Property Management Blog

The Three Most Costly Landlord Expenses (Avoid These to Maximize Profits)

Real Estate as an investment involves some risk, as do all good investments. Naturally, by reducing risk a property owner increases the opportunity to maximize profit. Then, what is the greatest risk and the three most costly expenses in Property Management? The quick answer to the above can be summarized in just two words: bad tenants.  

In the same way that experts often describe the three essential elements of good real estate as ‘location, location, location', we can emphasize that the three big reasons for draining profits to property owners are 'bad tenants, bad tenants, bad tenants'.  

Bad tenants create losses in three ways. First, bad tenants are tenants who are not paying rent. This scenario is worse than a vacant residence as there is no chance to get it re-rented until the bad tenants have finally been removed. Second, bad tenants are not taking care of the property. You can assume they're probably not taking off their shoes before walking on the carpet. Walls get dirty faster, appliances break down sooner, and plumbing issues occur more often. These all have to be restored to good order before a landlord can expect good tenants to move in once the bad tenants are finally moved out. Finally, bad tenants involve the necessity to go through legal processes to evict. Not only is this costly but also it consumes a lot of time, sometimes dragging on for months.  

Although there are no guarantees, good Property Managers are trained to recognize the signs of bad tenants before they move in. Some of these signs are revealed in credit scores, employment history, references and time period at previous locations. Additionally, through a thorough screening processes, Property Manager's are able to spot trouble before leases are signed, thus nipping it in the bud.

Unless you are confident about the business of property management, save yourself a lot of time and money by hiring a Property Manager who's been doing this a long time and knows what he is doing.

Dan Stein is the president and founder of Silver River Property Management, providing property management services in PG County, Anne Arundel, Howard and Montgomery Counties since 2002.