How should landlords set goals? Management problems look a lot more manageable when enough money is coming in and your forecasts show it will continue to do so. Bad tenants are an annoyance, but not devastating. Repairs and maintenance are in the budget, and not reason to lie awake nights worrying about how to deal with them.
Two key words jump out here: forecasts and budget. If you are suffering from month to month with your rental property, doing both of those can ease that suffering immeasurably. Forecasting is another case entirely. The amount of money you forecast you will receive and pay out during the coming year is dependent on numerous variables, many of which you have control over.
Look to local experts for their views on what the rental market will do in the coming year, but not too hard. Your apartment or landlord association should have speakers and articles about what you should expect. Take it with a grain of salt. Pay attention only to real numbers, not guesstimates of what the market will do. From that you can decide how much, if any, you can raise the rents. The amount of rent then tells you how much gross income to forecast.
Forecast done, set a goal on how much money (gross and net) you plan to earn in 2010 from the renting of your properties. While you’re at it, you could do a five-year plan, as well. “Real Estate Investment Analysis Software,” available from us, makes it simple.
Management Goals
These fall into several slots. One is, of course, goals for the quality of tenants you rent to. We discussed that earlier. However, you might want to really define your tenant quality goals to include specifically when you want to get a particular bad tenant out of your property and start the ball rolling, determining to do whatever it takes (legally, of course) to get the job done. Then define exactly what you would consider to be a good tenant.
A second goal could be rent collection. How about 100 percent rent collection by the fifth of the month? That is accomplishable if you set your energies and mind to it.
Another planning slot is maintenance and capital improvements. Maintenance planning is part of goal setting, and until you find out how much money you can expect to have, you can’t make definitive plans. So your budgeting and management planning have to work together.
You can set a specific goal for customer service repairs. Those are the repair that tenants call about, saying something is broken. A goal of all requested repairs completed in 15 days would be reasonable. Of course, safety and safety repairs would have to be completed within a day or so.
Prompt repair completion is a selling point to tenants and prospective tenants. A common complaint tenants have is that their landlords don’t make repairs promptly. If you could provide a guarantee of all repairs in 15 days or less and health and safety repairs in 48 hours of less, wouldn’t that give you a leg up on other landlords? It’s something to think about.
Sale of Property
When large corporations and Real Estate Investment Trusts buy property they know exactly when they will sell it. Every property has a plan. There is no reason that every property owner shouldn’t do the same thing. Once you know when you are going to dispose of a property, you also know what kind of money you are going to spend on it before you dispose of it. If you knew when you were going to sell it before you ever bought it, you would also have decided what kind of maintenance and improvement needs would be acceptable, too. For example, if you plan to sell in five years and were looking for cash flow, you would probably not buy a property needing capital improvements, such as a roof. However, if you planned to keep the property 20 years, your considerations would be different.
If you don’t know already when you are going to sell individual rental properties, decide now. It might be after you retire, and that is fine—then you know. But it might also be in the coming year. That being the case, you have things to take care of, such as making a schedule for getting it on the market and getting touch with the 1031 Exchange facilitator so you will know exactly how to proceed toward buying another property while deferring capital gains taxes.
Buying More Property
What are your ultimate goals for real estate investing? Don’t know? Used to have them but got discouraged with the business? Used to have them but never wrote them down so you forgot? Now is the time to revisit and remap your road to real estate investment success.
Certainly if you are going to sell a property in the coming year, you’ll want to look at buying (exchanging for) another. And if you acquire another property, you’ll want to have specific plans for it, such as how much to spend in repairs and at what point you want to sell, as mentioned above.
Follow the advice about how to set goals and plan, write down specifically and when you are going to acquire more property, including the amount of income it needs to generate. The more specifics you include about the property you want, the better. Will you get all of them? Probably not, but if you don’t know specifically the property you want, how will you know when you find an acceptable one?
Years ending in zeros generate more goal setting and planning than common, run-of-the-mill years ending in threes and sevens. If you are inclined to do more planning than you would for another year, just make sure to do a terrific job of it. If you need to, find a book on goal setting and planning that uses a system that works the way you do and have at it.
Here’s to even greater success in the coming decade.
