What If Your Cash Flow Is Still Tight?
You collect rent, then pay the mortgage, interest, insurance, and taxes. You pay bills — advertising, maintenance, small repairs, cleaning supplies, utilities, water, and garbage. If you have an accountant, a lawyer, or a handyman, they have to be paid, too. On some properties there might not be much left as a cushion for emergency repairs and a monthly profit.
Ideally you want to collect enough rent to cover all expenses. So what happens when cash gets tight? If the unit isn't bringing in enough to meet the bills, you have to figure out why and find ways to reduce your expenses.
Read the Bills Carefully
Look closely at your monthly bills. Are they getting too high? Take a good look at what's happening with your heat, electricity, and water bills. Perhaps your tenant is roasting when the furnace turns on and opening one or more windows to get cool, fresh air. If you control the thermostat, ask if there's enough heat or too much.
If your tenant controls a thermostat, ask to check it. Explain that your heat bills have skyrocketed and perhaps the thermostat is defective. Find out if your tenant ever has to open a window to cool down the apartment. Perhaps then your tenant will take the hint and turn down the thermostat, and you won't need to do anything else.
Check the websites of your local utility companies. The sites may include tips for ways to save energy in your home. They also may have a home energy analysis that you can do online. There might also be an online “store” where you can purchase such things as energy-efficient light bulbs.
You might be losing heat through windows and doors. Put in some weather stripping and check it every year before winter sets in. The weather stripping might help you save money that can later be applied to new energy-efficient windows and doors. Make sure storm windows and attic windows are closed. Heat loss also occurs when buildings are not insulated, and few buildings were insulated before the 1970s. Before you have the house insulated, think carefully about the total cost (including replacement of siding, if necessary) and the length of time it will take you to get a return on this investment.
When you can't figure out why the water bill was so high one month, inspect all the faucets, toilets, and water heaters for leaks. Don't forget to look at the water meter that's in your house. Sometimes it, too, leaks or needs to be replaced. A slow drip from an indoor or outside faucet can add up to quite a few extra gallons that you have to pay for.
Even in an emergency, paying for something by tapping into money saved for taxes is never a good idea. You'll only have to find more money for the taxes. And the security deposit you got from your tenant is off limits. It doesn't belong to you and you might be required by your state to earn interest on the money while you have it.
Some people, including tenants, rarely turn off the television, lights, or fans, and that raises the monthly cost of electricity. You won't succeed in getting your tenant to change habits, but you can install sixty-watt bulbs or the new energy-efficient compact fluorescent bulbs in the entrance, yard, and hallway. They use much less electricity. Perhaps you can also purchase a package of those bulbs as a “gift” for your tenant.
Don't hesitate to ask the utility companies and the city to check your meters. Sometimes they're not working correctly, and if that's the case, you'll get a replacement at no cost.
