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Best Path to Higher Profits – 100% Occupancy or Better Tenants?

Real estate investments in Westminster

The name of the game in real estate investing is maximum profits, minimum headaches, and a dream life. In hot pursuit of this ideal, investors inevitably come to a proverbial crossroads.

Investors Must Choose Between Two ‘Loves.’

This choice is deceptively difficult, because, while they both make the same bold promise, only one delivers, while the other leaves you high-and-dry.

Yes, achieving 100% occupancy and having A+, quality tenants are two of every investor’s favorite things.

But when forced to choose one or the other – which is the reality for most investors in the Carrol County area – many investors choose wrong.

One would think that the choice is simple.

“I’ll sacrifice premium-quality tenants in exchange for 100% occupancy any day,” is the cut-and-dry retort of many landlords. After all, if all your units are rented out at the price you set, you’re making money and life is good.

This is how most businesses are launched, mind you. Simple equations are plugged into a calculator and the resulting sum total reflected in that little screen sends an endless flood of entrepreneurs straight to la la land – where the houses are big, the cars are fast and the dollars are long. “Ah, my life with all those zeros…”

But, every investor and entrepreneur is soon snatched right out of cloud 9 when faced with actual numbers, equated by doing real business in the real world.

Think 100% Occupancy Is the Better Choice? Think Again…

In most cases, sacrificing premium-quality tenants for 100% occupancy leads to diminished profits in the long run. You see, in order to achieve 100% occupancy, most landlords settle for subpar, even unqualified, tenants.

However, placing an unqualified tenant in your unit to get it rented quickly and earning money, instead of costing money, will, likely, come back to haunt you. Sure, you want to eliminate the financial burden of an empty unit as fast as possible; but it may cost more than you can calculate.

The Cost of a Bad Tenant

Let’s put into perspective some of the costs and headaches an unqualified tenant may cause you. First off, I’ve seen unqualified tenants write checks, just to see those checks bounce harder than a basketball in the NBA Finals. In one particular case, a tenant that bounced a check broke their lease just a few months later, leaving the landlord to pick up the pieces.

Unqualified tenants are far more likely to take poor care of the property, which may lead to costs far greater than the deposit you collect. If you have an unqualified tenant that causes disturbances and eventually have to evict, you’re looking at costs of $2,500 or more.

These horrors and more are all fair game, and far more likely with unqualified tenants than with premium-quality ones.

Steps for Maximum Rental Moolah

  1. Financially Prepare for Vacancies – Don’t operate financially on a month to month basis. When you calculate rental pricing for each of your units, you need to allow for 30-60 days per unit, based on industry averages. There are certainly ways to minimize this number, but, if you prepare based on the industry averages, you’re less likely to lose money on an annual basis.
  2. Use a Proven Qualification Process – It’s critical that you ask ALL the right questions on your screening form, background checks, employment references, and rental history. Done right, this process will give you a full picture of qualified tenants.
  3. Hold Tenants Accountable – You must have collateral with your tenants and measures they know you will take if they don’t act in accordance with the rules and contractual agreement.
  4. Conduct frequent inspections – You can nip a lot of small problems in the bud before they become big problems by conducting frequent inspections.

Focusing on attracting premium-quality tenants is the key to building a profitable rental property business with far less headaches. Following these steps will ensure that you maximize rental profits and minimize headaches and frustration.

But wait…what if you could have it ALL?

Join me at our next local Real Estate Investor Meetup where we discuss the best kept secrets of attracting premium quality tenants AND maximizing higher-than-average occupancy!

There’s no cost and no obligation, just the savviest investors across Carrol County, meeting to reveal our best kept secrets.

Simply Call us at 410-332-4432 (UTZ PM) or email info@utzpm.com to register today.

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