ABCs of Buying Rental Property: How You Can Achieve Financial Freedom in Five Years

How to Reduce Costs

If you can’t raise rent rates to keep pace with inflation, then try to decrease costs.

You can start this process by looking at a list of expenses on your property.

1. Your Mortgage or Equity Loan Rate

Is it too high? Can you convert your equity loan into a conventional mortgage, which normally should decrease your interest rate? 

Check to see if the monthly payment is lower even though you have to pay for closing costs. If so, that might be a good option if you plan to hold on to the property for at least five years (a general rule of thumb when it comes to paying closing costs and points).  

2. Taxes

Is your property being overtaxed? 

You can check this at Zillow by looking at the values of homes located around your rental property and checking the tax records of your home compared to the others. 

If your property is paying 20% more than others that recently sold, you might file an appeal with the property tax assessing authority. 

You lose nothing if the authority rules against you. 

3. Insurance

Home insurance rates can vary greatly from company to company. 

It’s easy to get new quotes. 

If you don’t want to do the legwork, contact an independent insurance agent, who can search scores of companies to find you the least expensive option. 

Be sure your property isn’t over-covered — that you are not paying for more coverage than you need.

4. Advertising 

Have you tried putting a for-rent sign on your property when it becomes vacant? 

That is often a lot cheaper than placing advertisements in news media or social media.

John’s property was located on a moderately busy street, and he found that he received more calls from prospective residents who saw the sign than from ads he had placed.

5. Homeowners Fees

If you have to pay HOA fees for your property, there often isn’t much you can do to reduce the fees, especially if you’re not a member of the board. 

But should you try to join or seek election (depends on your HOA rules)? 

As a member of the HOA management team, you might be in a better position to find ways to reduce costs, such as getting multiple bids when the time comes to hiring a lawn maintenance/landscaping firm.

6. Gas/Electric and Other Utilities

If your tenant pays the gas and electric bill, you may not concern yourself with such costs.

There also isn’t much any of us can do to reduce rates from utility companies. 

But if you pay those costs, you might consider adding insulation in the attic or around piping. You should do a cost/benefit analysis, however, especially if you don’t intend to keep the property for a long time. 

7. Routine Maintenance and Repair Costs

When you have to contract with vendors to do repairs on your property, always get more than one bid. 

The rates that electricians, plumbers, painters, tilers and others charge varies greatly. 

Of course, to really save money, do the work yourself if you are competent. You might also be able to hire friends or neighbors to do jobs that don’t require technical knowledge (like raking leaves, picking up trash, cleaning up areas).  

8. Internet Service and TV Programming

The costs of internet service and television programming have become more competitive in recent years, especially with the advance of steaming channels. 

Search around for the best price but be aware that some forms of internet delivery are faster than others. Speed is often a big concern among residents.

9. Accounting and Taxes

If you can, do your own books and taxes. 

It will save you a lot of money. 

But if you have a question, seek out expert advice. Sometimes the experts can save you a lot of money or keep you out of legal and tax trouble. 

Above all, always follow the law.