Rental property ownership can be an incredible route to financial independence through passive income. *But*, if done poorly, it can also be a drain on your time and resources. Unfortunately, one doesn’t usually choose to do it poorly. It just happens through choice and circumstance – sometimes even out of your control. It’s an investment, right? Investments have risks! Yet risks can be mitigated and managed with proper planning. Here a few ideas to help make sure the path you follow has a strong tailwind:

  1. Screen tenants thoroughly to reduce the risk of non-payment or damage to the property. This list includes
    • An application on file for every adult who will be living in the unit
    • A proper background and credit check for every adult who will be living in the unit
    • Verification of pay through pay stubs
    • Place a call to the previous landlord for a reference.
  2. Perform proper preventative maintenance to keep the property in good condition. There are a variety of reasons to do this. First, to keep costlier repairs at bay – potentially saving thousands of dollars in the long run. Second, keeping good tenants happy is tantamount. Your first bad experience with a renter that doesn’t pay, stays, and wrecks the place is/will be all of the proof you need here. There is a human interaction here that needs to be respected.
  3. Be efficient in your financial practices. Find ways to free up time and increase organization with actions like online rent collection, online rental applications and online maintenance requests so you can have online records storage and not stacks of papers in files.
  4. Keep up to date on market trends and pricing. There are limits to how much money a rent can be raised by year over year. If a unit becomes woefully underpriced in a changing market, consider all of your options. One may be to vacate the unit at the end of the rental term, invest in some upgrades, and put it back on the market at a higher price point. Or, maybe you have a really great tenant and it wouldn’t be worth the hassle. There are also middle ground options here. You may have an excellent tenant who has been living in the same unit for years in a now well below average market rent. Talk to the tenant, perhaps they would be willing to commit to a higher rent if some upgrades are performed in the unit – a new kitchen or bath.
  5. Regularly review operating expenses to find ways to save costs. This can include utilities, landscaping/snow removal, etc. Most importantly it can include time. Are you spending too much time in a particular area managing your units? How much is that time worth, and could it be spent elsewhere more productively.

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