Owning rental properties can be a profitable investment, but expenses can pile up quickly. Learning how to manage expenses is a critical factor in maximizing returns.
Unfortunately, many property owners fall into the trap of believing that saving money means doing everything themselves, but in reality, taking the right steps – and working with the right partners – can help you cut costs while protecting your investment.
As you look for ways to cut costs, it’s important that you don’t try to reinvent the wheel. There are some very practical methods you can use to see big results. Here are a few:
Work With a Property Manager
You might think hiring a property manager is an added expense, but in many cases, it’s a strategic way to save money. A professional property management company has the experience, network, and knowledge to reduce costs in ways that DIY landlords often overlook.
Take this real-world example: A new client of Los Angeles Property Management Group was on the verge of overpaying $5,000 for a roof replacement. By stepping in and reviewing the agreement, the property manager was able to renegotiate the deal and save the client thousands of dollars within the first week.
This shows how a skilled property manager can spot inefficiencies and ensure you’re not paying more than necessary.
Perform Preventative Maintenance
Repairs are often one of the biggest expenses for rental property owners, but they don’t have to be. By taking a proactive approach to maintenance, you can prevent minor issues from escalating into costly repairs.
For example, scheduling regular inspections of plumbing, HVAC systems, and roofing can help you identify and address small problems before they lead to water damage, system failures, or structural issues. It’s also wise to keep a detailed maintenance log, so you can track when certain components were last serviced and avoid unnecessary emergency calls.
Preventative maintenance might require an upfront investment, but it saves you money in the long run by extending the life of your property’s systems and appliances.
Reduce Turnover With Quality Tenants
Tenant turnover is one of the most expensive aspects of property ownership. Between lost rent during vacancies, cleaning costs, and marketing expenses, every move-out can eat into your profits.
You can cut these costs by focusing on tenant retention and selecting high-quality tenants from the start. A thorough screening process – checking credit, rental history, and references – helps ensure you’re leasing to responsible tenants who are likely to stick around long-term.
Once you’ve secured great tenants, keep them happy by addressing maintenance requests promptly, maintaining open communication, and offering incentives for lease renewals. Happy tenants are less likely to leave, saving you the cost of finding new ones.
Reassess Vendor Contracts
If you’re not regularly reviewing the contracts you have with vendors, you could be overpaying for services like landscaping, cleaning, and maintenance. Reach out to multiple vendors to get quotes and compare rates.
Even if you’re happy with your current vendors, it’s worth negotiating for better terms. Many service providers are willing to offer discounts or price adjustments to maintain long-term relationships. (By the way, a property management company can often negotiate better deals on your behalf, thanks to their established networks and volume of business. So that’s another reason to work with one.)
Minimize Energy Costs
Utility costs can quickly add up, especially if you’re covering them for your rental property. Investing in energy-efficient upgrades is a smart way to cut down on these expenses while making your property more attractive to environmentally conscious tenants.
Consider installing energy-efficient appliances, LED lighting, and smart thermostats. These upgrades reduce energy consumption and often qualify for rebates or tax incentives, further lowering your costs.
Streamline Operations
Technology can be a cost-cutting game-changer for rental property owners. Property management software helps you streamline operations like rent collection, maintenance requests, and lease tracking. Automating these tasks not only saves time but also reduces errors that could lead to financial losses.
Digital tools also make it easier to communicate with tenants and manage multiple properties. For example, you can use apps to schedule automated rent reminders, monitor expenses, and store important documents. By cutting down on administrative time and improving efficiency, technology helps you run your properties more cost-effectively.
Challenge Property Tax Assessments
Property taxes are one of your largest recurring expenses, but many property owners don’t realize they can challenge their tax assessments. If you believe your property has been overvalued, gather evidence – such as comparable property values or recent market trends – and file an appeal with your local tax authority.
Challenging your assessment takes some effort, but it can result in significant savings. Many appeals are successful, especially in areas where property values have fluctuated.
Get Control Over Your Financials
The key to long-term success as a property owner is to be in control of your finances. And while you can’t always control your income, there are usually ways to rein in your expenses and trim excess expenditures. By doing this consistently over time, you can drive a higher ROI for your investments.
