Can Your Toxic Investment Property Be Saved?In an ideal world, you buy an investment property and immediately begin renting it out to model tenants, who pay on time and care for your property as if it was their own. However, the reality of owning a rental can be drastically different for most of us; while investment property obviously pays off in a variety of ways, some properties or units turn into money pits that drain cash from your account each month. As a last resort, you can try to sell the unit, but first make an effort to figure out why you are losing money and what, if anything, you can do to stop the bleeding to help turn things around. If a tenant has simply stopped paying, has turned your nice and orderly home into a meth lab, or is hoarding cats in the basement, your property is losing money for a reason. If your home is in poor repair, features 1970s shag carpeting (and appliances to match) and has an overgrown jungle for a yard, you simply won’t be able to charge enough rent to make things work. “Assuming your price-to-rent ratio is intact, the next fastest way to lose money on a rental property is with bad tenants. Worse than ending up with bad tenants one time is ending up with bad tenants consistently.” — Bigger Pockets Blog If the area your home is in has experienced a significant decline, and even upgrading your property won’t help, then you might need to consider getting out. Take a look at how your home stacks up against other properties in the area. Also consider the people you are choosing or maybe being forced to rent to. Both of these factors can help you decide if you are losing money because of outside factors which are beyond your control, or if you can make some changes and rehab your investment property.
Can You Improve the Property to Make It Profitable?While you can’t change the location of your rental home or unit, you can take steps to make it function more efficiently and to increase its profitability. If you have tenants in place, but they are regularly damaging the property, failing to maintain the interior or exterior, or simply not paying regularly and on time, you’re losing money each month. Upgrading your tenants, either by legally evicting them if the circumstances call for it, or waiting out the lease and then investing the time and money it takes to find a better class of tenant, can help. “A landlord can evict a tenant for the nonpayment of rent, for the failure to vacate the premises after a lease agreement has expired, for a violation of a provision in the rental contract, or if the tenant causes damage to the property and it results in a substantial decrease in the value of the property.” — Findlaw.com Once the offending tenants are gone, taking the time to rehab the property and make it appeal to a better class of tenant can help you climb out of the money pit and begin making a profit on your property.
Beyond Dollars and CentsWhile watching a steady stream of cash flow out your door each month is no fun, you also need to consider the emotional toll that dealing with your property causes you each month. If you are constantly worrying over getting paid each month, getting called at all hours by troublesome tenants, or are struggling to make timely repairs and improvements to your home, you’re living in a constant state of stress. You could get rid of the property (which could cost you even more money), but partnering with a professional property management company can help improve your bottom line and eliminate the hassle of dealing with your investment property.
Is It Time to Hire a Property Management Company?A professional property management company can use several ways to help turn around a struggling investment and eliminate the time-suck that a bad property can become:
Better-Quality TenantsAs a property owner, you search for tenants once a year, but professional management companies do it all the time. They have the tools necessary to determine suitability and ensure that a tenant is able to pay — and likely to continue to be able pay the rent each month. In addition to the expertise that comes with meeting with hundreds or even thousands of prospective tenants each year, a proven system of background checks, and tenant suitability rules, a good property manager can smell a bad tenant a mile away. Familiarity with some of the red flags that signify a bad tenant can protect you and ensure that your property is safe from harm. Some tenants make a business out of appearing as if they are steady, reliable individuals — until they move in. Once in place, these tenants wreak havoc on your property and your profits. A savvy property manager can help you avoid trouble from the start and will have a system in place for dealing with good tenants turned bad.
Improved Maintenance OptionsWhen you need to hire a subcontractor for one unit, you won’t get much of a deal; a property management company who either employs professional contractors and subs or handles multiple units can ensure that your unit gets the maintenance it needs while employing economies of scale on your behalf. The same benefit holds true for urgent and emergency maintenance needs — plumbing, HVAC and other big ticket repairs never seem to happen on Monday mornings; that 3 a.m. phone call from a frantic tenant will get answered by someone else when you use a decent property management company.
Regular and Ongoing InspectionsAre you losing money because it seems as if you have to repair something or attend to a new tenant concern each month — or because you have to overhaul the entire unit every time a tenant leaves? A specialized property management team will perform regular, well documented, site visits and inspections and ensure that your unit is being cared for correctly. Spotting a plumbing problem or insect infestation before it has a chance to damage your property can save you thousands in repair costs each year. Determining the reason you’re losing money and fully examining your options can help you determine if a property is truly toxic, or if it simply needs a different approach when it comes to management and maintenance. If you are worried about an existing property, are losing money each month or every time you need to find a new tenant, we can help. Contact us to learn more about the benefits of working with a professional property manager and for some specific help and advice about dealing with your toxic investment property.
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