Why Rental Owners Lose Money - The Dirty Little Secret

What happened? I ran the numbers, bought the property, and found a tenant who was highly qualified financially, but at the end of the year, I lost money on my property. I thought I had done everything by the book!

This was me fourteen years ago. I thought it was simple to be a landlord. Rent out the house and make extra after all the bills are paid. I didn’t understand that not only did I not genuinely understand rental property maintenance neither did my tenants.
I made the tenants responsible for minor repairs and maintenance in my leases. I didn’t realize at the time that a lot goes into maintaining a property that can only be learned from experience. I became a rental property owner six months into my homeownership experience. I had just enough time to think I knew what I was doing before I was transferred and became a roommate again. I had rented plenty but never had full responsibility for taking care of a property.

What was the biggest thing I missed?

Maintenance.

This was HUGE and cost me several thousands of dollars before I realized what I was doing wrong. What was the most expensive mistake with the cheapest solution?

Furnace filters.

I grew up in a house with a boiler. I had never seen a furnace before. I had no idea what maintenance was required. I never informed my tenants of the responsibility. It wasn’t until I got the call in mid-January in Wyoming that the furnace was not working. I sent out a repair company, and they explained that the filter had lodged inside the furnace and that the lack of maintenance over the years caused a total failure of the machinery.

I needed a new furnace.

This was a $4500 mistake. If I had taken proper care to ensure that maintenance was conducted regularly, I could have made it another 5-10 years on the furnace I had. Ouch.

What did I change? I spelled out what needed to be done with future tenants and when. I wrote it all in the lease. Did this help? Not so much. I learned later that tenants rarely read the lease; if they do, they forget nearly everything in it, and something comes up.

Next, I realized that I had to communicate better with my tenants. I checked in with them every couple of months to see what they needed. This wasn’t efficient, and I usually couldn’t remember what had been done on each rental property.

Eventually, I moved out of state, and the situation got more complicated. I couldn’t just stop by to check on the property anymore. I tried hiring property managers, but the ones I found didn’t conduct onsite inspections nor take care of maintenance issues unless the tenants requested them.

This is what I came up with to prevent issues from occurring:

• 1. Set up a spreadsheet with all the items on each property that required maintenance. I included: Make, model, serial number, a digital copy of the owners, and maintenance schedule.
• 2. Added dates to my calendar to check in with the tenants.
• 3. Send emails or make phone calls checking in with the tenants, seeing if they need anything from me and a reminder of the steps they need to complete for maintenance.
• 4. Log these contacts with my tenant and set a reminder to check in again.

This system worked well, which may seem obvious to some, but I had to learn this the hard way, and I hope that it helps some of you to keep these preventable issues from arising.

What has your experience been with keeping up on rental property maintenance?