Rental Property Business Planning, Map Out Your Next Year and Beyond

2025 is coming in hot! And we are here to talk about why you should NOT be waiting for the new year to focus on your business plans.

This week on the podcast we are talking about planning and strategy.  Not only for the next coming year, but for many years out.

We discuss those aspects but will go beyond the focus of financial evaluations and make you think about your business as a whole and what part you play in it.

What do you like best about owning rentals and what makes you cringe when you have to handle it?  How much do you want to scale and how quickly do you want to add more rental properties to your portfolio? When do you plan to step back from hands on management?

Property improvements, the value of time, as well as planning for financial growth now and in the future, are all discussed in this episode.  

LINKS

👉Episode 18: 7 Ways to Increase Profit for Your Rental Property.

👉 Property Management Questionnaire 60+ questions you should be asking when vetting a property manager.

👉 Dr. Ben Hardy Book: 10x Is Easier Than 2x: How World-Class Entrepreneurs Achieve More by Doing Less 

👉 Course Waitlist: From Marketing to Move In, Place Your Ideal Tenant
👉 Text Us a Question! Two ways: SMS text to 650-489-4447. OR

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Transcript

Stacie: 0:00

We know that if you do not have your mind and your numbers and your goals organized it becomes very difficult and challenging to achieve those goals. And one more thing, this episode is not only about money, it's also about taking the time to think about what you want to happen with your rental property business, or not, in the next 12 months. Chances are you do not need that ball to drop on December 31st to make big decisions about what needs to change. Your emotional well being is crucial to your success, so if you have doubts or if you're getting burnt out, you need to get real with yourself when you're doing these evaluations. Today is about year end strategy and goal setting for your rental property business as well as for your personal life.

0:51

Welcome to your landlord resource podcast many moons ago. When I started as a landlord, I was as green as it gets. I may have had my real estate license, but I lack confidence in the hands on experience needed when it came to dealing with tenants, leases, maintenance, and bookkeeping. After many failed attempts, fast forward to today. Kevin and I have doubled our doors and created an organized, professionally operated rental property business. Want to go from overwhelmed to confident? If you're an ambitious landlord or maybe one in the making, join us as we provide strategies and teach actionable steps to help you reach your goals and the lifestyle you desire. All while building a streamlined and profitable rental property business. This is your landlord resource podcast.

Stacie: 1:41

Hey there, landlords. Thank you for listening to the Your Landlord Resource Podcast. I'm your host, Stacie Casella, and I'm here with my co host, Kevin Kilroy.

Kevin: 1:50

Hello there, landlords. Happy to have you all here.

Stacie: 1:53

Yeah, so I want to tell you up front, sorry about my voice. It's a little froggy today. I'm going to do my best to not hack and cough and you know, keep my voice. I haven't had it really much for the last week or so. So anyway, that's we're gonna move on here and and do the best we can.

Kevin: 2:11

I just want to say Stacie's being a real trooper because it's it's been a tough week. But Let's give it a shot.

Stacie: 2:20

All right. So a couple of weeks ago we did a podcast about winter prep for your rental properties and end of year prep for the business side of owning rental properties. And the focus on that latter part was more on tax prep and making sure that you have all of your ducks in a row. Meaning we explained what you should have done by way of improvements and tracked expenses properly before the year ends, so that you can take advantage of those write offs when you process your taxes in 2025. As a result of that episode we have had some inquiries and have decided to discuss a more focused approach on planning or mapping out your next year and beyond, you know for your rental property business.

Kevin: 3:05

Yeah, and I believe we did touch on planning during that episode. But, today we will dive a little deeper into the strategy behind the business planning and try to help all of you landlords really think about what you have, where you want to be, and what it will take for you to achieve those goals.

Stacie: 3:25

Okay, so it's a little late to tell you this, but business planning is not a once a year event. At a minimum, you should be reviewing numbers and your goals every quarter or like four times a year. And if you can swing it every month or every other month, even better, but again, just do what works best for you. But know that the more attention that you give to your planning and your goals, the easier they're going to be to envision and keep your sights on, so that they actually come to fruition. Now, I want to say that many people, and we have fallen in this category as well, most people are going to wait for the new year to evaluate the previous year and set new goals. Don't do that. Evaluate your business now so that when the new year rolls around, you're excited and ready to put that plan into action.

Kevin: 4:19

Yeah. And as we've mentioned before, I believe it was episode 86 that aired just a few weeks ago. You should be diving into your financials for tax planning purposes anyway. So why not dive a little deeper and see if you can find a way to improve your income and expenses. I will say we have a 10 year plan for our investments. We don't really pay much attention to detail that far out. Most of our strategic planning goes out to one year, three years, and five years. And the reason we actually have a 10 year plan is because that is our end goal for retirement. By then, or hopefully sooner, we will have all of our investments. That's our income generating properties as well as our stock portfolios all dialed in and set. And we can either hand it off to the boys for them to run or to a property manager. But for this episode, we'll keep it simple as we only have, what about five weeks left in 2024 when this episode airs. So your initial task is to review and evaluate your numbers or your income and expenses. And if you have a formal accounting program like QuickBooks, or a semi-formal one, like REI hub through RentRedi or Turbo Tenant. You should be able to pull out what your income was monthly, quarterly, and for the year. Same goes for expenses.

Stacie: 5:49

And let me hop in here real quick and say that if you're a toss receipts in a box and wait until the 11th hour, you know, like in September or October, right before the tax extension deadline. You need to step it up and get a little organized and take care of that stuff a little earlier. And you guys no judgment We have 100 percent been there. Why do you think that we're on here encouraging you to be more organized? Because we've made these mistakes and we have learned from them. We know that if you do not have your mind and your numbers and your goals organized it becomes very difficult and challenging to achieve those goals. And one more thing, this episode is not only about money, it's also about taking the time to think about what you want to happen with your rental property business, or not, in the next 12 months. Chances are you do not need that ball to drop on December 31st to make big decisions about what needs to change. Your emotional well being is crucial to your success, so if you have doubts or if you're getting burnt out, you need to get real with yourself when you're doing these evaluations. Today is about year end strategy and goal setting for your rental property business as well as for your personal life.

Kevin: 7:09

Okay, so let's start off with what went well for us in 2024. Now, Stacie had a busier than usual year with real estate transactions. There was the sale of some land her family had on the market for some time that finally sold. An eight plex she sold for a friend. And she also took on management of that property before the sale in addition to all the other properties. And she also sold her single family home rental that was used when kid number two went to college. Now, it might not seem like much, but handling the management of eight units, as well as the showings and coordinating improvements like a new roof, paint and bathroom updates, just for that one sale was really time consuming.

Stacie: 7:58

Yeah. And not to mention the negotiations on the sale, which, it's not my area of expertise. So I had to take a lot more time to read and understand that side of the transaction as well.

Kevin: 8:12

Right. And we mentioned this before, but for Stacie's broker, it is customary to take over management of a building they are selling. It gives them more control over access and understanding the need for maintenance improvements, etc So when you're looking at multi family properties, remember what goes into getting more than just one unit ready so you can impress the buyers. So Stacie and I had an old but still very nice patio set from one of the mountain homes that we were getting rid of. So we worked with the owner and their contractor to create a communal tenant space in the rear of the 8 Plex. That meant adding some ground cover like bark I think we used, and some pavers to make the space attractive. I mean, not a lot of money went into it, but it made a really good impression. Now, we are not complaining at all because we were happy to have the patio set go to a good home, but we did have to drive to the mountains, load it up, and deliver it to the property that was for sale. There is a lot of time that Realtors put into helping their clients to get the best price possible. So please remember that when you cringe at the commission you pay for a sale or a purchase. And like I said, we are not complaining in the least, it was all good stuff.

Stacie: 9:35

Yeah, but that good stuff meant us having to manage our time differently than we're used to. And same goes with Chico. It was pretty much ready to sell but we had to make several trips up to the property to clean it out, meet with the realtor, and meet with our contractor to remediate some issues that were found during the property inspection. That property is three hours away so it's not like Hey, let's just head up for the day. And where we did do our trips in a day, it meant leaving at 6 AM and returning after 10 PM, which means we're exhausted the following day. Again, not complaining, just wanting you all to understand the time elements that we had a battle just for those three transactions. Or should I say two because the land we didn't have to do anything for we just all we had to do was list it and deal with it remotely. So yeah, I completed three real estate transactions, which was awesome. The commissions earned from those along with the proceeds from the Chico sale have put us into a position of having capital to invest in our next investment. For Sacramento we had all but one unit renew their lease. So all we had to do was deal with one turnover, which is huge, you guys. And that guy who did not renew, he wanted to stay on, but his roommate needed to get out and he couldn't afford the rent on his own. So we worked with him to keep them in there as long as possible, give him time to find a new place.

Kevin: 11:05

And when he moved a couple of weeks ago, we had our contractor, Jim go in and do some updates that we were working on for all the units. We are removing all of the incandescent light fixtures and replacing them with LED recess cans and updating the unit in general a bit. So one thing about this property is that it was completely gutted and remodeled in 2004. They redid all the wiring, the duct work, HVAC units and mechanicals like heaters and water heaters. That's great, right? Well, one thing we have learned is that the cycle of life for residential homes is around 15 years. When you go in and do everything new, all in one fell swoop, everything seems to start failing and needing replacement around that same time. So about four years ago, we started with the kitchen appliances. Then we did some remodel work to the bathroom exhaust fans. And when we got a couple of units done with those exhaust fans, we realized that we should be upgrading the light fixtures in the baths as well. And since Jim was in there making a mess and cutting into the ceiling for those fans, we started to have him install recessed lighting in the bathrooms when he went in to replace those fans. Now we are working on adding recessed lighting to the bedrooms and kitchens, one unit at a time to update those. And why are we doing this? Well, for a couple of reasons. First, it's easier for us to spread out the improvements a little at a time so our reserves can replenish themselves easier. When we do these upgrades, it helps our units remain competitive in our market. We have mentioned this before, all around us, there are these big, beautiful, multi family units being built. And they have all the amenities, so parking, gyms, pools, a mail room, so their packages are secure. And some even come with concierge service, where they will handle personal tasks for the residents. Now, they are not our direct competition. However, for the people who want a nice unit like those places offer, but don't need all those amenities, that's where we come in. Our units are clean, our building is kept up, and little by little, we're updating them. But the big difference between us and the other smaller properties who don't offer all those amenities is that our units have central air conditioning and a washer and dryer in each unit. Very few of the smaller mom and pop duplexes, triplex all the way up to six and eight plexus have those. So my point here is that we have positioned ourselves at the top end of the middle ground for rentals. Which means we can get more rent and our tenants tend to stay longer, because they would struggle to get what we offer anywhere else within let's say a two mile radius. Now I'm not saying there are not other rentals like ours but when they have a vacancy they go first like ours do. That is why we plan for these upgrades and improvements. And the second reason why is because if at any point we decide to sell that building, we would be able to get top dollar for it, given all the upgrades and higher end market rents that we've been able to get.

Stacie: 14:32

Yeah. And I'll say that right now, there are some properties on the market that are nice and some that are what we would call value add. And the difference in price between the two is pretty significant. The one thing that is consistent is that landlords in our area do not raise rents to keep up with the market. And unfortunately we have statewide rent control, which limits how much landlords can increase rents on multifamily properties. I believe the most we can raise rents is between five and 10 percent depending on the CPI or the consumer price index for that city. And for us to make our numbers work and a property be worth the purchase, we have to make market rents on a property. There is no pro forma planning when you buy in California, if the previous landlord has never raised their rents, because it can take years to achieve those market rents, which would likely mean years of losses. And so real quick, let's just say the market rent is 1500 bucks and a landlord has a fourplex where the current rents are a thousand dollars each. Even if market rents stay the same, which they would not, and we are able to raise rents 10%, it would take us five years to get those units to market rents. Which means we would run at a severe loss every single month. It also means it's unlikely that there's going to be room for the recommended minimum 15 percent reserves from rents each month. And listen you guys, my point is that for us, we're hands on landlords. And yes, we raise rents annually when the market calls for it. We also take a lot of our income and put it back into the units. Because as Kevin mentioned, it allows us to get a higher rent and hopefully someday a higher sales price when we go to sell that building. So that was a very long winded way of discussing where our time goes. But it's also to tell you how we plan out for our next business year. In 2023, we decided that 2024, we would sell our single family rental located in Chico, so that I could use the capital from that sale to purchase another property, which I'm hoping to at least be a fourplex.

Kevin: 16:44

Right. So, I believe we were discussing what went right for us in 2024. And basically what we are trying to say is that we made plans for improvements in 2023 and are just now completing them. We also made plans to sell the one rental and then purchase another. And where we have not made that purchase, at least at the time this episode airs, we are narrowing down what we want and how we can make that happen. One way we do this is by revisiting our goals and reviewing our metrics and evaluating how on track we are in reaching our next goal. Now we have different levels of goals. We have financial goals for us personally, like what amount of income we will need to retire comfortably. So that means we have to look at and evaluate each stream of income we have. Which would be our rentals, our real estate commissions, which include managing properties for others, and of course, any income we derive from Your Landlord Resource. And then we can see where we are doing well and where we can improve. And improving doesn't only mean adding more revenue, it can also mean reducing expenses. We did an episode a while ago that might be helpful for you to listen to. It's called Seven Ways to Increase Profit For Your Rental Property. That was episode 18, and you can find it by going to your landlordresource. com forward slash episode 18. We will link it in the show notes as well. In that episode we talked about different ways you can add income and cut expenses. And when we say review your metrics, it can go beyond just income and expenses. You can track how often tenants opt to renew, turnovers you have had to do, how often you get calls for maintenance, as well as evaluate your vendors, like their level of service and their costs.

Stacie: 18:45

Yeah, and I'll say, I wish we had a fancy software to recommend, but honestly, for these analyses, we just use an Excel spreadsheet. You know, Google Sheets would work fine here too. You should start with your rent roll which would be a list of your units with a quick description like studio, one and one, two and one, etc. and the rent that you charge. Then next to that line of the rent you charge, you can have a line to note the market rent so that you can evaluate how you're doing with your rental rates. You also can have a column for additional income opportunities like charging for storage or parking or internet access. This would be a time to examine charging the tenants back for utilities that you and many landlords traditionally cover like water, sewer, and garbage. How would your income look if you implemented those items? Now, you can do the same thing for your expenses. What would it look like if you had a landscaper only come every other week instead of every single week? Or, could you mow and blow around the property yourself? Are you using a property manager? And are you happy with their performance? Do you want to look for someone else or do you think you could do just as good a job, maybe better than your property manager? Or maybe you're just way too overwhelmed and you need to hire a property manager to take over. This year end evaluation is not only for what goes on in your business, it's also for you. Consider what you did this past year that you really enjoyed and felt fulfilled. And then think about what tasks that you had to do, and you really didn't like doing them. It can be from cleaning units during turnovers, to landscaping and bookkeeping. What, if you could, would you hire someone else to handle? Because if you could hire someone else to do those tasks, that would pay you back the commodity of time. And you know as well as I do, that emotional wellbeing is crucial to your success. So think about those things and set specific but realistic goals.

Kevin: 20:52

Or if you maybe didn't want to hire someone else, what could you do to educate yourself to learn how to do that task better? And I'm using this as an example, because it's a perfect way to describe what we're trying to say. What if you wanted to place your own tenants so that you didn't have to pay hundreds of dollars to a property manager to find a tenant for you? Could you take a course, maybe like the one we're working on now, to teach you a system for handling that task? And the same goes for bookkeeping. Most people don't know the basic terms when it comes to handling finances for a business. Could you take a course on bookkeeping to teach you that so you can learn how to have a better understanding of it? Because bookkeepers can be great, but if you can do it yourself, you would have a clear financial picture of where your business stands and know where changes can be made to benefit and improve it.

Stacie: 21:49

And shameless plug, if you'd like to get on the wait list for our tenant screening course called From Marketing to Move In, the link's in the show notes. And, we also have a questionnaire that we offer if you're looking to hire a property manager. So, listen, you guys, we're property managers, so we know what you should be asking those property managers when you're vetting them. We put together I think it's what 60 plus questions that you should ask and that you should know and understand about a PM before you hire them. I believe you can find it at yourlandlordresource. com forward slash PM questions But we'll link it in the show notes as well.

Kevin: 22:27

Nice Stace.

Stacie: 22:28

You like that?

Kevin: 22:29

I do. Now if you're still working a nine to five for someone else and maybe you'd like to spend your weekend somewhere other than working on your rental properties, think about how you can add flexibility to your schedule. If you can increase your income from the rental property, is there a way you could reduce your hours at your other job? You know, maybe have a four day work week, or maybe even every other Friday off, or just take Friday afternoons off. Any which way you can add more time into your schedule the better. Okay, so some things you want to also be thinking about and evaluating is improvements to your property. If someone does not renew or you chose not to renew them, is there anything that you could go in and do to make that unit or property better or more marketable? Alongside those improvements you'll need to check out your reserves and make sure you have enough to complete the project. And here, do yourself a favor. Whatever budget you set to do that project, add at least another 25 percent on for stuff that comes up that you might not expect. Here's a case in point. Jim went into the two bedroom, two bath unit to add six recess cans, one in each bath and four in the kitchen. So Stacie, how many cans did Jim actually install when all was said and done?

Stacie: 23:57

Fourteen.

Kevin: 23:59

Right. So, even if we had added 25 percent to our budget, We still would have been way off.

Stacie: 24:06

Yeah, but we are solving a problem by adding them into the bedrooms, too.

Kevin: 24:10

I mean absolutely no question. And I'm not arguing they weren't needed. I'm simply trying to explain to our listeners that once you start a project, oftentimes you'll find more that you want to do. And when Jim is there running a bunch of electrical to the bathrooms and kitchen, a hundred percent, it's the time to have him do the bedrooms too. We just didn't think about that when we did our planning. We thought we could do it later down the line. Which we absolutely could have, but it's gonna be great now to have it all finished and completed.

Stacie: 24:43

Oh, yeah I mean, it's gonna look so much better and so much more light than those two little 60 watt bulbs were throwing out. You know, now I want to do the floors in there.

Kevin: 24:51

Okay, no way. Don't even go there. Yeah. I mean, for now.

Stacie: 24:56

Well, it's on the list of improvements, so it may not happen now, but it's going to happen sometime.

Kevin: 25:01

Yes, dear.

Stacie: 25:03

You guys see the stuff I have to deal with here? I'm going to deal with you later, guy. Okay, I want to start wrapping this episode up, but first I want to talk a little bit about long term goals. So, we talked about having time now to think about what you want to achieve in the next year. But what are your long term goals? So, what's your three year plan, your five year plan? What are your income goals? How many properties or units do you need to reach that goal? Do you have property that you'd be willing to 1031 exchange into a larger multifamily rental property? Now I realize many of you only have one rental that you manage at this time. But setting goals on how to get that second one and the third one is something that you need to try and plan out. I recently listened to a podcast that was co hosted by both Amy Porterfield and Jasmine Starr. They had a guest by the name of Dr. Ben Hardy on and he was talking about impossible goals. And I'm not going to go into the whole episode, but the gist of it is most people who set goals do so by thinking about how to double it. And that can mean income, or properties, or unit doors. He was discussing that it takes someone much longer to reach their ultimate goal. Let's say it's 25 unit doors by using the double up method, or as he calls it, 2x'ing your goals. Then if you 10x times, or 10 times your goal, doesn't that seem like way too much to even wrap your head around? But he has a method that he explains in his book called 10x Is Easier Than 2x: How World-Class Entrepreneurs Achieve More by Doing Less. Now we'll link it in the show notes if you're interested in checking it out, but his theory is definitely something you guys want to consider.

Kevin: 26:47

I'd be interested in reading that one actually. So my and Stacie's goals are a little extreme but absolutely attainable. And that's that we want to own 10 million dollars in investment property by 2032. For some of you you might be thinking that's all, and some of you might be thinking must be nice to have such lofty goals. But keep in mind that we are building our portfolio so we can live off it comfortably when we are ready to retire. And we are very conservative people who do not care to take extreme risks. We prefer to buy our rentals in the traditional manner and don't wanna rely on quote unquote, creative deals. We are not young. I mean, I'm 65. Stacie is young, she's only 54. And we do not have the time and energy to chance any sort of loss. Our investments are very calculated and fit our needs our plan and our buy box. Now many of the properties we own or planning to buy will have a mortgage against them, so once we're able to pay those off, or sell or 1031 exchange them, we plan to have enough income coming in to be able to live in the same manner as we do now with the income we earn outside of our rental properties. As those properties are paid off, which we are working to schedule those too, our income will grow significantly. As we age, we might not need as much income, but we plan to have a very active lifestyle. And with everything costing way more down the line, we hope to be able to cruise through those times with little uncertainty.

Stacie: 28:29

And we have mentioned this before, but we want to be able to help our kids and grandkids out when they need it. Even if that means paying for a big family vacation or helping with educational costs. So we have planned to have almost twice as much income that we have now to take us into our retirement years. And who knows what we're going to need. We certainly can't rely on Social Security still being around and who knows where Medicare is going to be. We just want to hope for the best, but plan for the worst. So we don't have to live a life where we worry about money or where we can't afford to live. And believe us when we say we have several friends our age who have not worried about retirement and will have to deal with a big surprise someday. And I will end this by saying that I am very grateful to be married to someone who shares the same or at least supports my goals and aspirations. We are truly blessed and for that I am thankful. Alright you guys, that is our episode this week. Thank you for putting up with my froggy voice. I hope it's given you some inspiration to take time and sit down and evaluate your rental property business goals soon and plan out your next year so that you continue to grow and scale. So set your end goal and then work backward on how you plan to get there. And don't forget to evaluate yourself in all of this too. Think about what you like and what you don't like about owning rentals and where you can make changes to give you more time to spend with others or doing the things that you love. If you guys enjoyed this episode, would you do us a favor and leave us a kind review of the podcast because reviews help others find us and understand that we are the real deal. And if you want to hear more, follow or subscribe to the podcast so that each week the episodes are downloaded right to your favorite podcast platform. We'd love to stay in contact with you. In the show notes, you can find links to all the free downloads we offer and ways to sign up for our free newsletter and the wait list for our upcoming course on tenant screening. There's also links to our private Facebook group that's just for landlords, and our social media accounts on Instagram and Facebook, as well as YouTube, where we share very informative and detailed tips and tricks for landlords. So check those out. I think that's about it. Thanks again. And until next time you've got this landlords.