As a real estate investor, you’re focused on staying profitable and increasing your profitability over time. Thanks to the coronavirus pandemic, profitability goals are getting challenging.
No matter what situation you’re in, the following tips will help you recover and even improve your profitability in the housing market.
1. Hand over your duties to a property manager
Being a property investor can be overwhelming, but the pandemic is amplifying even the simplest landlord challenges. If you want to alleviate some of that pressure, hiring a property manager is the smartest move you can make.
With a property manager, you won’t have to touch any landlord duties, no matter how small. You won’t have to answer emergency calls at 2 am, rush over to a unit to turn off the main water source for a tenant, or stress about filing an eviction lawsuit. No matter what you need, a property manager will handle everything.
Being relieved of your landlord duties will help you stay profitable in the following ways:
- You’ll have more time to focus on your investment portfolio.
- You won’t risk fines for unknowingly taking illegal actions against tenants.
- Your repairs and maintenance tasks will be performed by licensed, reputable contractors.
- You won’t get suckered into cutting deals for tenants who really don’t deserve a break.
- You won’t have to struggle with marketing vacancies and screening potential tenants.
Hiring a property manager will cost money, but it’s a necessary fee that provides an enormous return. Think of hiring a property manager like taking out a homeowners insurance policy. Your property manager ensures that your investments stay profitable.
2. Know when to fold
Staying profitable requires ditching investments that have turned into money pits. Do you currently own any properties that are draining your bank account?
Now that the CDC’s eviction moratorium has ended, you can evict tenants who haven’t been paying rent. Once you evict non-paying tenants, calculate how long it will take to recover your losses with a new tenant. If that time frame doesn’t work for you, sell your property.
There’s no point in hanging onto a property that won’t become profitable for an extended period of time. You’re better off cutting your losses and rolling your money into a new property that you can rent and start over.
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3. Provide incentives for good tenants to renew their lease
Good tenants are hard to find, so if you have a good tenant, consider providing incentives for them to renew their lease with you. You might knock off $50/month from the rent or change some of your lease terms.
When you’ve got a great tenant, you’ll stay profitable long-term when you can keep that tenant. In this case, it makes sense to offer a discount for signing another lease.
If you don’t have any problems with your current tenant, and they have a stable job, consider doing whatever’s necessary to keep them.
4. Raise your rents
Are your tenants paying rent without issue? Consider raising the rent. You don’t have to go crazy and raise the rent by $500/month, but don’t hesitate to raise the rent by $50 or $100 if you can.
Before giving your tenants notice, make sure your rent increase is within the terms of your lease and your state laws.
5. Buy foreclosures
Now is the perfect time to grab foreclosures before corporations like BlackRock gobble up foreclosures en masse. Foreclosures were up 27% in August 2021, and are expected to continue increasing in the coming months.
There will come a time in the near future when the market is saturated with foreclosures and you want to get in on the action before the giant bidding war.
6. Evict non-paying tenants immediately
Do you have non-paying tenants? If so, you’ve dealt with a lack of income for long enough; it’s time for them to leave.
Evict all non-paying tenants immediately. Refer to your state and local laws to serve a proper eviction notice to your non-paying tenants. You’re losing money every day your unit is occupied and your tenant isn’t paying rent.
File fast because it takes time to have an eviction case heard and to get a tenant out. Depending on how backlogged your court system is, it could be months before you have your unit available to rent again.
Struggling with profitability? Consider selling
It’s hard to watch your property investments die, but you can’t force tenants to pay rent when they don’t have a source of income.
Do everything in your power to maintain profitability, do everything in your power. Otherwise, sell while you can still get some good offers and focus on other investments.