Becoming a landlord is an exciting time as you can generate long-term wealth from your property portfolio. But, to achieve this, you must be aware of some common mistakes for landlords that can jeopardize the profitability of your investment.
Not knowing these mistakes is no excuse as you have the internet and this post to help you avoid the pitfalls that so many landlords have fallen into. Once you understand the most common mistakes for landlords and the solutions, you are well on your way to a successful property investment.
Read on to ensure you don’t fall into them.
1. Failure to Screen Tenants
When looking for a tenant, landlords should always perform a thorough tenant screening process. This is to make sure they are choosing the right person for their property.
It is all too common for landlords to forget to do a background and credit check. This mistake can lead to serious financial problems, as someone with poor credit could end up not paying their rent or create other issues.
Landlords can avoid this mistake by using a reputable tenant screening service or rent reporting services. These will provide comprehensive background and credit information about potential tenants. Additionally, landlords should collect full copies of all identification documents, such as driver’s licenses or passports.
2. Not Putting Agreements in Writing
One of the most common mistakes landlords make is not putting oral agreements into writing. This can lead to serious consequences such as disputes, misunderstandings, and costly litigation. To avoid this, all legally binding agreements should be put in writing.
This includes lease agreements, property maintenance requests, and any other relevant agreements. This not only protects you from potential legal disputes but also ensures that the other party follows their obligations.
Additionally, landlords should make sure to keep accurate records and documentation of all their activities in the event of a dispute.
3. Underestimating Expenses for Repair and Maintenance
Neglecting the maintenance of a rental property can lead to costlier repair expenses in the future, or worse, lost rent from an inability to find tenants. To avoid this, it’s important to maintain a schedule of repairs and inspections which are required in rental property maintenance.
Keeping track of the condition of the rental property, both when tenants move in and before they move out, will give you a better understanding of any potential issues you may face in the future. Hiring qualified contractors to regularly inspect the property and make necessary repairs is also key. Draw up a maintenance budget annually and stick to it.
4. Not Conducting Property Inspection
Property inspection is necessary to effectively manage your rental property and it is one of the important responsibilities of landlords.
If a tenant violates the lease agreement, or if there are potential damages, a landlord should inspect the property. This is necessary to assess the situation and make informed decisions.
Without a valid inspection, landlords risk not detecting underlying problems that can potentially lead to further issues. To avoid this mistake, landlords should be sure to enforce regular inspections of their property and document necessary findings.
5. Not Budgeting for Vacancies
One common mistake for landlords is failing to budget for vacancies. Vacancies will happen from time to time, but not having money set aside to cover them can lead to a great financial cost.
Being aware of market trends and how they may affect vacancy rates or tenant turnover is important so that potential vacancies can be budgeted for in advance.
Landlords should also consider keeping some additional cash available in an emergency, in case of an extended period of vacancy. Additionally, landlords should regularly review their rental costs, to ensure that they are competitive and in line with current market rents. It is also a great thing to know the marketing strategy for landlords.
6. Being Extra Nice
Being extra nice might seem like a great idea to landlords, but it can also lead to a variety of problems. One common mistake is allowing tenants to get away with poor financial habits, such as paying their rent late or not paying it at all.
To avoid this, landlords must be proactive about collecting rent and ensuring that the tenants are held to the same standards as all other tenants.
A second mistake landlords make is being too lenient with tenants. For example, landlords might be more likely to allow tenants to have extra people living at the property or break lease terms without repercussion. To avoid this, landlords should always set clear boundaries and policies, and should always enforce them.
Lastly, landlords should avoid taking a friendship approach when dealing with tenants. Though a landlord may want to be kind, they should still maintain their professional stance. In sum, being extra nice is not always the right choice for landlords.
7. Delaying an Eviction
Unfortunately, many landlords forget that they have a legal and moral obligation to complete the eviction process in a timely manner and will wait too long to take action.
This can lead to landlords being stuck with a tenant they don’t want, while also costing them time and money in legal fees. To avoid this mistake and protect their interests, landlords should always begin the eviction process as soon as possible.
Additionally, landlords should familiarize themselves with local and state laws to ensure that they’re completing the process properly. They must also contact a landlord-tenant lawyer if necessary to discuss their eviction options. Doing so will help them avoid any costly delays.
Be Sure to Avoid These Common Mistakes for Landlords
Managing rental properties may not be an easy thing. You need to deal with different types of tenants. However, you have to make sure that you are doing your best as a landlord.
For this reason, it is important to understand these common mistakes landlords that can be made during the rental process in order to avoid them. From the proper use of lease agreements to the implementation of certain policies, taking the time to get it right can save landlords from possible legal disputes in the future.
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