Landlords saw a real mixed bag in 2021. On the one hand, eviction bans left many stuck with nonpaying tenants, and bills just piling up. On the other, rents skyrocketed, and the red-hot housing market kept demand for rental housing high for much of the year.
There's no telling what's in store for 2022, but if one thing's for sure, it's that landlords need to be prepared -- for basically anything.
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Want to safeguard your rental property business in the new year? Here are the five tasks you'll want to tackle as we head into 2022.
1. Strengthen your tenant-screening process
Choosing your tenants wisely is critical -- and this year has taught us that in spades. Though the eviction ban has been lifted and many COVID restrictions are now in the rearview mirror, that doesn't mean nonpaying (or always late) tenants are easy to deal with.
Late payments can mean an unpaid mortgage and delayed property maintenance. And evictions? Those are time-consuming and expensive. Your best bet is to choose a highly qualified, responsible tenant from the start.
As we get closer to the new year, take some time to assess your current methods for screening tenants. You should be analyzing their credit reports, talking to past landlords, and getting a feel for their employment and financial habits. There are services that can help size up a prospective tenant, so if you're not 100% confident in your own process, consider bringing in the big guns to make it ironclad.
2. Reevaluate your rent
Rents have been on a tear this year. According to Realtor.com, they actually notched their first-ever month of double-digit growth in August, with an 11.5% jump over August 2020. Rent growth is even outpacing home price appreciation. which clocked in at just 8.6% for the month, according to Realtor.com's data.
Larger properties have had the biggest jumps, but even studio units are seeing growth. So if you haven't evaluated your rents in a while, it's high time to do it -- especially if you have any leases expiring soon.
If you need help determining whether an increase is warranted, contact to a local real estate agent. They can help you run the comps and see what your property should fetch in your rental market.
3. Start saving
Every landlord needs a good emergency fund, and this last year (or the past 18 months, really) has made that abundantly clear. A smart property owner should have funds to not only cover unexpected repairs and expenses but months of lost rent and income, too.
As a general rule, you should have at least six months of expenses in savings. And if that's not possible? Consider signing up for rent guarantee insurance. This covers rent nonpayment and can help you stay afloat if your tenant goes MIA.
4. Plan your updates and repairs now
Will your property need a new heating/air conditioning unit or refrigerator? Does the siding need to be replaced or repainted? Want to update the kitchen and command a higher rent with new tenants? Then start planning your projects now.
Construction supplies have been in short order lately, and their prices are on a hot streak as well. If you don't want your project delayed or costing much more than you'd hoped, having a plan is crucial. You might consider buying in bulk, spreading your material purchases out over a few months, or just watching prices and being strategic when timing your purchases.
5. Consider diversifying
If you really want protection from another year like 2021 (and 2020, to be fair), make a plan to diversify your portfolio. Instead of focusing solely on buy-and-hold rental properties, venture into short-term rentals with services like Airbnb, fix-and-flips, or multifamily developments. The more you can spread into various market niches, the more cushion you'll have if one sector's hit hard.
The bottom line
We can't predict the future, but we can prepare for it. If you're a landlord and still reeling from the trickle-down impact of the pandemic, make sure you're ready for anything in 2022. Stow away plenty of emergency cash, look at your tenant-screening process, and consider diversifying your portfolio. The more effort you put into prepping now, the more protected you'll be should something go awry.
