February 10, 2023
Due to rising inflation, the cost of living has become a major concern for many individuals. There are now many more people who find it difficult to afford even their basic necessities. If you are a landlord in the real estate industry, this can lead you to numerous challenges. Coming up with the right strategy is now crucial to overcome the negative effects that the rising cost of living can have on your rental business. Let's dig deeper into this topic.
The increased cost of living is making it more difficult for your tenants to pay the rent. That's because now, they have to spend more money than before on energy costs, transportation expenses, food expenses, and so on.
One way to address this is to reduce the rent you charge, thus providing relief to your tenants. This reduction doesn't have to be significant; just make sure you find the right balance between profitability and tenant affordability - managing your cashflow is also imperative.
Freezing the rent is also an option that you should consider. Freezing rent involves not increasing your rent for a certain number of months. This will help tenants predict the rent and budget accordingly. While this option can help your tenants catch their breath, it can reduce your profitability - especially if your own expenses are being negatively affected by inflation.
You may also consider reducing the rent for a short time period. This can help the tenants to manage their expenses until the difficult period comes to an end. However, this can also lead to a loss of revenue.
Some landlords may also consider the option of offering flexible payment plans to their tenants. This means that tenants can pay the rent in instalments based on their current financial situation. This move will certainly help you increase tenant retention. However, you will have to take a financial risk.
As a landlord, you can take a look at your operating expenses and highlight the areas in which you can save more. For example, you may hand over your rental property management to a property management service, freeing you from the worry of negotiating with vendors.
A property management company will help you to optimise your expenses in different ways. For example, you can expect the property management company to come up with energy-saving measures and improve your financial business model. You should also conduct regular property maintenance so you can detect problems ahead of time. This is a proven method available to prevent serious problems and save a considerable amount of money in the long term.
Another way you can optimise the management of your rental operations is to use the right rental spreadsheet for landlords. They can help keep track of your income, expenses, and other key financial metrics related to your property.
With a simple internet search, you can discover the right template for your needs. Then you can have a clear view of how profitable your rental business is and how you can best deal with the current economic conditions. For example, you may use a spreadsheet template to cut down unwanted expenses and save money. The amount you save can be passed over as a rent cut to the tenants.
During these uncertain times, it's important to adopt the right approach to managing relationships with your tenants.
It is crucial to keep your tenants informed about any changes or adjustments you make during uncertain times.
This can help promote better understanding, especially in regard to rent adjustments or flexible payment plans. Taking into account tenant feedback can also be beneficial in enhancing the overall rental experience for them.
Instead of relying entirely on your traditional rental income stream, you may take a look at the other options available to make money through your property.
For example, you may rent out storage units for individuals who are looking for storage space. Another option is renting out laundry facilities for people who are looking for laundry.
Take a look at all the unused spaces on your property and see what options are available for you to make some extra bucks out of them.
This approach will help you to diversify your property portfolio. When one revenue stream fails to perform, you can cover it up with another. This will help you to generate steady revenue at all times.
Manual administrative work can be time-consuming and expensive.
That's when using property management software and automation tools can come in handy and help you streamline administrative tasks.
For example, property management software can also help you automate bill payments, tenant communication, and other crucial tasks.
One thing about the economy you can count on is that it's never still. We don't know how long inflation will stay at its current levels, whether it will increase even more, or whether and when things will improve.
This is why landlords should always be up to date with the latest economic trends and closely monitor the cost of living, as well as its implications for both tenants and rental operations in general, especially if they operate in a landlord friendly state.
Staying informed allows you to take proactive measures to adjust your strategies. For example, if the cost of basic necessities is coming down, you may slowly increase your rental. Conversely, if a significant increase in the cost of living is projected to happen over the course of the years, you can inform your tenant in advance and work out the right solution for both of you when there is still enough time for preparation.
As you can see, there are quite a few approaches available to landlords who are struggling with the consequences of inflation on their rental operations. These range from adjusting your rental to the current cost of living to taking steps aimed at cutting costs and improving operational efficiency.
Taking these steps will help you retain your tenants and minimise the impact on your revenue. Hence, we encourage every landlord to pay attention to these tips and implement them.
