It’s a new year. You’re closing the books for the old year. It’s time to review the past and see what you can do better this year. With these relatively slow days in early January, it’s the perfect time to conduct these annual assessments.
Here, we’ll discuss different parts of your rental property business that deserve special attention at the start of the new year. We will cover areas such as reviewing your leases, assessing your insurance coverage, staying up to date on the newest laws, and much more. Plus, we asked some of our favorite landlords what their resolutions are for the new year!
Consider How Changes to Laws and Regulations Will Affect Your Landlord Business
Though changes in laws and regulations happen throughout the year, the start of the new year is the most popular date for new laws to take effect. Landlord-tenant laws have always seen changes from year to year, but we’re seeing much more change than usual over the past few years.
If you have properties in certain parts of the country, you’ll want to watch out for rent control initiatives. In these same parts of the nation, some of the last COVID-19 moratoriums should expire.
Wherever your properties are, changes to federal laws can affect your business. These are laws like those pertaining to fair housing standards and access rules for those with disabilities. And, of course, you always need to know about any changes to your state’s landlord-tenant law. If there’s a new notice requirement before you can evict, you must know about it.
It’s a good idea to attend a seminar or webinar about any updates to federal or state law. You’ll probably want to check in with your attorney too. You don’t want to find yourself in the expensive situation of finding you’ve violated a law you knew nothing about.
My New Year's Resolution for my Vacation Rental business is to expand onto other platforms, including a direct booking website. Since I started my business in 2017, I've been focused on Airbnb. In 2022 I laid the foundation by investing in software to expand to other platforms. In 2023 I'm looking forward to accepting more direct bookings and optimizing my properties on platforms outside of Airbnb.
Review Leases and Make Changes Based on New Laws and Regulations
Now that you understand any changes in laws and regulations, you need to review your leases. These are the most important legal documents for any rental business. They’re much more than agreements on what the monthly rent is. Leases spell out landlord and tenant responsibilities in many situations.
You’ll want to pay particular attention to any illegal provisions in your leases. By simply attempting to enforce an illegal provision in your lease, your tenant could win money from you. For example, if your property is in a state that has adopted the Revised Uniform Residential Landlord and Tenant Act (2015), you need to know if the state kept the exact wording of §205.
If your state adopted the precise wording of §205, you might have to pay your tenant three times the amount in controversy should you try to enforce a lease clause that says the tenant must pay your attorney fees.
Review Your Tenant Screening Process
Tenant screening is one of the most important tasks of a landlord. The old saying, “prevention is worth a pound of cure” applies when deciding on whether to accept a tenant. It only takes one bad tenant to make your life miserable.
Make sure your screening techniques comply with the latest laws. One of the easiest ways to do this is to work with a professional tenant screening company.
My theme for this year is "Level-up". My plan is to take all of my accomplishments and lessons learned from last year and use them to level up in 2023. Some of my more specific real estate goals are to: buy a foreclosure property, complete my first flip, buy a tiny home rental, and start investing in mobile homes!
Review Your Finances and Make a Strategy for the New Year
Going into the new year, managing your finances in light of economic stress is one of the most important things a landlord can do. The good news is that there’s a lot of demand for housing. The bad news is prices are increasing everywhere. You will probably need to raise the rent.
Make a Budget and Financial Plan for the New Year
Plan now for higher prices in 2023. Work this into your budget. When making your financial plan for 2023, consider if extra spending can increase your profits. Cost cutting isn’t always the best solution during tough economic times.
For example, if you want to attract new tenants that will pay more rent, upgrades might be a good idea. If the cost of upgrades is less than the increased rent you’ll receive from attracting these new tenants, it’s makes sense to spend the money. Also, consider that during inflationary times, your money is losing value when not invested.
Often, it’s better to invest in what you know best. Being a landlord, you probably know more about your properties than about the stock and bond markets. With inflation, any upgrades will cost more later. But making the upgrades now will open you to increased returns on investment. Of course, this rule only applies if the upgrades work to increase profitability.
If you have great tenants, you may want to focus on keeping them. If so, instead of adding fancy new security systems to rental units, consider what will keep your tenants happy. Is it time to replace the HVAC unit? Remember where there’s inflation, it’s going to cost more to replace that unit next year.
You Will Probably Need To Increase Rent To Match Inflation
As mentioned earlier, you’ll probably have to raise the rent. Your costs are increasing and you can’t stay in business unless you deflect at least part of the increased costs on to your tenants. They need to shoulder part of the burden of inflation.
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Make Sure You’re Sufficiently Covered by Your Landlord Insurance
Risk doesn’t go away just because there’s a tough economy. Litigation actually increases during tough economic times. One of the most important services any business must have is insurance. Insurance provides a level of certainty needed to plan effectively for the future. Without insurance, a single accident on your property can wipe out your rental business. Even worse, it could leave you broke.
If there’s one rule all landlords need to know, it’s this: your homeowner’s policy only covers issues while you live in the house. If an accident occurs at a dwelling you own, but tenants live in it when the accident occurs, you must have landlord insurance to cover the loss.
It’s a good idea to look at your current landlord insurance policy to see if you have sufficient coverage. Does it cover you for natural disasters likely to occur in your area? For example, if your properties are in an area with frequent hailstorms, you’ll want to make sure your landlord insurance covers hail damage.
My goal for 2023 is to add an additional 4 units to my family's portfolio. This should come to about $2,000/month in cash flow! Additionally my goal is to continue helping other investors crush it in real estate!
Natural Disasters Are a Bigger Program Than in the Past
Losses for natural disasters don’t go away just because you’re enduring a tough economy. Since 1980, the average annual inflation-adjusted cost for natural disasters has been approximately $50 billion per year. For five of the last 10 years, the losses from natural disasters have been greater than $100 billion. At $350 billion in damages, 2017 holds the record.
Inflation has nothing to do with those higher numbers. It’s a fact that we’re seeing not only a higher quantity of natural disasters, but also these disasters are more severe than before. Never has it been so important that you have the right landlord insurance.
Remember, these are inflation-adjusted numbers. When you’re ready to replace a unit destroyed by fire or storm, you’ll find the price of the labor and materials will be higher because of inflation. You must have the right landlord insurance to make sure you’re completely covered.
The Right Landlord Insurance for You
The right landlord insurance protects you in many ways, including:
Legal defense where there’s personal injury or property losses by tenants or their guests
Coverages for damages from personal injury or property losses
Loss of rent while a unit is being repaired or rebuilt
Losses from vandalism or burglary
Different types of risk are more likely in different areas. If your units are in a higher crime area, you’ll want to make sure you have enough coverage for vandalism and burglary. Whether it’s volcanos, storms, fires, or vandalism, you must make sure you have enough coverage for the types of risks you face.
Of course, there are some issues that apply anywhere you have rental properties. One example is the risk from personal injuries occurring on your property that leads to a lawsuit. Make sure you have enough coverage.
While I don’t believe in New Year’s Resolutions, I deeply believe in writing down and reviewing your goals. I recommend a three-step process for goal setting. The first thing is to write down your goals in the past tense as if they have already happened. For example, in January 2021, I wrote a goal in my journal: “ I wrote a book with my name on the cover.” Well, I had not yet accomplished this goal but I wrote it in the past tense to give myself an opportunity to visualize it actually coming true. Thus, the second step is visualization. What does it feel like when you accomplish the school? For me, I saw my book on a bestseller list, and I felt the pride I would have felt while reading positive reviews. The third step is to give gratitude for this accomplishment. That’s right; I actually thank the universe for providing me with all of the skills needed to accomplish the goal and give thanks for making it come true.
By December 20, 2021, I had a book proposal with Bigger Pockets, and by April 2022, I submitted the completed manuscript. On November 7, 2022, it was published. By December 10, 2022, it was on the best-seller list on Amazon. By January 2023, it had more than 100 positive reviews. Exactly 2 years after I visualized what it would feel like to read these positive reviews, and I can tell you it feels better than I ever imagined. - Sarah Weaver, Author "30-Day Stay: A Real Estate Investor’s Guide to Mastering the Medium-Term Rental"
Making sure your rental business is functioning at its optimal level is one of the best New Year’s resolutions for landlords. Early January is a slow time of the year for many landlords. It’s a great time to review your operations and plan for a better year.
One of the most important considerations with your planning for the new year is how you’ll keep risks low. For you, that’s means having the best custom-tailored landlord insurance solution for your properties. Steadily is here to help make this part of your New Year’s resolutions easy.