3 Tips to Make Your Real Estate Side Hustle Profitable

Managing a real estate side hustle isn’t easy. Technically, real estate investing is more involved than most side hustles, and it’s more like having a second occupation than a side gig.

Even owning just one rental property requires your time, money, energy, and diligence to ensure you follow the law to the letter. One mistake can sink your investment and tank your profitability.

Although it’s hard work, it’s a profitable side hustle, whether you own one property or ten. The key to maximizing your profits is to manage your properties more efficiently, and here are three tips to make that happen.

1. Track your expenses

If you aren’t tracking your investment expenses, you won’t know for sure how profitable you are. You also can’t determine the true cost of running your investment business. Tracking your expenses will show you where you can save money, where you might be wasting money, and opportunities to negotiate.

Ideally, you should be tracking your expenses with software and not just an Excel spreadsheet. A dynamic expense tracking system will help you see your current expenses and how your future expected expenses will impact your finances. While it’s possible, it’s inefficient to calculate these details manually.

Investment-related expenses are vast, and they’re simply impossible to track manually. Even with just one rental unit, you’re going to have the following expenses, at the very least:

·  Property tax

·  Various insurance policies

·  Other taxes

·  Software fees

·  Maintenance and repairs

·  And many more

Tracking your expenses with software is not only easier, but it also provides better accuracy when you run reports or view your analytics.

2. Protect against preventable losses

There are several preventable losses you may face as a real estate investor, and managing these potentials will help you stay profitable. The most common potential losses are:

·  Tenant damage. Wear-and-tear won’t create a significant financial loss, but retaliatory damage will. Most of the time, serious damage is an accident, but that’s not always the case. Some tenants intentionally damage their unit while they’re going through an eviction. This type of damage often includes punching holes in the wall, smashing up sinks and toilets, and stealing large appliances like washers and stoves.

The best overall way to protect your investment properties against tenant damage is to hold high standards for your tenants and fully screen each applicant. Don’t skip any steps in your process or make exceptions.

·  Lawsuits. Most lawsuits filed against landlords are for personal injuries. Sometimes genuine accidents happen, but sometimes they’re contrived by tenants going through an eviction.

The key is to run scheduled maintenance plans, have a good lawyer, draw up solid rental agreements, and follow all laws regarding your duty to inform tenants of known hazards. This might include putting up a sign rather than just having a verbal agreement.

·  Fires. Fires can happen seemingly out of nowhere and fast. Although, some are preventable. For instance, you can prevent cooking fires from becoming devastating by installing a fire suppressor like the StoveTop FireStop in your occupied units. You can also provide tenants with a fire extinguisher and teach them how to use them in case of an emergency.

For vacant properties, double up on security to prevent squatters from taking over.

·  Water damage. Most water damage comes from leaks and broken pipes, and this damage is preventable. For instance, when a leak is repaired right away, the damage is minimal. However, a leak left alone for a long period of time will eventually rot the inside of your wall or roof with almost no visible signs until the damage is enormous.

The key to preventing water damage is to insulate your pipes to prevent them from bursting after a winter freeze, and help tenants understand the importance of reporting minor leaks right away.

·  Tree damage. Tree damage can happen when you least expect it. Sometimes trees fall over after a heavy wind storm, but sometimes they fall over after a heavy rain due to shallow roots. Either way, you can prevent some tree damage by staying on top of the trees on your property. Call in a professional to take down dead trees when necessary.

3. Eliminate unnecessary expenses

Last, but not least, eliminate expenses that don’t support your bottom line. For instance, if you’re using software, make sure it actually makes you more productive. If you’re leasing a fancy car just to impress your clients, consider buying a used vehicle instead. You can find nice used cars just about anywhere.

Efficiency leads to higher profits

Finding a great deal will increase your profits temporarily, but increasing your efficiency – including cutting expenses – is a long-term strategy to stay profitable consistently.