There’s no denying that investing in property and becoming a landlord is one of the most effective ways to build long-term wealth. After all, people will always need places to live and conduct their business, and if you’re the one with your hands on the keys, then it’s easy to see how that would be a favorable position for you to be in! However, while becoming a landlord can be a profitable path to take, it’s not as if success is guaranteed. If it were, then everyone would do it. As with all things, there’s an element of risk involved. While you’ll never be able to get rid of risk entirely, there are things you can do that’ll help to minimize the risk you take on.
In this blog, we’ll run through some of the most effective methods for doing just that.
Write It Down
It doesn’t matter how small or inconsequential it might seem: everything should go in writing. If you do that, then you’ll avoid the most annoying problem — a differing opinion/memory with someone you’re involved with professionally. It takes next to no time to get something in writing, yet the benefits can be so significant. They say that, in the real estate world, if it isn’t written down, then it doesn’t exist. Remember that!
Get Insurance
You might hope that nothing goes wrong with your properties, but that’s realistic. If you’re a landlord for long enough, then there’s no avoiding the fact that, eventually, you’ll run into problems. The existence of issues isn’t what’s important; it’s how well you’re able to manage those problems that count the most. If you have insurance, then you’ll be able to deal with them in a quick and straightforward manner. If you don’t have insurance, then you could be looking at a big bill that seriously undermines your profit margins or wipes them altogether. You may also consider encouraging renters to get renters insurance. There are benefits to the tenant, but also to you too. Basically, the more insurance there is, the more secure your position will be.
Think of the Future
Everything might be going well right now, but will things be just as favorable in the future? It’s not guaranteed. There are always things that impact the rental market. For instance, let’s say that you rent commercial properties to one specific industry. When that industry is doing well, then you’ll be doing well. But if it encounters problems, then you will too. You can help minimize this risk by using property lease management software to alert you to potential tenant defaults. By thinking of what the future may bring, you can reduce the likelihood of falling into problems and, on the plus side, strategically position yourself to take advantage of a new climate.
Ongoing Maintenance
It is much, much easier to deal with problems before they occur, rather than having to deal with them in a panicked rush. This is where a little bit of ongoing maintenance can come in handy. You should be taking a proactive approach with your properties in order to ensure that everything is in tip-top condition. If you notice that there could be an issue that’s beginning to develop, then spend the time, energy, and money to get it fixed. If you don’t, then the problem won’t go away — the issue will only get worse.
Healthy Relationships
It’s important to have a good relationship with your tenants. This begins, of course, with your screening process. If you bring someone on board with whom you were never going to have a good relationship, then you’ll be more likely to run into issues. After the screening process, it’s important to put the time and effort into making sure that you have a good relationship. It can be the difference between not having issues and getting into a messy situation. Absent landlords are more likely to receive petty lawsuits!
Manage Cash Flow
If there’s one thing that’ll influence your long term rental property success, it’s how you manage your cash flow. If you don’t have the correct techniques, then you’ll be putting yourself in a vulnerable position. The landlords that ran into major problems during the coronavirus pandemic were the ones who didn’t have the best techniques. The best approaches include building cash reserves. This can take somewhere in the region of 18 months if you’re starting from zero. Another way to do it is to look at rent diversification. The more diverse your income sources, the stronger the position that you’ll be in.
