Being a landlord is one of the best methods of delivering an outstanding rate of return, provided that you can keep the property fully occupied with excellent, reliable tenants who not only pay the rent on time but also look after your property. Replacing a good tenant is not just a challenge, but is also fraught with danger, as, on numerous occasions, good references do not always equate to a good tenant.
Why Tenants Vacate Properties
With all that being said, the best option where possible is to keep your tenants happy, and hopefully to extend their rental agreement for many years. The reasons below are the top five quoted by tenants who decide to vacate their current properties. By understanding these risk factors, a property owner can utilize this to their advantage, and hopefully, help to keep their properties fully occupied with reliable tenants.
An Increase In Rent
Mortgage or rental payments are usually the most significant expense in the family budget, and so when renewal time comes around, although it can be tempting to increase the rent to maximize profitability, this may be a poor option. If this forces out a good tenant, there is no guarantee that you will be able to rent out the property instantly, and even one month with no tenant could take a long time to recover from financially. Think carefully before increasing the rent by even a few dollars a month, as the risks may far outweigh the potential benefits.
On the other hand, study your competition. Rentometer.com is a good resource for determining market rent. It is better to raise your rent incrementally each year, even $5 a month. Otherwise, you may find yourself needing to jump the rent with a large increase that will chase away your tenants.
The value of an apartment building is based on the current income…. NOT potential income. When it is time to sell their building, landlords are shocked that they cannot get top dollar. If they had raised the rents every year, they would be able to sell at market values.
Lack Of Investment
As a landlord it can be very tempting not to invest in the property, a new kitchen or bathroom can be expensive, and it is understandable why businessmen and women would want to save on expenditure. A tenant, on the other hand, wants to live in a fully furnished well-maintained home. If they feel that the landlord is letting their home fall into disrepair through a lack of investment, it is only human nature that they will start to investigate other possibilities. Not every improvement needs to cost a lot of money, a new carpet, window blinds or even a dishwasher could make all the difference.
Increasing Crime Within An Area
As a landlord, there will always be specific factors outside of your control, and one of these is the crime rate. If an area experiences an increase in crime that will quickly be reflected in its popularity. Although as a landlord, you have no control over the crime rate, it is always advisable to be proactive, and if you sense a deterioration in the area, it might be a good time to sell before things get too bad. Rest assured if this does happen and you have failed to act, your tenants will move out, your property value will decrease, and the situation can rapidly turn into a disaster.
Disruptive or Aggressive Neighbours
Another problem, which is slightly out of your control, but needs to be taken very seriously is the neighbors. Imagine if you have a small family and live next door to neighbors who party late into the night every night. This would very quickly become exhausting and frustrating, and when the time came for renewal, you would be welcoming an escape. That is precisely the situation some tenants find themselves in.
If you get complaints from tenants about their neighbor, take them seriously. Try to resolve the situation by speaking directly to the neighbour/landlord or by speaking to the authorities. Consider installing a fence. Let your tenants know you are doing everything in your power to deal with the problem.
Lack Of Response From A Landlord
As a renter, when a leak develops, or the HVAC system goes out, they expect a rapid response from their landlord. In their view, they are paying rent and expect a certain level of service. When things do go wrong, it is imperative that you resolve those problems quickly and with a minimum of fuss. Otherwise, when the end of the rental agreement comes around, they will find a landlord who does fulfil their responsibilities.
Bonus: If you encourage prompt communication with your tenants, you will save money on water, electricity, and other maintenance issues.
Be a Professional or Hire a Professional
Being a landlord is not always easy, and as you grow your business and increase your portfolio, the challenges only multiply. However, being a property owner is still the best paying career.
You can learn the skills it takes to being an effective property owner/manager. The CT REIA offers a property management course once a year. Also, the CT REIA store offers a property management manual complete with forms, leases, and screening tools.
It might actually be a good investment to hire a property manager who will deal with all of these minor issues, enabling you to spend time growing the business and generating more profits. Visit the CT REIA Service Directory to select a property manager that fits your needs.