8 COMMON RENTAL PROPERTY OWNER MISTAKES
You’ve invested in some real estate rental property. This can be highly profitable if you stick to some basic guidelines. However, owning a real estate rental property can also be very costly if you make a few common mistakes. Mistakes can lead to many consequences, from an interruption in cash flow to serious legal implications.
It can be a bit of a steep learning curve for new real estate rental property investment owners to know the do’s and don’ts when it comes to managing their rental property. Alltrade Property Management has got you covered to help you learn the ropes of managing rental properties!
To help you understand the kinds of mistakes landlords make when managing a property on their own, we’ve created a list of common mistakes made by rental property owners so you can make sure that you manage your real estate property investment stress-free.
1. MANAGING PROPERTY BY YOURSELF
A lot of first-time real estate investment owners try to manage everything by themselves. This seems like an easy solution to save a bit of money, but they aren’t aware of the mistakes to avoid.
There are a lot of intricacies in real estate property management. From buying the right rental property to filling the units with the right tenants, trying to do everything yourself might end up costing more as simple errors can add up, especially when it comes to documentation of your rental properties.
Real estate contracts are difficult to understand, especially if you aren’t experienced in knowing where to look in the fine print, and it is easy to make a mistake. Missing critical details in contracts can be costly and can be detrimental to your cash flow.
An experienced real estate and property management professional can help you analyze the documents. They’ll guide you through the purchase contract and keep your best interests at heart. Working with a professional will save you money and a headache.
2. PURCHASING INCORRECT INSURANCE
It’s very important to get the correct real estate rental property insurance. Sometimes it seems obvious to opt-out or seek the minimum amount of coverage, but your real estate property investment must not be dealt with languidly. Having the right insurance will also give you peace of mind.
When you invest in insurance, consider getting real estate property and liability insurance. Consequently, this will save you money, as a renter is bound to cause some sort of damage.
As well as getting the right type of coverage, it’s important to get the right amount.
Investment insurance is more complicated than your average homeowner insurance. Hiring a licenced insurance professional is an important step in getting the right coverage for your investment.
3. BECOMING TOO CLOSE WITH YOUR TENANTS
Many first-time landlords want to become friends with their tenants. It’s easy to want to be the “good guy.” However, getting too close to your renters could be a mistake over time.
As with many jobs, there is a fine balance between being a professional and someone’s friend. You can still be kind, polite and considerate, but it can become very ethically challenging to be your resident’s friend.
This can be one of the biggest mistakes that landlords make. When you become friends with your tenants, you might subconsciously give them special treatment. They might also expect extra leniency on certain issues. Furthermore, they might ask for extensions on late payments, which will cost you in the end.
It can become very difficult to address this if you are too close. Other renters might notice special treatment. Legally, they are able to file for a lawsuit because they might feel as if they are being treated unfairly.
You should strive to ensure a balance between kindness and professionalism when dealing with the tenants who occupy your real estate rental properties. Getting too close can ultimately be a costly mistake!
4. SCREENING TENANTS INADEQUATELY
It’s important to have good quality tenants that fit your real estate building. It can also be challenging not to immediately fill a vacancy without screening potential renters, as having an empty unit for any length of time can be costly and disruptive to your cash flow.
One of the biggest mistakes you can make is to screen your tenants inadequately. Be patient and screen your tenants properly. It’s important to know who each tenant is and their rental history. You want tenants who will treat the unit with respect so that your maintenance is limited.
Rushing to fill your real estate unit might mean that you end up with a bad tenant and, worst-case scenario, end up having to evict them. This mistake can be avoided from the start by screening your tenants properly. The eviction process can be awful and costly.
Save yourself from future headaches and extra costs by screening your tenants properly. Just as it is important to consider all the aspects of a real estate property before buying it, you should consider all aspects of a renter before entering a contract with them.
5. ASKING INAPPROPRIATE INTERVIEW QUESTIONS
It’s important to screen your tenants effectively while treating them with respect. Avoid asking discriminatory questions during the screening process. These questions go against the Fair Housing Act, which can end up being a costly mistake for you in the long run.
It’s illegal to reject an application based on race, national origin, color, sex, handicap, marital or family status. Refusing a tenant based on these guidelines may have you facing complications with the law. As a landlord, it’s important to learn the Fair Housing Act.
Do screen properly, but also follow the guidelines of the Act. A property management company can help ensure your screening and lease applications are drafted in compliance with Fair Housing.
6. NOT SETTING PROPER RULES FOR YOUR TENANTS
Not setting proper rules and regulations for your tenants can be a serious mistake when you are managing your rental. The skill of setting rules and guidelines is a priority for first-time real estate rental property owners to develop. We recommend stating these rules in the lease so that you will have them in writing. This way you won’t forget about any of them as you are going through the lease with your new renter.
Here are some questions to ask yourself when you’re making the rules:
- How much is the rent?
- What day is it due?
- What are the penalties and fees for late payments?
- What classifies as damaged property?
- What is your standard for the return of a damage deposit?
7. DIY MAINTENANCE
When you are thinking about buying rental property, you might considering that you are totally capable of doing the maintenance in your units by yourself. However, this can quickly become a mistake as one little slip can cost you a lot of money. Common mistakes can occur when managing your own real estate property maintenance.
The same goes for allowing your tenants to do their own repairs. If they do a poor job, or something goes wrong, the liability is on you. As a landlord, you will be paying for their mistake.
It’s important to find affordable and quality contractors to do your maintenance. It will save you additional worries and costs in the end.
8. FAILING TO MEET HOUSING CODES
It’s important to learn about the housing codes for your area. If health and safety standards are below code, your tenant has the right to break their lease. It might also end up in a lawsuit.
We suggest doing regular check-ins on your tenants. Make sure the investment property is up to standard and provides the renter with a safe and livable home. It’s also important that you let the tenant know you are coming in advance.
Drop-in’s are also a good way to keep tabs on the property.
There are many mistakes that first-time landlords can make when attempting to manage their rental properties on their own. If you are considering buying rental properties, consider giving Alltrade Property Management a call.
Many of our clients are landlords who are managing their properties for the first time. We can help you avoid common mistakes like the ones listed in this post!