COVID-19 changed the rental property management space. It compressed budgets and added financial pressure on you and your tenants. This means you need to be more diligent than ever before when it comes to cost savings.
While there are several great ways to cut costs, here are five of the most effective actions that you should consider implementing right away: screen tenants more carefully, use free tools instead of paid services, maximize tax credits and deductions, find the best value utility and insurance providers, and perform do-it-yourself (DIY) maintenance (when possible).
Some of these cost-cutting measures take a little effort to implement, but the money you save in the long run will make it worthwhile. Let’s take a closer look at each measure to see what’s involved.
1. Screen Tenants Carefully
Careful tenant screening is a preventive measure that can save you headaches and money. Great tenants pay their rent on time, help you avoid costly maintenance issues, and don’t cause property damage.
A crucial part of screening tenants is understanding the foundational criteria for what makes a good tenant: Income, employment, credit history, criminal history, and rental history. A thorough screening process covers all of these areas (where allowed by law) to help you find great tenants.
Some property management tools help you vet potential tenants by making it easy to run background and credit checks. Many of these platforms are free, and they cut down on costs and time spent filling out and filing paper copies of the forms needed to request an applicant’s background information.
Be careful of “trusting your gut” when it comes to potential tenants. Someone can be charismatic and friendly, and still be a subpar tenant. This is the reason your screening process is so important. It takes your emotions and feelings out of it and gives you a factual picture of potential renters.
2. Use Free Tools Instead of Paid Services
In addition to helping you screen tenants, property management software offers a milieu of features that will save you valuable time. Contrary to common belief, these efficiencies do not have to come at a high expense. In fact, some property management software providers have emerged that are just as feature-rich as their costly counterparts, yet offer their services at no cost to you.
Invest time in finding a free tool that provides core features like online rent collection, tenant screening, document management, maintenance management, and in-app tenant communication. Then, if there are other features you know you want, be sure to look for those as well. The right tool can increase efficiency and decrease costs.
3. Maximize Tax Credits and Deductions
Mortgage interest, property tax, operation expenses, depreciation, and repairs are the major deductions you can claim on your tax return.
If you have a tax accountant and haven’t developed a relationship outside of tax season, now may be the time to change that. Yes, your role is to track and collect these items over time, making it easier for you when it’s time to file. But if you and your accountant work together throughout the year, you can maximize deductions and operate in a way that sets you up for greater savings come tax season.
If you don’t have a tax accountant, then you’re going to want to do some research. Learning about deductions and tax credits isn’t a walk in the park, but it will pay off. The Internal Revenue Service (IRS) website is a good place to start.
The bottom line here (I know, mediocre pun) is deductions—while they may not be sexy—are valuable. So, taking the time now to develop a stronger relationship with your accountant or dive into research, will pay dividends in the future.
4. Find the Best Value Utility and Insurance Providers
Believe it or not, you may be able to find a cheaper utility provider in your area than your current one. Likewise, there may be insurance providers who can provide the same coverage you already have for less than what you currently pay.
An insurance broker can be an excellent resource when researching and determining the right insurance policy for you and your properties, but recognize that as a broker/salesperson they do have an inherent bias. It behooves you to do some independent research. Educate yourself online and reach out to other landlords in and outside of your network. In general, here are some good questions to keep in mind before making a decision:
- Can your homeowner’s insurance provider bundle the landlord insurance policy as well?
- Does the insurance provider have a new customer discount for the first policy?
- Are there discounts to get home security and smoke detectors installed?
- Are there organizations you can join to qualify you for a discount?
These are just a few important examples. Be inquisitive and find answers to other questions you have. Don’t be afraid to ask a lot of questions.
You should take the same approach to find utility providers. You’ll want to make sure you know the answers to these questions:
- How long will my contract be?
- Are there any discounts or promotions?
- What will I pay per kilowatt-hour (kWh) of electricity?
- Is this offer a fixed rate, variable rate, or indexed?
- Do I have to pay for unused energy?
- Will I be penalized if I install solar now or in the future?
- Are there renewable energy options?
- What are my payment options?
- What happens when my contract expires?
- Is there a penalty if I break the contract?
Talk with multiple providers to get a sense of what offers are out there and what people charge.
5. DIY Maintenance
Unclogging drains and toilets, repairing holes in walls, repainting, and tackling other minor repairs yourself can save you a lot of money, especially long-term. Professionals will charge hundreds of dollars for maintenance you can attend to without too much hassle.
However, unless you have expertise, you should hire professionals for major repairs like electrical and HVAC issues.
YouTube transformed the do-it-yourself movement. Many repairs are now easier for people than in the past. So, consider browsing YouTube before hiring anyone.
Don’t overthink it. If it seems like something that is straightforward and you find a reliable YouTube example, do it yourself. The point here isn’t to become MacGuyver, though. If you need a professional, call one!
These five cost-cutting measures can help you relieve financial pressures on your business. Be proactive about saving money, even if it means extra research and time spent now. Small things like repainting your properties yourself instead of hiring someone may seem inconsequential, but that effort will pay off long-term.
Cutting costs makes you more prepared for an uncertain future—and we’ve seen how uncertain things can get. You can be nimble while unprepared landlords will scramble to keep their operations afloat. Give yourself a safety net by cutting costs now.
Innago is a free, easy-to-use property management software solution, designed to save you time & money. Innago allows you to easily: collect rent, screen tenants, list properties, manage work orders, create applications, sign leases, organize financials, communicate with tenants, & much more! Learn more here