Wealth, Waste (time & money), Wear & Tear, Web
Wealth – Owning investment property is an excellent way to build long term wealth. As long as you manage your property as an investment and business your chances of building wealth will be good. Many people don’t treat their rentals as an investment and therefore actually lose money – by not maintaining the property, having rent too low, paying for all utilities, not collecting rent on time, etc. Investment properties cost money and it is worth having a good CPA on your side to advise you on what you can and cannot write off on your taxes. Investment properties are like any part of your investment strategy such as stocks, bonds, 401k etc. Real estate is more hands on unless you have a management company handling everything. Building wealth takes work but has a huge payoff.
Waste – Time & Money. Again, manage your rental like a business so you don’t waste your time. Have systems in place. Manage the showing, vacancy process and when maintenance gets done. Handle your accounting in a systematic way again to save you time. Your time is worth something. Trying putting a dollar amount to an hour of your time. You might be shocked. All the time you spend at the property is costing you money. Don’t be cheap with vendors – they save you time and yes they cost but you get to write all this off on taxes.
Did you know that as an owner you cannot write off your time when you do a maintenance repair? You can write off the materials but not the time. So, then, why do it yourself? If you are doing a full remodel ok you will save alot of money but if you have a plumbing repair – just call a plumber. I have one client that when a toilet needs to be switched out on the rental will go buy the toilet and have the plumber put it in. I am sorry but that is a waste of time and money! First, how long did it take to go find a toilet, purchase it and take it to the property. Then the plumber comes out and puts it in but now there is no warranty for the toilet. You still paid the plumber their service charge so are you really saving anything???
The biggets piece of advice I can give property owners is to do annual preventative maintenance checks or have a contractor or handyman do it for you. We do this annually in the business and we find all kinds of little things that tenants always says to us, “it is small I didn’t want to bother you with it” Well, they are afraid of the rent increasing if they complain. The reality is that the small drip can turn into something large and very expensive. It is also when I get to tell tenants to put the batteries back into the smoke detectors and if there is a fire they will be held liable. If the place looks like a dump then I let them know they have to clean it up – health and safety is at hand and their lease states the property has to be kept clean. Not only will these checks allow you to save money but time in the long run. It will help determine if you want to renew the lease with the tenant, how many people are actually living in the residence and the overall care being taken with your investment.
I had one owner that refused the annual inspections. He called them “fault finding missions”. It took me years to convice him of the benefit to doing them.
I like the old sayings, “A stitch in time saves nine” and “Don’t be a penny wise and a pound foolish”
Please don’t waste your valueable time and money micromanaging or ignoring your investment properties. Get help if you need it. On your death bed are you going to be saying, “I wish I spent that Saturday snaking the plumbing at the rental”…God, I hope not, I hope you are thinking of how glad you are that you spent your free time with family, friends, and doing the things you love. What a better way to spend your time and money.
Wear & Tear – Hard to define but I am a common sense person and property manager. Here are some examples of what I consider wear and tear. Walls have some marks from furniture, a few nail holes a hole behind the door from the knob. Crayon or pen painting on the kids walls or holes of any kind in closet doors, or in walls (large holes) is not normal wear and tear. Carpet once professionally cleaned looks good. If less than 5 years it should looks almost new maybe a few small discolorations. Not ruined. Blinds shouldn’t be bent. House should be clean at move out. Dirty is NOT wear and tear. Find out what manufacturer warranty and time frame for the product is.
Web – when advertising on Craig’s list keep in mind you can’t use words that discrimminate such as (family home, kids welcome, perfect for seniors etc.) Can’t say NO Section 8 either. – Post good photos that show the property clean.
Be very careful of scams. Delete any inquiry from someone out of the country wanting to rent sight unseen. My policy is you have to see the property before you can apply. Another scam is people take your photos and description on Craig’s list and change the add and offer the same property for substantially less rent. You may get calls from people who are angry thinking you are trying to do a bait and switch. You can water mark the photos so it is harder to copy and paste. Make sure to check on your property. There have been situations where people send money ahead of time, meet someone at the property and get a key and come to find out the person runs off with the money and the owners find out the house is rented to someone they have never dealt with.
Use caution with people on the web. This is another reason to use a property management company for placement services. They have heard it all and know the scams.
Please check out my website at www.PortolaRentals.com if you are interested in properties in Santa Cruz or have rentals in Santa Cruz, CA.
Kathleen Richards
