You might be doing a lot of the right things to maintain your return on investment, but did you know that there are also plenty of things that property owners do that can reduce ROI? Unfortunately, it can be easy to overlook issues that will zap your return on investment if you're not careful.
Some things that eat away your ROI are obvious, while others could be things you do (or don't do) without realizing the impact on your bottom line. Today our Detroit rental property management experts talk through the top five hidden investment property ROI killers.
First and foremost, it's crucial to set goals. Without long-term goals for your investment properties, you may spin your wheels and fail to move ahead. However, when you have set goals, you can track progress toward the goals. If you're off-track, you can reassess and tweak the goals or determine why you're not reaching them.
Once you have your income and ROI goals set, it's critical to have a strategy to reach them. Many property investors may have clear-cut goals but no plan to reach those goals. A Detroit rental manager can help you develop a strategy that puts you on the path to achieving your goals.
The best property management companies can tell you that setting and managing expectations is vital for success when operating rental properties. Expectations allow others to know what is required of them, which helps diffuse misunderstandings. Conversely, when tenants or vendors don't understand their responsibilities, property owners experience poor ROIs.
For example, if a property owner hires contractors to perform maintenance work, they need to know exactly what you expect from them to consider the job "complete." This includes agreeing on the cost, the scope of work, and the timelines to complete the repair. Failing to set expectations with contractors means jobs and tasks may not get done as planned, including exceeding the budget or leaving you with an unfinished make-ready that lengthens the vacancy time for a rental property.
In addition, it's crucial to set expectations for your tenants, too. They need a clear idea about the rental costs, fees, late charges, security deposit requirements, and the rules and responsibilities outlined in the lease agreement.
When a rental property is empty and you have a vacancy, property owners often worry about lost income the longer the property sits empty.
Many property managers recommend including vacancy time into your budget and ROI goals so that you don't panic when it happens. When panic sets in, it's easy to make poor decisions, like reducing the rent amount or choosing a tenant that doesn't meet your criteria or screening process.
Making the wrong decision regarding a new tenant can cost more later if they don't pay the rent, and you incur the costs of an eviction (and another vacancy). In addition, lowering the rent price can leave you without the cash flow you need to cover expenses and maintain ROIs.
Good rental property management involves regular maintenance and routine inspections. When real estate investors don't keep up with these duties, it creates greater problems (including unfavorable ROIs).
For example, if a property experiences a small problem, such as a water leak, but the owner fails to fix it, it could lead to other property damage. A property manager can tell you that it pays to keep on top of maintenance issues so that you won't have costly replacements or more significant repairs later. Plus, one of the primary reasons tenants don't stay is a lack of good property maintenance. Setting good repair and upkeep practices help property owners reduce costs and keep good tenants long-term!
When property investors think about their ROI, they probably don't think much about the importance of communication. However, communication is an important factor for anyone in business, especially those who deal with "customers" (or in this case, renters).
You and your tenants must have a good flow of communication. Be upfront with them about what the lease entails and what they can expect from living in the property. For example, if you plan to do quarterly inspections, make sure they know in advance what you're doing and when you're doing it to maintain good relationships and respect their privacy.
In addition, be proactive about things like lease renewal terms and deadlines. Respond promptly to requests and help renters feel valued and heard to avoid miscommunication or damaging relationships.
Staying on top of your ROI is vital to building long-term success through rental property investments! If any of these five issues that could ruin your ROI sound like something that could be affecting your returns, it's time to connect with the best property management company Detroit offers.
The seasoned experts at Own It Detroit help property owners quickly identify areas where improvements can boost returns. Reach out to learn more about how our property management services can help you avoid issues that could be hurting your ROI!
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