Rental property owners enjoy some unique advantages when it comes to profitability and return on investment. Between tax breaks, lower homeownership rates, lower inventories and higher rents, it’s been a pretty good 3 to 5 year period. There are still some foreclosure bargains out there, and it’s still possible to cash flow well with appreciation potential.
The good news should be balanced with some caution and maybe some preventive measures to protect our investments and shore up profits in the face of today’s post market crash economy. This article is in part prompted by a recent article over at PropertyManager.com. The article gives property managers some tips on increasing their revenue. If you use a property manager, this means their goal of a revenue increase will result in a cost increase for you.
The direct expense for a property manager is just one of a long list of expenses involved in rental property ownership. Inflation hasn’t been a major concern for a few years, but it also isn’t dead. Every year costs increase, and it’s easy to get surprised in an end-of-year financial analysis with the total of aggregated small individual expense increases. Raising rents can work, but it can also have the opposite result by increasing vacancy costs.
Property insurance premiums, both casualty and liability, have been increasing. Unfortunately, this has in many cases been coupled with tighter restrictions and reduced coverages. Every rental property owner should be doing an annual review of their insurance and coverage levels and shopping for better deals. Switching from insurer franchised agents to independent agents gives you more choices and frequently reduces costs.
You can’t do anything about property taxes, but pay attention because cash-strapped local governments are always trying to push through incremental increases for pet projects or just reducing deficits. If you see a trend developing, it could be time to consider rolling that asset and using a 1031 Exchange to buy in a less tax-burdened area.
Lastly, if the inventory is increasing or demand is decreasing, it may be wise to forego rent increases, even if they’re structured into your lease agreements. The decision should be based on a balance between the benefits of a small rental increase with the possibility of increased vacancy rates. It’s just a good idea to look at every one of your rental property investments in detail every year as if you were studying it for whether to buy or not.
Rental property owners enjoy some unique advantages when it comes to profitability and return on investment. Between tax breaks, lower homeownership rates, lower inventories and higher rents, it’s been a pretty good 3 to 5 year period. There are still some foreclosure bargains out there, and it’s still possible to cash flow well with appreciation potential.
The good news should be balanced with some caution and maybe some preventive measures to protect our investments and shore up profits in the face of today’s post market crash economy. This article is in part prompted by a recent article over at PropertyManager.com. The article gives property managers some tips on increasing their revenue. If you use a property manager, this means their goal of a revenue increase will result in a cost increase for you.
The direct expense for a property manager is just one of a long list of expenses involved in rental property ownership. Inflation hasn’t been a major concern for a few years, but it also isn’t dead. Every year costs increase, and it’s easy to get surprised in an end-of-year financial analysis with the total of aggregated small individual expense increases. Raising rents can work, but it can also have the opposite result by increasing vacancy costs.
Property insurance premiums, both casualty and liability, have been increasing. Unfortunately, this has in many cases been coupled with tighter restrictions and reduced coverages. Every rental property owner should be doing an annual review of their insurance and coverage levels and shopping for better deals. Switching from insurer franchised agents to independent agents gives you more choices and frequently reduces costs.
You can’t do anything about property taxes, but pay attention because cash-strapped local governments are always trying to push through incremental increases for pet projects or just reducing deficits. If you see a trend developing, it could be time to consider rolling that asset and using a 1031 Exchange to buy in a less tax-burdened area.
Lastly, if the inventory is increasing or demand is decreasing, it may be wise to forego rent increases, even if they’re structured into your lease agreements. The decision should be based on a balance between the benefits of a small rental increase with the possibility of increased vacancy rates. It’s just a good idea to look at every one of your rental property investments in detail every year as if you were studying it for whether to buy or not.