The past year has been a mixed bag for landlords. The eviction bans left many stuck with tenants who couldn’t pay rent; on the plus side, rents skyrocketed, and the demand for rentals increased. Although there’s no way to know what 2022 will bring, one thing’s for certain: it’s best to be prepared. Here’s a look at some of the most important tasks you should complete before the new year to ensure you—and your properties—are ready.
Preparing Your Rental Business for the New Year
- Review your tenant screening process
If there’s anything the pandemic has shown us, it’s that choosing the right tenants is critical for your business. Even though the eviction ban has ended, no one wants to deal with non-paying tenants (or chronically late rent payments). Late or missed payments could mean the difference between making a profit and being unable to pay necessary expenses, like mortgage, utility bills, or repairs and maintenance for your rental.
As 2022 inches closer, take a moment to evaluate your current tenant screening process. Are you assessing credit reports, eviction history, and background checks? Are you utilizing tenant verifications to confirm that the rental and employment history applicants provide are accurate? Do your current screening methods give you a clear picture of their employment and financial habits? If you’re not 100% confident in your current process, consider adding on our comprehensive screening reports.
- Evaluate your rent
Rental rates have been on the rise over 2021. According to a report from Realtor.com, rent prices saw an 11.5% increase from August 2020 to August 2021. Based on the report, rent growth even appears to be outpacing home price appreciation.
Out of the many types of properties, larger properties saw the largest growth rate, but even studio apartments showed promise. If you haven’t evaluated your rent prices in a while, now is the perfect time to do so—especially if any of your leases or rental agreements are expiring soon. If you’re having difficulty determining how much to charge, contacting a local real estate agent can help give you some perspective on what your property is worth in the current rental market.
- Put some money aside
Another important lesson from the past two years of the pandemic: it’s essential to have an emergency fund. Ideally, you should have enough set aside to cover things like unexpected repairs or months of lost rental income—just in case. In general, you’ll want to have at least six months’ worth of expenses in savings.
If it’s not possible to set that much aside, you may want to consider signing up for rent guarantee insurance. This insurance covers rent payments (usually for 6-12 months) if your tenant defaults. Depending on your insurance provider and policy, it may also cover legal expenses for disputes related to evictions or recovering lost rent.
- Plan updates and repairs ahead of time
As you may have noticed, construction supplies have been in short supply over the past year. This is due to several issues: a growing demand to construct bigger homes, a surge in DIY projects during the pandemic, and the worldwide supply chain disruption.
So, if you know your rental will need to be repainted, have new siding installed, or an appliance will need to be replaced, it’s best to get ahead of the supply issues and rising costs. Start planning any repairs or upgrades you’ll need as soon as possible to prevent the project from being delayed or costing more than you anticipated. You may also want to consider buying certain materials in bulk or simply being more strategic about when you make purchases.
- Is it time to diversify?
If you want added protection against the uncertainty of the past couple of years, you may want to consider diversifying your portfolio. This could include a mixture of buy-and-hold properties, short-term vacation rentals, fix-and-flips, or multifamily housing developments. Holding a variety of diverse properties can ensure your business has a cushion if one sector is hit harder than the others.
Although there’s no way to know what the future holds, taking steps to prepare your business is the best defense against uncertainty. Take some time to evaluate your current processes, rental rates, and investments, and make sure that you’re planning for the future. The more effort you put in, the more you’ll be prepared for whatever 2022 has in store!
Landlords Property Managers Contact TSCI