the more you will eventually spend when that item breaks.
Things will happen to your property when you least expect it or when you least want it. Things can be going smoothly for six months or so and then all in a period of one week you will have to replace two major appliances and deal with a tenant issue. If you brace and plan for these events months before they happen, you will be in a far better position when they occur. The big things like collecting rents and finding good tenants are usually a byproduct of handling the small tasks every month. Once you neglect these, it is just a matter of time before something happens with your rental property.