My 6 Investment Property New Year’s Resolutions

I never write (or even think about) New Year’s resolutions, but all businesses (and investment property is a business) need to set goals and measure themselves against those goals, frequently. After reviewing my cash flow and financial results for 2007, I decided that I need to make some changes and commitments going into this next year. Here are some key items I want to accomplish in 2008:

1. Cut tenant bad debt by 75%. I have tenants that pay throughout the course of the month and most of them do eventually pay (see accounts receivable goal below). Unfortunately, every so often, I get one tenant that will catch me with my guard down and not pay as planned. At this point, they may owe me 1 month’s rent, but because the eviction process can take 3 weeks, they will owe me at least 2 month’s rent before they are finally out. I plan to accomplish this by firmly setting the 15th of the month as the last day before I start the eviction.
2. Reduce total accounts receivable to less than $1000. Not only do I want to shorten or eliminate my bad debt, I want to reduce the number of tenants that owe me some portion of back rent. I will be accomplishing this by consistently applying late fees to any outstanding balance owed after the 3rd of each month (per my leases). A stern letter is going out to all tenants as I write this post!
3. Reduce vacancy rate to less than 1%. This equates to less than 4 vacant months across my 336 rental months. I will be working to more aggressively market each apartment sooner in the process.
4. Develop a more realistic budget for 2008, print actual vs budget reports each month and analyze them. Many landlords look at the cash flow or expenses on a property when they buy it and (I would argue), very few ever print a report to confirm the properties are performing as expected. I am committing to you (and my wife) to do this every month.
5. Buy three Investment Properties (MN). Because of the quantity of property I own and with the new mortgage industry changes, it will require me to think/work outside the box to make this happen.
6. Reduce my maintenance expenses. I am realizing that my cash flow from my MN investment properties was strongest when I was doing the property maintenance myself. During 2007, I found a new handyman who I now call for every plugged toilet, kitchen remodel, and burned out light bulb. In 2008, I plan to take back some of the maintenance when it makes sense and does not interfere with my real job of selling Minnesota investment property.

These changes are designed to improve my cash flow, lower my stress, and strengthen my business. All investment real estate owners need to look critically at their business yearly and spend the time to set strategic goals and directions. Then when the toilet is overflowing or the tenant is not paying rent, you can work tactically to fix the problem.

 

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