4 minute read
MONEY MATTERS
+ MONEY Matters Ways Landlords Can Cut Costs5
on a Rental Property
Where you can easily save money to protect your bottom line.
By Andrew Kay
Just as in any business, owning a rental property comes with plenty of costs. In addition to the mortgage, property taxes and insurance premiums, regular maintenance and unexpected repairs come up as well.
When rental rates are steadily climbing and you can charge 5% to 10% more each year, it's not difficult to cover escalating costs. When rental rates are stagnant, however, rising costs can eat into your bottom line.
You might think you're operating as inexpensively as possible, but it's always worth seeing if you can trim the fat any further. Here are five ways landlords can cut costs.
1. Shop Around
Sometimes you get so used to paying a bill that you don't look for ways to lower it. It's worth it to shop around every so often for better deals on your fixed costs.
Get new quotes every other year. Insurance premiums tend to rise over time, and you might be able to get a better deal as a new customer with a different provider. The same is often true for utilities if you're paying for those. If you use a property management company, get new quotes for that as well.
2. Build a Reserve
When your property is occupied with tenants who pay on time and the property's net income is solid, consider putting some rent aside each month to build a reserve fund. It can often mean the difference between paying cash for an unexpected expense or having to borrow money to cover it. Going further into debt on a property means paying more in interest. You cut costs by paying cash.
3. Refinance or Recast the
Mortgage
When interest rates are super low, you can get to a breakeven point on upfront refinancing costs quicker. For example, if it costs you $2,000 out of pocket to refinance, you'll make it up faster with a rate that's a half-point lower than one that's only a quarter-point lower.
Recasting occurs when you pay down your principal balance with a lump-sum payment, then ask your lender to re-calculate the remaining scheduled payments based on the new balance. If you can't refinance but have some cash available, consider this option.
4. Do It Yourself
Do you immediately call a contractor when an issue arises? Learning some basic plumbing, electrical and flooring techniques can save tons on maintenance and repair costs. There are how-to videos online for just about anything. It's worth it to invest some time learning what you can.
5. Use Free Online Tools
Rental property owners sometimes have accountants, lawyers and property managers on speed dial. While you might need an attorney if you appear in court, you shouldn't require a lawyer every time you sign a lease or post an eviction notice. You can also find free accounting and property management software online.
To protect your bottom line, you might have to find ways to cut costs where you can. The good news is that it can be done.
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