Making your property a lucrative source of passive income requires good management. If you don’t manage your tenants properly, you won’t retain them, and constantly looking for new tenants is a costly exercise.
If you don’t maintain your property properly, it will decrease in value. Managing your finances is essential if you want to make a reliable income. That includes accurate bookkeeping, as well as filing your taxes on time. Here are five tips to ensure that your property is a lucrative source of passive income for you.
1. Manage Your Tenants Properly
- Managing your tenants properly consists of far more than just collecting rent when it’s due. You have to screen tenants properly to determine whether they’re a good fit and have a good credit record etc.
- You must set up lease agreements and verify that they include all the legal terms your state’s landlord-tenant laws require. They should include a start and an end date.
- When tenants move in, you must go over the rules, collect a security deposit and the first month’s rent. You should do a walk-through with them and note the current condition of the rental unit.
- When tenants move out at the end of the rental term, you need to check its condition for any damage.
- While tenants are in your unit, you must deal with any complaints quickly and effectively.
- Enforcing the lease agreement includes addressing any issues with a tenant, such as keeping a pet when it’s not allowed or playing loud music that disturbs others.
- If you want to evict a tenant, you must send legally required notices and file for eviction in court with evidence supporting the reasons for eviction.
Companies that handle property management in Nashville will manage all of the above for you to ensure you receive a reliable monthly income from your rental properties. Evernest, TurnkeyVR, ApexVentures are some of the property management companies with a great reputation and their teams are friendly and competent. Evernest is greatly experienced in handling different clients across US cities like Denver, Detroit, Colorado, etc
2. Maintain Your Property
The physical structure of a home must be sound to ensure tenants are safe. Regular maintenance of the home will include things like fixing roof and plumbing leaks, changing faulty door locks, fixing cracked tiles, replacing loose handrails, etc.
Property inspections should be done on a regular basis to prevent major expenses down the road. An insurance company will inspect the property and may require parts of the structure, such as the roof, to meet certain requirements before insuring.
If you neglect your property and don’t do proper maintenance, you will have more tenant complaints and the value of your property will decrease. You will also need to inspect any work done by contractors and other repairmen to make sure it is according to code and done correctly and efficiently.
3. Set the Right Rent Rates
Need to set competitive rent prices if you want to attract tenants to your property. You will generally set the amount by finding out the rent being charged for other comparable properties in the area. You will need to do this at least annually to make sure you can get tenants.
The longer a property stands without a tenant, the more money you lose. If the rent is too high, it may be unaffordable for tenants looking to live in that specific area and if it is too low, you may not make what you need every month to cover your expenses and still make a profit. You need to make clear to tenants whether utility bills are included or excluded from the rent amount, as this can cause misunderstandings that affect your income.
4. Collect Rent on Time
To ensure optimal cash flow, you need to set a collection date when rent is due so you can meet your expenses. When you can’t meet your expenses, you have to pay interest and penalties. You need to strictly enforce late charge policies so tenants know they must pay on time or they will pay more.
When tenants can pay their rent online, it makes it easy and convenient. If you’re renting to younger tenants, they will expect this. There are various software packages that can help you manage your rent payments, send out automated email reminders with late fees included when rent is past due.
5. Keep Good Financial Records
You need accurate bookkeeping for your income, tax, and investment purposes. This will include all your income and expenses, such as rent, mortgage payments, insurance costs, and repair costs. Unless you keep good records and stick to your budget, you won’t make a reliable income from a rental property.
When managing your budget, you must remember to include items like yearly property taxes and make sure you know what deductions to make or your tax burden could be higher than it should be.