If you want to know the fastest way to build wealth, most people will point you toward real estate. It won’t make you rich overnight, but the compounding benefits certainly allow you to grow at a faster and more predictable rate than almost any other strategy.
But once you decide on real estate as an avenue for building wealth, you have to further narrow your focus and choose a niche.
For most people, owning rental properties is one of the more accessible options. However, there is one downside: The time and stress it takes to manage the day-to-day tasks of a rental property.
Thankfully, there are steps you can take to reduce and eliminate pain points that cause you stress as a rental property owner and investor. Here are several of them:
Be Thorough With Tenant Screening
The number one thing you can do for yourself as a rental property owner – aside from purchasing good properties in the first place – is to find good tenants. You do this with thorough tenant screening.
Good screening consists of a documented and intentional strategy that includes things like rental applications, background and credit checks, employment verification, and reference checks.
One of the most important things you can do when screening tenants is speak to past landlords. It’s a good idea to contact previous landlords – not just their current one – to gather their feedback.
(A current landlord might recommend a bad tenant just so they can get them out of their property, whereas a previous landlord has no stake and will be much more likely to shoot you straight.)
When you have good tenants in place, you don’t have to worry about late rent payments and all of the excuses that come along with them. You can also rest assured that your tenants are taking care of your property and treating it like they would if it were their own.
Hire a Professional Property Management Service
As a rental property owner, you obviously want to maximize every dollar of income that you possibly can. This means lowering expenses so you can be as profitable as possible. But sometimes you have to spend some to get some.
In other words, there are certain expenses that actually increase your long-term profitability. One of those expenses is a property management service.
A good property management company will help you manage the day-to-day aspects of your rentals. This includes finding tenants, screening tenants, signing lease agreements, scheduling repairs, collecting rent, and more.
When hiring a property manager, consider the type of property you own. If it’s a luxury property, for example, hire a luxury property management company. By working with someone who understands your specific type of property, you’re more likely to get the results you want.
The great thing about having a property management company on speed dial is that you can stop being the one who executes and start taking a more strategic role in your investments.
This frees you up from constantly having to be “on call” and allows you to simply be a person who presses “buttons” and makes decisions. No longer are you tied to your properties.
You can leave the country for a month at a time, if you want, and as long as you have your phone with you, everything can be managed properly. Having a property manager allows you to go from landlord to lifestyle business owner.
Be Proactive With Maintenance and Inspections
Preventive maintenance is key to avoiding major issues down the line. Proactively schedule regular inspections to identify and promptly address any maintenance needs. You should do this while tenants are occupying the property – not just in between tenants.
(If you wait until a tenant leaves to conduct inspections and perform preventive maintenance, it could be 12 months or more before an issue is identified and dealt with. Take preemptive action!)
Some examples of things to be proactive about:
- HVAC tune-ups
- Checking the crawlspace and attic for possible leaks
- Termite treatments (if prevalent in your area)
- Roof inspections
- Etc.
By addressing small repairs early on, you can prevent them from becoming costly problems later, reducing stress related to unexpected maintenance issues. It also allows you to protect the long-term value of your investment.
Maintain an Adequate Emergency Fund
Set aside funds specifically designated for unforeseen expenses. Having an emergency fund like this can provide peace of mind, knowing that you have resources readily available to address sudden repairs, maintenance emergencies, or unexpected vacancies without causing financial strain.
You can decide how much money you’re comfortable setting aside, but it’s generally considered a good idea to have a minimum of five to six months of expenses set aside.
That means if it costs you $4,000 per month to cover the mortgage, interest, taxes, utilities, and upkeep, you would want at least $20,000 to $24,000 set aside in an emergency fund that you don’t touch. You obviously won’t be able to reach that level right away, but it’s something to work toward.
Having a six month emergency fund might seem kind of excessive, but it’s always good to think about worst-case scenarios.
If you’ve been in this industry for a while, then you probably have pretty strong memories of the 2020 pandemic and how, almost overnight, many tenants stopped paying their rent. In some cases, this went on for months – leaving landlords holding expensive mortgages with no cash flow.
When you have a beefy emergency fund for each property you own, it helps insulate you from some of these worst-case scenarios, which allows you to stay afloat and sleep better at night.
Enjoy a Stress-Free Property Ownership Experience
There are always going to be pros and cons with any investment you make. With rental properties, these pros and cons can feel more pronounced than they may with passive investments, such as stocks or bonds.
However, along with these heightened factors comes the potential for great upside.
By optimizing your rental properties for less stressful day-to-day management, you can give yourself more advantages than most investors get to enjoy.
