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Alt Title: 4 Ways to Recover the Cost of Investment Property Repairs
Investing in real estate can be highly profitable, but it comes with plenty of expenses. In addition to property tax, repairs are usually a significant expense for property investors.
Not only is the labor expensive, but you also have to pay for permits. Depending on where you live, you might end up spending more money on permits than the repair itself.
Although repairs are unavoidable, there are several ways you can at least offset the cost of those repairs – here’s a list of several possibilities to consider.
1. Become your own agent for your deals
Each time you sell a property, you pay around 5% in commission fees to your real estate agent. On top of that, you’re paying around 2-4% for attorney fees and transfer taxes, not to mention several other expenses. On a $300,000 home sale, that amounts to around $18,000 in commissions.
You’ll have to pay commissions and fees as a buyer, too. For instance, in addition to your agent’s commission, you may have to pay a brokerage fee, an escrow fee, and a courier fee. You can’t get out of paying most fees and taxes, but commissions are a different story.
If you’ve ever wondered how to get out of paying agent commissions, the answer is to become a licensed real estate agent yourself. Technically, it’s the only way to avoid paying commissions, and licenses tend to be affordable in any state. For example, you can get licensed in New York for less than $150. Compare that to the thousands of dollars you’ll save by not having to pay agent commissions.
When you get your real estate license, you’ll have the legal right to act as your own agent during real estate transactions. Whether you buy or sell, or both, you’ll only be working with one other agent, which means your cost of investing will drop significantly.
2. Work with a property management company
If you have numerous investment properties, you may want to look into hiring a property manager to save some money on repairs. While a property manager will be an additional expense, the overall benefits outweigh the cost and the right company can save you plenty on repairs.
Property management companies usually get great service rates from local contractors and pass those savings onto their investor clients. They get great deals because they can provide the contractors with a steady flow of business.
While you’ll save money on repairs, you’ll pay property management fees. However, it’s a worthwhile expense when you need their services anyway. For instance, a property manager will take over all your landlord duties, including collecting rent, filling vacancies, showing units, scheduling cleanings, and serving eviction notices.
When you don’t have to be a landlord, you’ll have more time to pursue additional investments and manage your existing investments. So, in the end, you’ll actually save even more money in the form of your time.
3. Avoid unnecessary renovations
Repairs are expensive enough, but renovations can be astronomical. With rental property, it’s better to avoid unnecessary renovations to start with. When you need to offset the cost of repairs, avoiding renovations becomes a necessity.
Before doing any serious work on your properties, make sure it’s going to add significant value to the property and won’t take away from your repair fund. For example, if your kitchen cabinets are outdated but fully functional, don’t replace them just for your tenant. Only replace the cabinets if you’re trying to sell the property or if you’re moving in and you want to have nicer cabinets.
Some renovations will be unavoidable, like certain renovations that resolve deal-breakers for tenants. For instance, if your toilet is in an awkward position, it’s worth renovating the bathroom to reposition the toilet. Other renovations might be required, like getting your building up to code or making it accessible for a tenant.
4. Raise the rent
When was the last time you raised the rent? It’s admirable if you want to be the kind of landlord who doesn’t raise the rent, but that’s not going to make you profitable. If you haven’t raised the rent in a while, consider starting with small increments until your property is being rented at the current market rate. You can use the extra money to pay for repairs for your properties.
Repairs don’t have to break the bank
Your repairs don’t have to break the bank. In addition to having a repair fund, use the tips in this article to offset the cost, and you won’t feel like you’re paying too much for repairs.
