These 10 ideas can help landlords save money.
bad news is that investment property costs increased when taxes increased in
January. Interest rates have also increased. The good news is that savvy
landlords can take proactive measures to improve the bottom line now and in the
upcoming new year. With the help of experienced legal counsel, landlords and
investment property owners can consider the following suggestions for
increasing their properties’ profitability.
10 Tips to More Income
1. Refinance. As
predicted, interest rates have climbed but still remain
historically low, so now is the time to take advantage of low rates, available
financing, and rising property values before the window of opportunity closes.
Before you decide to refinance, compare the expected savings and income with
the expected expenses and risks, and determine if and when the benefits
outweigh the costs. The costs can include appraisal, inspection, legal, title,
and other fees, and any penalties for early payment of the existing loan. The
risks can include restrictions and guaranties in loan documents. The benefits
can include lowering payments, accessing needed cash, avoiding balloon
payments, reducing or extending the loan term, reducing the amount of debt,
improving loan terms, and increasing income by using loan proceeds to make
improvements. Review your properties to minimize your costs and risks and
maximize your benefits.
Reduce Taxes. Have you considered a real estate tax
appeal before the deadline? Even landlords who lease on a triple-net basis
should consider filing timely tax appeals to lower their property taxes. In
this economy, tenants are extremely sensitive to additional costs; this move
avoids losing tenants because the taxes being passed through are too high,
helps existing tenants survive by saving money, and attracts new tenants who
are comparison shopping among potential sites. Another way to obtain tax
benefits is through 1031 exchanges.
Plan. Consult with counsel to discuss and
update your plans and options, including estate planning, exit strategies, and
business succession planning. An experienced trusts and estates lawyer can
ensure that the maximum amount of your money stays where you want it, instead
of going to Uncle Sam.
Reduce Responsibilities. Update all your
documents and procedures to reduce your responsibilities. For example, you can
clearly require tenants to perform and pay for all obligations, including,
without limitation, all construction, compliance, utilities, maintenance,
repairs and replacements. And you can reduce responsibilities by improving
procedures, from installing energy efficient lighting and equipment, to
improving negotiations and vendors.
Improve Insurance. In the wake of Superstorm Sandy, the
Colorado floods, and other disasters both natural and human, it is important to
review your coverage and your tenants’ coverage to know and understand what
risks your property is protected from — and where exposure exists. Don’t rely
on certificates of insurance that may not protect you; make sure that all
insurance is up-to-date, accessible, and provides adequate coverage for the
most likely damage in your area.
Manage Risks. Review and update your compliance
procedures, employee handbooks, and other documents and procedures to prevent
problems. Other ways to reduce costs are by considering available dispute
resolution options to improve and expedite resolutions, using estoppel
certificates and releases to prevent lease problems, and using lien and claim
waivers to avoid construction claims.
Improve Properties. Have you recently developed or
remodeled your real estate to attract and retain the best tenants and increase
rents? You may also be able to transform vacant spaces into new uses, add pad
sites, and lease to temporary tenants. Other sources of potential income include
charging for underutilized spaces, and charging other fees. And you may be able
to save money by adding solar panels.
Increase Collections. Make sure you are collecting your
unpaid debts while complying with the Fair Debt Collection Practices Act and
other applicable laws. It is important to expedite collections while also
ensuring that your strategies and procedures will reduce future debt collection
problems. And it is essential to enforce all your bankruptcy and other rights.
Improve Your Deals. Do your documents maximize recovery of
operating expenses and unpaid rent? You can also increase income and cut costs
by improving leases and other documents. For example, by avoiding dangerous use
and building restrictions, co-tenancy clauses, termination rights, and
unexpected obligations, landlords can avoid lease landmines that can kill
deals, prevent operation and development, and cause lost rent and damages.
Get Deals Done Faster. Do your negotiations
take too long? You can increase income and cut costs by expediting the
negotiation and drafting of letters of intent, leases, amendments, contracts,
and other documents.
are just a few examples of how landlords can improve the bottom line now.
Evaluating these questions requires careful review on an individual basis with
A. Nelson, Esq., is a shareholder and member of
the Commercial and Industrial Real Estate Group at Stark & Stark. Contact
him at firstname.lastname@example.org.