You're rental property is up and running. It's cash flowing nicely. You're a lazy landlord. Life is sweet.
There are clever ways to boost your returns and cashflow mainly by adding to the topline. I've written about them here:
But there are two big line items that many landlords don't think about. And that's an opportunity. Every landlord should question their property tax and insurance.
Property tax can be as much as 10% of your gross rental income and maybe half of your expenses. Insurance - especially for coastal or high risk areas - might be 5% of your gross rental income. Together those are dollars straight out of your pocket. And, unlike landscaping or maintenance expenses, your tenants don't see any immediate and direct benefit to them.
Let's start with the easier and quicker of the two: insurance.
Shop your insurance around every two years. That's it. If you're using a broker, tender your business to another broker. Make sure you give the "challenge broker" a copy of your existing coverage so you're comparing like-with-like. Different brokers work with different insurance companies. Try online-only providers like Lemonade. (This is not an endorsement, and they have limited state/building coverage). Start the shopping-around process about 60 days from the renewal. That way you'll have plenty of time to make the switch.
I recently tendered one of my buildings and the annual policy cost dropped by 40% or about $1,950! That's $1,950 straight to the bottom line for about 90 minutes of work. I love that hourly rate (and you can think of it as a recurring annual saving!).
Insurance brokers and companies hate it when you shop policies around every year. Their business model relies on you "setting and forgetting". But every two years seems like a reasonable compromise to me. They have to earn your business. You have to invest 90 minutes. Fair deal.
Get an abatement on your property tax. An abatement is a reduction in your tax. The process to appeal varies jurisdiction to jurisdiction. An abatement is a way of saying "this building isn't worth what the local council thinks it is worth".
Fill out your property tax abatement form. Here's one from my local council:
And here's your order of operations:
- Check your property tax card from the local assessor's office. Note anything incorrectly recorded, like the square footage, number of bedrooms, permitted use etc.
- Compare your property value to similar properties in the neighborhood. Use public records and google map photographs. Get a realtor (or pay an appraiser) to pull recent "sold" data.
- Take down any unused buildings (say, an old decrepit garage) that don't add value to the rent but adds cost to your assessment.
- Check if your city/jurisdiction has specific abatement allowances for recent renovations or new constructions. Some councils want to encourage improvement, like Portland, Philadelphia, and Des Moines among others.
- Walk the property with the assessor and point out all the ways that your property is bad. Tree on the sidewalk blocking light on your building. Uneven flooring. Old appliances. Worn countertops.
The key is to use hard data. Don't be subjective. Your assessor won't be. Property tax on one of my buildings runs over $15,000 a year. Even a 10% saving is meaningful, especially given that abatements tend to carry forward for many years.
If you're adamant that you're paying over the odds for your property tax you can go a couple of more expensive and time consuming routes. One is to use a lawyer specializing in property tax abatement. Another is to use a commission-only company that challenges property taxes.
Remember: a dollar saved is a dollar earned. Now go earn that dollar.
For random takes on real estate investing you can follow me on Twitter @laziestlandlord