Avoid These Landlording Mistakes
By Paul Esajian on November 29, 2019
Do you remember how you felt when you closed on your rental property? You had visions of collecting rent checks and building equity for years to come. You heard horror stories of evictions and rowdy tenants but swore that would never happen to you. Things were going smoothly with your rental and then out of the blue everything changed. You became lax on some repairs, let your tenants pay a few days late or allowed a pet for a temporary visit. The next thing you knew everything you said you were going to avoid was happening and you are not exactly sure how you got there.
There is no question that a rental property should be a great addition to any investor’s portfolio. That being said, it needs to be treated with the same discipline as any other investment you make, maybe even more. Just one mistake can completely change everything overnight. Here are five landlording mistakes you need to avoid.
- Not Knowing All The Numbers: There is a lot more that goes into a rental property than the rent received. Of course, the amount of monthly rent generated is important, but far from the only consideration. There are several items that must be considered well before you make an offer. You need to know every potential property expense you could encounter. The property taxes, insurance and mortgage payment are the obvious ones but there are others. You need to consider any utility costs, lawn care, snow removal, property management, repairs, vacancy factor and local fees. Not understanding just one of these can have a trickle-down effect on the rest of the bottom line. A property that appeared great on the surface could turn out to be average at best. Talk to as many people as possible and do as much research as necessary so you know every number associated with the property.
- Poor Lease: It is not enough to use the first lease template you find online. Sure, you may get away with this for years but eventually you will run into a problematic tenant where your lease will be critical. Without the proper lease language, you could find yourself in a situation where you are left with little recourse. Your tenant may be able to walk away without covering property damage or they can live rent-free for several months. Most of these situations can be solved with a strong lease. Instead of getting the lease online you can reach out to your attorney and have them craft one. Whatever is important to you will be on the lease and you will have the protection you desire. You will use these lease, making only minor tweaks, for years making it a great long-term business expense. There are several areas with a rental where you can look to save a few bucks. Your lease should not be one of them.
- Lack Of Tenant Screening: The single most important thing you can do as a landlord is screen your tenants. Everything in a rental starts and ends with rent collection. The numbers can be where you want, and the property have everything in place, but if your tenants are a mess you will have problems. While you can never be 100% certain who you are renting to, you will have a pretty good idea if you spend time screening. Start with a basic rental application and don’t be afraid to follow up with employees and previous landlords. If a prospective tenant is apprehensive about providing this information, it can be a giant red flag that they may be hiding something. Even if a tenant really wants the property and is ready to sign the lease on the spot you still need to do your diligence. You may lose a tenant or two by doing this, but the ones you gain are the ones you really want in the property.
- Slow Maintenance Response: You need to treat your rental property like your personal residence. If your toilet was clogged or the washing machine broken, you would certainly find a way to fix it asap. This must be the mentality you take with your rental property. The longer you make your tenants wait for seemingly simple maintenance items, the quicker they begin to lose trust. With lost trust they will not take care of the property the same or pay their rent on time. They will find a way to get back at you that could have long term ramifications to the property, or your bottom line. You should have a list of people you can call to remedy almost every situation. At a minimum you need an electrician, plumber and a general handyperson. The more contacts you have the quicker you can deal with any property situation.
- Not Following Lease: If you are going to spend the time, and expense, to craft a lease you should make sure you follow it. Of course, there are times when you need to bend your rules in extreme situations. However, 99.9% of the time you must make a point to follow your lease. If you don’t want pets or smoking in your rental make it be known and provide ramifications if broken. If you have a late fee for the rent don’t be afraid to collect it. Following up on your rules does not make you mean or over the top. It allows you to run your property efficiently and effectively.
Without question, these are the most common culprits with disgruntled landlords. All of these can be avoided with a little research, diligence and execution.