Whether your investment properties are a full-time business for you or a way to generate passive income on the side, it’s important to maximize every dollar you make from your rentals. There are some important ways you can protect your real estate investment income. Here are some strategies to keep in mind as you purchase new properties and work to make the most of the ones you already own.
Customer Service is King
Any amount of research on marketing will tell you that it costs five times more to attract a new customer than it does to keep the ones you already have. The same rule applies when it comes to pleasing your tenants. Once you’ve found responsible renters who pay on time, it’s worth investing your energy and money to keep them happy and protect your real estate investment income.
This means making sure the property is kept well-maintained and up-to-date. That might include taking on landscaping projects to clean things up or maybe even add in features that your tenants will enjoy (an outdoor patio or a pool, depending on the size of the property?). It definitely includes ensuring that any problems — an outdated stove in the kitchen or damaged flooring in the living room — are addressed right away. Good communication and immediate action are two qualities of an excellent landlord.
Ensure You Have the Proper Insurance
Just as with your full-time residence, it’s essential to properly insure your rental property. Insurance is important whether the property is a condo, a townhouse, a single-family home, or an entire apartment complex. This will make sure you’re covered if the unimaginable strikes — a fire breaks out, drenching rains bring historic flooding to the neighborhood (as happened in Houston during Hurricane Harvey in 2017), or a tornado touches down.
More than just natural disasters, insurance can help protect you from human-related emergencies, as well. Maybe someone cuts their foot while barefoot in the pool area of your apartment complex or falls while coming down the front steps of their rental townhouse. No matter what, you’ll want to make sure your real estate investment income is well-protected from any lawsuits that may result. Talk to your insurance company to find out what kind of policy will provide full coverage for your specific properties.
Structure Your Business Wisely
If you’re new to real estate investing, you may not realize that one important way to protect your real estate income is through tax deductions — and some of those tax deductions are only available if your properties are structured in certain ways.
For example, a new tax code put in place by Congress in 2017 gives tax deductions to pass-through organizations like LLCs. This brings the tax rate from 37 percent down to 29.6 percent, and it’s an excellent way to make the most of your real estate investment income.
Use a Property Manager to Help Protect Your Investment Income
There are a lot of moving parts when you own rental properties, and utilizing the services of a property manager is one of the best ways to protect real estate investment income. They’ll help you keep your properties occupied by finding the best tenants, follow up on missing rent payments and late fees, as well as be able to advise you on questions you may have about property renovations, taxes, insurance, and other aspects of the rental property market.
Owning rental properties is just like running any other type of business; every dollar counts. By learning how to maximize and protect your real estate investment income, you’ll be able to make your investment property portfolio a true success.