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Can you win in any market?
No seasoned real estate investor would deny the importance of keeping up with macro and micro market conditions. Ignore either, and you don’t really stand a chance.
With that said, lately, conversations of a downturning market have swallowed up evergreen advice. So, it feels like not enough is being said about tried-and-true strategies, principles, and tools.
Why does this matter? It’s these very strategies that are invaluable for being successful in any market, whether that be to:
- Maximize your profits
- Reduce the energy spent managing your rentals and reduce stress
- Streamline systems and processes to save time
- Anticipate issues or roadblocks by preparing in advance
Getting a read on a changing market is vital to the success of your portfolio, but there’s a lot you can do now that will help you be a more successful investor, whether the market goes this way or that.
Before we start, let’s talk about what we won’t cover.
Besides obvious tips (I know, you’ve read a billion articles with those, and you’re tired of it), the things include:
- Considering your local market
- Maintaining a property
- Choosing the right property
If you were looking for general, boring tips like those, then I’m sorry to disappoint, but there are plenty of other articles you can read on BiggerPockets that cover that.
Instead, below, we’ll be talking about more creative (but still evergreen) tips that aren’t so obvious. Some may ride that line, but the reason I include them is because I feel there’s something that’s often missed about the topic.
While you’re bound to have heard some of the tips I’m going to cover before if you’re a seasoned investor, my goal is to give you something new and actionable you can take with you to actually improve your business no matter how long you’ve been investing.
Ready? Let’s talk about it.
1. Expand Your Networking Opportunities Beyond Just Agents And Investors
As a real estate investor, the value of connecting with other investors who may be able to fund your deals or be a partner on a project is clear.
Connecting with local agents who can find you deals you’re willing to invest in is also straightforward and something you’ve likely already done as well.
And you’ve probably already tried or actively participated in local networking events and groups.
But one area I’ve seen investors at times not take full advantage of is connecting with other local professionals, such as:
- Title companies/officers
- Contractors
- Loan officers
Depending on the types of deals you do, there are many other people that play a vital role in the process of buying and selling real estate that you can benefit from.
Don’t be shy about it, either. These are mutually beneficial relationships that can and will bring you deals and them business.
2. Factor Vacancy Rates Into Your Overhead
Handling vacancies is just a part of managing rental properties. If you’ve been at the game for a while, you know that. How landlords handle vacancies, however, can vary greatly.
The most important thing you can do is make sure you have funds put aside for vacancies, which allows you to have a way to immediately turn around and:
- Market the property
- Get an inspection done
- Get the unit cleaned
All without having to worry about it affecting your bottom line for that month.
The most common numbers thrown around are 5-15% of your gross monthly rent, with 10% for vacancies being conventional wisdom. However, you’ll need to figure out what number works best for you depending on factors such as your market and the type of properties you’re renting.
Some landlords don’t like putting anything aside at all, in some cases using a line of credit (LOC) to handle surprise expenses. However, this is risky and needs to be handled properly to not incur additional debt.
3. Find A Great Property Management Company That Matches Your Style
If you’re newer to real estate investing, contracting a property management company could save hundreds of hours per month and your sanity.
If you’re a seasoned investor, however, you may have had a bad experience with a property management company, dropped them, and never given it another try.
The problem with hiring a property manager is that they’re like any other partner in your business: you need to mesh well. If you don’t, it doesn’t work.
Not every property management business operates the same way. Some companies will have a process that works for you, while you may clash with others.
Also, every property management firm is run by people. Some of those people you’ll click with, others you won’t.
You should read up on how to find a property manager that works for you and take some time to learn what you should be looking for before trying a few out.
4. Screen Tenants Fully And Don’t Be Afraid To Turn Someone Down
Sometimes, you have to take what you can get. I get that. However, in many markets, you can and probably should be a bit pickier than you typically are in how you select tenants.
A better tenant will save you an immense amount of time and money over the course of a lease. They’ll lead to fewer calls, issues, and more time.
It may be worth waiting a bit longer than you typically would to see if you can find someone that is a better fit.
Make sure to run full background checks, too, not just criminal background and credit reports. Use a service like TransUnion’s SmartMove® that offers access to unique reports such as:
- Eviction history
- Income insights
- ResidentScore system
Doing so will give you a fuller picture of whether that applicant is a good fit, leading to fewer tenant issues over the long run.
5. Expand Your Toolbelt To Include Creative Financing Tools
If you’ve dipped your toes into creative financing already, you’ll know there are a variety of ways you can find and make profitable deals that are outside of the typical process.
When the market changes, what worked before may not work any longer (or for a period of time). Some types of deals are mainstays in every market, but how hot they are is another story. Still, others you may want to stay away from altogether, depending on market conditions.
Short-term rentals aren’t always hot, for example. Neither are fix-and-flips, depending on what kind of deals you typically do and your market.
To help combat that and allow you to find more deals that make sense based on what you’re looking for (and find ways to grab properties you otherwise wouldn’t be able to), you can sometimes use creative financing.
This includes a variety of strategies, such as:
- Seller financing
- Subject to
- Certain hybrid approaches
Creative financing is a whole different beast, so there isn’t enough space here to dive into the details. However, you can start with this article.
6. Systematize As Much Of Your Process As Possible
You need to work to streamline and systematize your process in every way possible. That includes how you:
- Choose which properties to invest in
- Renovate your properties
- Manage your properties
- Collect rent
- And more
Time saved is money saved and the more you widen your margins the more likely you are to be able to make a particular deal and property profitable.
The other benefit to systematizing? You can teach a team.
If you have a few dozen doors and you still don’t have more than a VA on your team, you’re probably keeping things too close to the chest.
Systematizing saves you time and money, and can even make it easier to expand your reach into further markets.
7. Invest In Property Management Software
I know, if you’ve been doing this for a while, then any change to your process can feel like nails to a chalkboard. I’m sure that’s how Blockbuster felt when they turned down buying Netflix for just $50 million too.
What’s my point? Change is almost always uncomfortable, but adapting is necessary for survival. And what has been one of the biggest upgrades to the portfolio and property management process in the past two decades? Property management software.
Gone are the days of spreadsheets and notepads, and in their place have arrived streamlined, centralized, and simplified systems that make:
- Everything easier to locate and track
- A variety of tasks take less time than they used to
- Make more possible with less effort
Not every property management tool is created equal, but most tools will help you in a variety of useful ways and areas, such as:
- Rent collection and late fees
- Listing, screening, and leasing
- Maintenance and tenant communication
- And more
Conclusion
The number of great tools, resources, and wisdom out there is limitless. You truly can make it in any market if you know how to play it.
Some factors are outside of our control, but by building out your toolbox, you’ll have more opportunities to build a successful portfolio in a way that works for you.
One of the best tools we’ve found at DoorLoop after speaking with thousands of landlords is simply knowledge and information, whether that’s knowing about landlord-tenant laws, how to properly evict a tenant, or access to documents such as forms, checklists, and applications.
That’s why we put together an all-resources zip file with all of our best checklists, templates, and other resources. It includes:
- A collection of checklists such as an apartment maintenance checklist, deep cleaning checklist, sales and negotiations, and an HOA audit checklist
- Lease agreements and rental forms for every state
- Landlord reference letter, introduction letter, termination letter
- Chart of accounts template
- A residential property questionnaire to find out how happy your tenants are and where you can improve
- Security deposit return letter
- And way more
Being a successful real estate investor in any market is a tall claim, I know. But you’ve never had more access to better information than now. Make the most of everything, and don’t be afraid to reach out to your fellow investors for advice and guidance.
This article is presented by DoorLoop
DoorLoop is the highest-rated property management software online
DoorLoop is the easiest-to-use, highest-rated property management software used to manage hundreds of thousands of units in more than 100 countries around the world. Attract tenant applications, manage leases & work orders, collect rent on autopilot, run accounting & reports, communicate with tenants, and much more from anywhere with ease.
Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.