25 Jul Five Money Drains
A Money Drain is anything that decreases your profit without providing a tangible result.
Over the years we have had numerous projects succeed and be very profitable. Occasionally we were not as lucky. The reason was we got away from the basics and didn’t watch out for money drains.
Top Five Money Drains
- Insurance: Two problems. One is wrong coverage and the other is obsolete coverage. Vacant houses need special coverage. Wrong policy no claim payment. Liability and property damage are expensive. Make sure you are only paying for what you need. Get the right coverage from a good agent and it will save you money in the long run. When a house goes from vacant to occupied notify the agent immediately. The price break can be significant.
- Utilities: Paying for utilities when nothing is scheduled for over 60 days. Electric and lights are needed for security. Why turn on the gas in the summertime? Does the contractor need water to do his job? Turn it on at the last minute.
- Sitting vacant for too long. Vacant houses cost investors more than occupied houses as long as the rent is paid. The goal is to rent it or flip it. Don’t let it sit.
- Slow contractors. General contractors can cost you money. Once we hired a family member to do electrical work. Huge mistake. We were on the back burner to get renovations done. Took twice as long as it should have. Get contracts with deadlines and penalties for contractors who miss them.
- Occupancy Inspections: Learn what is needed BEFORE the inspection. Inspectors set their own schedules and don’t work by yours. The problem is the three or four weeks to reschedule them if you missed something. We were thrown off track recently because we didn’t know that all detached garage receptacles must be GFIs.
Limit the money drains and you limit your expenses while increasing your profits.
Good Luck and Good Investing.