It’s easy to see why first-time investors would assume that a rental property automatically equals a worthwhile purchase. After all, well-maintained properties in demand-heavy areas tend to rake in a fortune for their respective owners on a monthly basis. However, it’s important to understand that not every rental property meets this description. Furthermore, there are a number of mistakes made by first-time buyers that inadvertently hinder the profitability of favorable properties. So, if you’re wondering why your first rental property has failed to generate the desired profit, the following possibilities may hold the answer.
You Aren’t Effectively Managing Your Investment
Not all property investors are skilled property managers, and as many first-time investors come to discover, there’s a big difference between being able to purchase a property and being able to manage it. Property management can be particularly difficult for investors who own large multi-unit properties, like apartment complexes and condo developments. Properties such as these essentially function as small towns unto themselves, and if your property management experience is lacking to nonexistent, you’re going to have some problems.
Furthermore, not every investor has the time or inclination to manage a large property. For example, if you have a day job that’s completely unrelated to your real estate ventures, it’s impossible for you to function as an effective property manager. So, if you lack the bandwidth to properly manage your investment, you’d do well to enlist the services of a professional property manager. These individuals are highly adept at managing properties of all sizes and can act as dependable proxies in your absence. A good property manager will be able to process rental payments, address tenant concerns, delegate maintenance requests and perform a bevy of other important tasks on a daily basis, thus providing you with tremendous peace of mind and the knowledge that your investment is in good hands.
Just remember – poor property management often facilitates the need to sell properties. And if you’re asking, “Is real estate a liquid investment?,” you should know that, given how long it can take a deal to fully go through, the answer is typically no.
You’re Disregarding the Needs of Your Tenants
All landlords should seek to maintain favorable relationships with tenants. No renter relishes dealing with a landlord who regards their needs as an afterthought. And given that your tenants are giving you a sizable chunk of their monthly income, such frustrations are perfectly understandable. So, if you’ve developed a habit of taking a long time to respond to tenant communiques or simply ignoring them altogether, this needs to stop immediately. Allowing tenant concerns and feedback to fall by the wayside practically guarantees low renter retention and even stands to land you in legal trouble.
Furthermore, in the digital age, being uncommunicative with tenants is liable to result in a host of negative online feedback – and renters looking to voice their grievances have no shortage of vehicles through which to do so. From rental review sites to message boards to social media platforms, drawing the ire of just one tenant can do tremendous harm to your professional reputation.
With this in mind, make sure that all tenants have a phone number and email address at which they can reach you during business hours. In addition, take care to provide them with a number to call in the event of an after-hours emergency. You should also make a point of responding to emails, text messages and phone calls from tenants in a timely manner – preferably within the same day they’re received – and exhibiting the utmost courtesy throughout every tenant interaction.
You Aren’t Screening Rental Applicants
Every rental application you receive needs to be put through a meticulous screening process – no ifs, ands or buts. Regardless of how rosy a picture an applicant paints of themselves or how impressive they seem over the phone, proper screening is needed to ensure that they can be depended upon to keep up with rent and treat the property with care. Additionally, if you’re hindered by time constraints, consider outsourcing this task to a highly-rated screening service.
Although a good rental property can generate healthy returns for many years, you should never assume that success is a given. There are a variety of reasons for which rental properties fail to produce their owners’ desired returns, and while some of them are largely outside of your control, a fair number of them fall squarely on landlords. So, if you’ve been wondering why your rental property isn’t shaping up to be the surefire moneymaker for which you had hoped, the problem may lie with you.