How to Avoid the 10 Mistakes Inexperienced Landlords Make?
Rental properties are good yet expensive investments. Effective management is the key in getting the most out of it. There are no rooms for errors when it comes to running a rental property. So, grab a pen and paper and remember the ways on how to avoid the 10 common mistakes inexperienced landlords make.
Mistake #1: Not Running Sufficient Background Checks to a Potential Tenant
Solution: Before you get too excited from probable occupants that are inquiring on one of your units, get to know them very well first. Their desperateness in moving in and willingness to make payments shouldn’t be the basis of your judgment in letting them occupy your apartment/condo. Prepare a rental application form that includes information about credit check such as history of late payments, delinquent accounts, financial capabilities, etc. Just hand it over to your prospective tenants in case you don’t have time to interview them yourself.
Mistake #2: Miscalculating the Cost of Repairs and Constant Property Maintenance
Solution: Who would want to rent a condo/apartment with leaking problems and wall paints that are wearing off? Nobody! So every time you construct a budget, don’t forget to allot money on these important aspects. Continues improvement of your property will not only make your current tenants stay for the longest period of time, but you’d also invite new ones. It is okay to include the costing of repairs and maintenance to your tenants’ monthly bill as long as they could see the improvements and that the price is reasonable.
Mistake #3: Perceiving the Rental Business as Merely a Hobby
Solution: Have everything under control – create bank accounts for expenses and deposits, consult a tax professional for correct tax handling and payment, utilize bookkeeping system, etc. Although rental properties are quite a stable source of income, you should always keep track of all the money and transactions that goes in and out. This will let you know if you’ve already recouped your investment or not.
Mistake #4: The Handshake Agreement
Solution: When making deals, never ever rely on promises or word of mouth no matter how big or small your investments are. Everything should be put into writing even your tenants will just reside in your property for 3 months max. A signed written contract that contains the terms and agreements will protect you and your tenants in case a misunderstanding happens.
Mistake #5: Asking Off Limit Questions
Solution: Be familiar with The Fair Housing Act of the Civil Rights Act of 1968. It states that landlords aren’t allowed to discuss or deny a tenant’s application based on sex, marital status, race, religion, and national origin.
Mistake #6: Not Taking Care of Your Tenants
Solution: What tenants hate the most is that you only remember to check on them during payment time. It gives them an impression that you only care about the money they pay you and not with their welfare. The properties that you’re renting out are your responsibility. Therefore, you are obliged to regularly check your tenants and ask if they are encountering problems with their units. But, you must avoid stopping by the property unannounced. Even though it’s yours, you must abide with the laws regarding tenants’ privacy. Or else, you might be giving them unintentional rights to be released from the terms of your lease agreement or worse sue you.
Mistake #7: Ignoring the State and Local Housing Codes
Solution: Make sure that your property meets health and safety standards such as fire exits, emergency lights, proper ventilation, etc. You also need to gain the cooperation of your tenants in implementing health and safety in the entire unit. Say for example, a tenant in Room 3, Dr. Doolittle, has 5 dogs, 3 cats, and 8 exotic birds. He doesn’t have time to clean up his pets’ mess since he’s on call 24/7. Therefore, tenants in Room 2 and 4 are always suffering from a “zoo-like” scent coming from Doolittle’s unit.
Mistake #8: Postponing an Eviction
Solution: Delaying an eviction may be beneficial for your tenants, but it’s a very costly move for you. It may be hard to evict a human being from their shelter, but business is business. If you don’t know how to proceed with the process of eviction, you can always contact an eviction attorney. And remember, evicting a tenant is not like literally sending them off to live on the streets. Eventually, they’ll find a solution like live with their parents. So, there’s no reason to be guilty about.
Mistake #9: Not Abiding with Lease Terms
Solution: No late rent payments, but Peter on apartment A is always 7 days delayed. No pets allowed, but Paris on unit 56 has collections of Chihuahuas around the world. No smoking inside the building, but Phillip enjoys smoking on the hallways and in the elevator after his graveyard shift in the call center. BE STRICT! Enforce penalties such as extra charge for late payments and eviction for tenants who turned their units into “animalandia”. If you’re too kind hearted, might as well hire someone who can do the job for you.
Mistake #10: Not Taking Notes
Solution: Like what was explained earlier, everything should be put into proper documentation (text messages, emails, voicemails, etc.). Written documentation of interactions with your tenants are very essential most especially if you need to take him/her to court. We’re not wishing that this kind of incident will happen to you, but you’ll never know if when it might come in handy.
About the Author
Joyce Del Rosario is part of the team behind Mark Hunke Real Estate Team. It is designed to inform consumers on how to be a pro in the real estate market and avoid common pitfalls that are costly.Joyce is also a photography enthusiast.