Are Goblins Ruining Your Real Estate Cash Flow?

Are Goblins Ruining Your Real Estate Cash Flow?

Goblins are things that ruin your real estate cash flow with nothing to show for it. Goblins can be things like landscaping and alarm systems.

In my experience these “extras” do not offer more value. Contrary to popular opinion, landscaping, alarm systems, and HOA fees are not passed onto the tenant, they are actually cash flow goblins. More often than not, they add no extra value yet they cost you more money.

3 Goblins that Reduce Your Cash Flow

  1. Landscaping: I do not include landscaping as many tenants would rather mow themselves and reduce the rent by the “landscaping” cost. I have also heard horror stories about tenants abusing the service by not picking up toys or animals feces. Another issue is tenants not reporting substandard service since they are not responsible for the lawn.
  2. Alarm Systems: Adds no value. Allow tenants to install at their own expense. Often times or not it is a negative because the question of “why is it needed?” comes to mind.
  3. HOA Fees: You cannot pass this onto the tenant by directly charging them. Sometime the neighborhood adds value by having a pool. Usually an HOA neighborhood does not offer more value than a non HOA neighborhood other than you are paying more than your counterpart.

Common Misconception:

The argument that the goblins “rent the house faster” is only valid if you would have lost money if you did not have those features. More often than not, it just rents quicker. While renting quicker is certainly less stress, it adds no financial value.

This is a business. I take care of my houses but need cash flow to do so. It is important to take care of your emergency account. Therefore I offer clean, well-maintained houses but I follow the KISS principle. I do not offer landscaping or alarm systems.

I have found that even $50 is the difference between renting your house out quickly or not. Don’t make the mistake and think that your tenant is covering these “extras.” Unless you can charge more rent for something, it is not a bonus and will cost you cash flow.

Check Out This Example

Say a house with a pool rented for $1,700 but cost $100 for pool service. A house without a pool rented for $1,600 but has no extra maintenance or insurance costs. You are taking home the same amount, but now you have to deal with a pool and the costs to maintain that pool!

Perhaps, you are that landlord that says, “No worries, I don’t care  if they ruin my cash-flow, I am not trying to make it rich!” Well guess what, you will might as well get acquainted with Whine and Cheese. With that attitude you will not be a landlord long! While you are at it, it will not be pleasant!

In my experience, the landlords who are barely breaking even or paying out of their pocket are the landlords that give up. You need to watch your cash flow so that it is worth your time, otherwise you are going to want to sell when there is equity!

By not over-providing, we are able to have a nice emergency fund that prevents anything from coming out of pocket. When the going gets tough, seeing the cash flow that I am putting in the bank for my family makes me stick with it!

Do any of your properties have what you would consider a “goblin”?

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