You may think it’s only the tenant who has a hard time paying the mortgage, but as a real estate investor or landlord, there may be times when it’s hard to pay the mortgage on your end as well. Here are some things you can do to avoid facing difficulty in paying your mortgage each month.
Keep your properties full. While it may sound overly simplified, this is the most obvious method for ensuring you’ve got rent money coming in each month to cover your property mortgage payments. Don’t allow yourself to get slack on advertising for new tenants. And don’t put off screening applicants or filling your properties because you get busy or overworked. Recognize filling your vacancies as a major aspect of your REI business success and deal with it quickly and efficiently every time.
Be proactive. If a lease is coming for renewal in three months, start communicating now to see where the tenant is. See if they will be definitely renewing. Ask if they are considering moving, and if so, why? You may be able to address their reasons for moving. Maybe they just need some of the rooms to be freshened up to make things more appealing to them again. If they are having financial difficulties maybe you can adjust things so that they can stay. Consider what you will be going through if they move. You will spend money on reconditioning the unit, at least one month’s lost rent, and if you have a property management company, they probably are charging you up to one month’s rent to go through the process of finding a new tenant. The costs could easily amount to three month’s rent. Would it not be more economical to lower your rent and keep the tenant versus finding a new one. And, if the current tenant always pays on time, it’s better the tenant you know that taking the risk on an unknown tenant.
Do your best to find quality tenants. While you want to keep your properties full, finding good quality tenants is key. By “good” it means they pay their rent on time, keep the property maintained and don’t abuse the lease. By using background and credit checks, you can find the best tenants available and thereby do what’s possible to keep your rental fees coming in regularly, which will help you pay the mortgage when it comes due. Consider an incentive to get a good tenant. The best kind of incentive is something that fits their need(s). If it is a tenant that you want above all the others, ask them what it will take. If you feel the tenant won’t abuse the property (retired couple with no kids), will pay on time (social security), etc. it may be worth installing extra lighting in the basement or garage or outside so they feel secure.
Look for longterm tenants. Don’t assume that quality tenants will necessarily be longterm ones. Some good renters may know they can’t stay over a few months at most. They may be students or working a temporary job. They may just be living in an area waiting to move or retire somewhere else. Whatever the situation, opt for longterm renters when the choice is available. Doing so will make filling a vacancy at least a more infrequent possibility.
Keep the property well maintained. If you want good tenants, longterm tenants and tenants who pay their rent on time, do your part to keep them. Deal with maintenance issues quickly. Make repairs as necessary. Upgrade appliances or at least ensure the ones you provide are in good working order. Respond to your tenants’ calls quickly, or if you can’t be sure they know you’ll be unavailable for awhile.
Being a good landlord will go a long way in developing lasting relationships with your tenants, which will in turn, help you keep them in your property longer. Often a tenant and landlord relationship can turn an average tenant into a great one simply because they want to keep that relationship intact. Communication is everything. Let them know you are there if there is an issue with the property. Let them know that if a change in their financial situation arises, to let you know. Don’t just not make the rent payment. Let them know, if you don’t hear from them, you’ll think the worse. You want to work with them to keep them in place. Constantly replacing tenants is very expensive.
In a tough economy, it’s important to do all you can to avoid facing the difficulty of paying the mortgage. That applies just as much to an REI professional as it does to the average renter. These simple tips can help as you work to develop lasting, longterm, rent paying tenants to keep your properties bringing in the income you need every month.