When you collect rent, money goes to pay business-related expenses such as insurance, taxes and the mortgage. It also gets used for other bills, such as those that come from advertising, property maintenance, utilities, water and garbage. And if you have a bookkeeper or handyman, you need to pay them as well.
But what happens when your rentals aren’t bringing in enough to pay for everything and cash gets tight?
The first thing to do is go over your monthly bills carefully, paying special attention to what’s going on with heat, electricity and water bills. Maybe you have a tenant who needs to open a window because the temperature is too high in his or her unit. If you control the thermostat, you might want to ask your renters whether they are getting too much heat.
If your tenants control in-home thermostats, ask them if you can run a check. Explain the situation to them. Perhaps you can get your renters to regulate their controllers more carefully. If it turns out that that defective thermostats are what are causing the problem, you may need to make a few replacements.
You might also consider putting in some weather stripping along windows and doors. If your rental home, condominium or apartment complex was built before 1970, the building itself may not have proper insulation. You may want to look into this, but be sure to do the math so that you know how long it will take you to get a return on your investment.
If it’s the water bills that are out of control, then you’ll probably want to do an inspection of all the faucets, toilets and water heaters for leaks. A slow drip from any indoor or outdoor water-bearing device can add up to quite a few extra gallons that you have to pay for at the end of the month.
No matter how tight things get, you should never tap into money saved for taxes nor should you even think about using the security deposits your tenants gave you when they moved in. Some states like Texas are less stringent about this than others, but as a matter of ethics, it’s to your benefit to keep that money separate.
At Herman Boswell, we believe that the one of the keys to successful landlording is good cashflow management. Our experts pride themselves on staying on top of the financial issues that matter most to our clients. When you need an experienced, top-notch team real estate management team to safeguard your investments, contact us!