Thinking about self-managing your rental property? Managing unavoidable expenses like taxes, maintenance, professional consultant fees and administrative costs, will set you on the path to increasing profits.
Let’s start with insurance.
Managing Your Bottom Line
Insurance costs continue to rise, although industry experts predict rates will increase at a slower rate or remain flat in 2015. Commercial insurance saw a modest 3% increase overall in the third quarter of 2014. Compared to increases as high as 6% in previous years, that’s a welcome bit of news. The asking price for homes (market value) likely influenced the diminished growth. According to MarketWatch, although some metropolitan areas are still accelerating home prices are flattening out in many markets.
If you’re going to manage your own properties, it’s imperative that you research state and federal requirements about coverage and understand your options. Coverage varies from state-to-state and depends on the company you choose, but here are some options to consider.
- Comprehensive: Covers property owners from sudden loss not excluded elsewhere in your policy.
- Named Peril Coverage: Covers specific natural and accidental damage from specific events, such as fire, hail, flood, etc.
- Liability: Covers injuries and damage to someone on your property due to negligence. Some attorneys recommend you add a liability rider that covers your property reputation. These riders protect you again slander, claims of discrimination and unlawful eviction charges.
- Extended Loss: Covers additional expenses associated with total property loss not covered in cash-value and agreed loss settlement policies.
Whether you have one home, or a dozen homes ready to bring on the market, schedule a risk management review with a trusted insurance agent.
Protecting Your Residents and Your Workforce
Designing an insurance plan is critical to protecting yourself from the unknown, but you can reduce your risks by keeping your property in excellent condition. Minimize your exposure by vetting local contractors carefully, scheduling repairs promptly, and inspecting your property for signs of age and damage. Your property is unique, but these tips will help you create a checklist for preventative care.
- Check exterior lighting weekly.
- Inspect stairs and walkways quarterly.
- Inspect breaker boxes and fuses annually. Don’t foget to check electrical outlets, wall receptacles and exhaust fans.
- Test smoke detectors and recharge fire extinguishers twice each year.
- Replace filters on appliances and HVAC units quarterly.
- Schedule routine maintenance on water heaters, heating and cooling systems, plumbing and appliances based on age and manufacture’s recommendations.
Partnering with Professional Consultants
Building a good relationship with outside contractors to maintain your property is important. Preventative maintenance extends the life of your appliances and keeps your property value high.
Unless you have extensive accounting and legal experience, you’ll probably benefit from hiring professionals. Many attorneys don’t charge for the initial consultation, so take your time finding a legal representative with an education and experience related to real estate law. It’s better to have a relationship with an attorney before a legal challenge arises than to search for one after the fact.
Our tax code is challenging. Staying informed about allowable deductions and fluid tax regulations is a full time job. Permanent tax code changes for landlords took effect in January 2014, offering some unique benefits for homeowners, but taking advantage of the changes means properly “decoding” the updates.
Engaging a CPA to guide your tax planning strategies is one step you can take to increase revenue potential.
Investing in Technology
Proactive management saves time and money. Investing in property management tools that help you manage maintenance issues and record rents and expenses accurately reduces stress and streamlines reporting.