How can landlords best protect their rental properties during the winter?
Extreme weather, as we experience in the lovely Midwest can definitely test and threaten rental homes. What smart moves can landlords make to winterize properties and protect their investments?
Going into winter it is a great time for owners of rental properties to inspect their holdings, take stock of condition and needs, and to ensure they are prepared. Prevention is far better and less costly than trying to fix things after the fact. That applies to all types of severe weather and natural disasters, including harsh seasonal weather.
Make it a habit, and system to routinely schedule property inspections before heading into the worst weather each year.
A part of this is having clear rental lease agreements which define whose responsibility certain items are (landlord or tenant). Then of course making sure you as the landlord have your end covered. That means supplies, contractors, and systems for dealing with maintenance, and responding to emergencies.
A part of routine maintenance and inspection at this time of year is certainly checking the gutters and keeping them clear. Be sure drainage is set up right to keep melting ice and snow flowing away from the property and foundation.
Check roofs for leaks and condition. Check doors and windows for drafts and water tightness. You don’t want unnecessary damage. If you are responsible for utilities this can be an area which creates or depletes cash flow as well.
Check heating. Will the furnace last through the winter? Has the filter been recently changed? Whether it is your responsibility in the lease or not, you certainly don’t want a grandmother or young family freezing in your property.
Cracks in sidewalks or porches or driveways are best fixed before a freeze and thaw which can make these problems and liabilities far worse, and more expensive.
One of the real challenges for real estate investors at this time of year is that they are not local. Either they have been investing from a distance, or they are off to spend the season in sunny/ warmer weather. That’s great, but someone needs to be on hand to keep an eye on the property and respond to calls. Get a property manager and have a plan for how to respond to various issues like the heat going out, slip and falls, and tenants being snowed in.
This is also an ideal time to check your insurance coverage. If your property has gone up in value you may want to raise your coverage. Make sure premiums are up to date.
What are you doing to protect your investments this winter?
Despite the fabulous displays of rehabbing and staging homes on ‘reality’ TV, the most experienced and savvy real estate investors typically avoid trying to be over-achievers when it comes to property renovations. Why is that? How do they tackle rehabs for rentals and fix and flips?
The Mindset of Success
The biggest way that the most objective real estate investors are different from the amateurs and flops is that they approach property renovation with a business mindset. Warren Buffett says “investment is best, when most businesslike.” This is a business. It could be a hobby. But most people don’t get paid for their hobbies. If you want to actually do well in real estate, you have to be business minded. That means watching costs and profits.
A big mistake most new investors make is trying to over-achieve when it comes to repairs and rehabs. It is easily one of the top three reasons investors fail and lose money. Remember, you are not going to live in the property. The key is doing what is necessary and profitable to rent or resell a property, not just to wow with looks. That would be like a real estate agent turning down a listing because they didn’t think a client’s home was up to par. They aren’t going to live there. Their job is just to sell it to someone. Everyone has different tastes and plans and needs.
Top Property Renovation Mistakes to Avoid
Spending too much on improvements
Improving items which the next buyer will replace, and discount the price for
Overspending on items a tenant is sure to break
Taking too long to finish a remodel
Renovating according to your personal tastes
Devaluing the property by poorly reconfiguring the layout
Adding features that give little ROI when you go to sell i.e. swimming pools
Don’t forget these two factors:
Buyers will revamp the property to their personal liking
Renters will put a lot of wear and tear on a property
You can put in gold plated toilets, but if the new buyer likes silver, they are just going to throw it out. Hence they aren’t going to pay more for your property. They may actually lower their bid due to the need to replace the toilet. Most renters won’t pay more because you have a $2,500 fridge versus a $700 fridge. Over a period of years those tenants will cause wear and tear on the unit. Which price fridge do you want to replace?
How to Nail a Profitable Renovation
Conduct thorough research on recently sold properties
Set a standard of improvements that will quickly yield a renter or buyer
Get multiple quotes and select a reliable contractor
Create a tight scope of work and deadline for completion
Know your budget, allow for overages on necessities
Commit to providing a healthy, safe, product which fits local renter and buyer budgets
Overspending and taking too long on a property renovation can get you in trouble. The property may never sell or rent, and you will eventually run out of money. Do provide a safe and healthy place to live. Yet, make sure you can make a net profit on the rates end users have proven to be willing to pay for comparable properties by location, square footage, and bedroom count. Stay objective, stay profitable.