The Ultimate List of Landlords’ Mistakes to Avoid
Although property management is not a rocket science, it takes knowledge and experience to become a successful landlord. If you are one of those who prefers to learn from other people’s mistakes, you’ll find this article of a great value. And even if you think you know enough, there’s always a room for improvement. For your convenience we compiled a list of the major landlord mistakes, click on the item to learn why it is important and discover the time-honored solution to the issue :
- Disregarding the importance of marketing
- Always sticking to a fixed price
- Not taking things seriously
- Underestimating maintenance expenses
- Hiring a property management company
- Assuming your properties will always be rented
- Treating the property as your own home
- Asking the wrong questions at the interview
- Seeking advice from family and friends
- Not run credit reports & background checks
- Relying on verbal agreements
- Not solving maintenance issues
- Charging too much rent
- Violating tenants’ rights to privacy
- Misusing security deposit or failing to return it
- Terminating rental agreements incorrectly
- Not starting the eviction process right away
- Ignoring your tenants
- Not meeting the standards
- Not enforcing the contract terms
- Building personal relations with a client
- Not having a depreciation schedule
- Heavily exploit your property
- Not living up to market trends
Disregarding the importance of marketing
No matter how good your property is, you still need to put your best marketing foot forward. You should become a guru of a property listing if you want it to get noticed. There are dozens of listings vying for attention, so you are strongly advised to educate yourself on the principles of a successful property listing. You might think that a title and a property description are less important than quality photos, but the truth is that every single detail counts. Make sure to come up with a catchy title that highlights your property’s advantages, think of a property description, provide accurate property details, and remember to add some quality pictures.
Always sticking to a fixed price
In whole, there is nothing wrong with sticking to a fixed price on your property. However, if you are lacking flexibility in a slow rental market, you might either lose money or suffer from an increased vacancy rate. As a farseeing and smart landlord, you should extend your horizons and respond to all major changes in the rental market. For instance, it is strongly advised to accept discounted offers in a slow rental market and increase prices slightly during the periods of the hot season. Acting this way, you will get the most out of your property.
Not taking things seriously
One of the biggest mistakes landlords make is considering the rental business a source of a passive income. However, you are strongly encouraged to understand that being a landlord is more like a part-time job. If you want to succeed, you should keep abreast of all changes in the rental market, educate yourself on the rental law, maintain your properties in a good condition, and keep in touch with your tenants. What’s more, you should strive for investing your income into buying new properties. It is a simple math: the more homes you own, the more revenue you get.
Underestimating maintenance expenses
Since you are legally obliged to keep your properties in a liveable and safe condition, you should not forget about maintenance expenses. They are an inevitable part of any rental process, so you should always have some extra money to cover them. Keep in mind that usually things get broken suddenly, and you are supposed to make fixes and repairs within a short timeframe.
Hiring a property management company
There are two problems with property management companies. First and foremost, renting your properties out through such companies prevents you from gaining a valuable experience. In order to prosper as a landlord, you should learn how to handle maintenance requests, how to deal with angry neighbors, and so much more. If you hire another person to solve all problems for you, get ready to lose your chance to become a good landlord yourself. The second problem associated with property management companies is that they prefer working with big customers who own a great number of apartments. Given this, they won’t prioritize renting out a single unit.
Assuming your properties will always be rented
In case you’ve taken out a loan to buy your property, it is crucial for you to evaluate whether or not you’ll be able to pay a mortgage when the apartment remains vacant for some time. There is a list of things you can do to increase your chances of renting out quickly. First, you can be flexible with your rent price (as it’s been said before, sticking to a fixed price is not the best thing to do). Second, you can soften your pet policy to broaden your target audience. Third, you can slightly liberalize your demands on the results of tenant screening.
Treating the property as your own home
The majority of first-time landlords tend to make this mistake. They treat the property as if it was their home and make decisions based on their personal preferences. Although it might be hard to switch your perspective, it is an absolute must. You might be a huge fan of red walls and yellow carpets, but there is a fair good chance that your future tenants don’t share the same feeling. With this in mind, you are advised to decorate your property in a way that is likely to meet a variety of tastes. Choosing the neutral colors and classic or modern furniture will increase your chances to rent out faster.
Asking the wrong questions at the interview
Although there is nothing wrong about trying to get to know your prospective tenants better, you should think carefully about what questions might put you in a trouble. Politeness and tolerance are of a great importance when you conduct an interview with your prospects. As stated in the Fair Housing Act, it is not legal to turn down applications from your prospective tenants because of their race, color, gender, religion, and some other distinctions. To save yourself a lot of trouble, make sure to study the document carefully.
Seeking advice from family and friends
If you’ve been renting your property out before, you are likely to know that rental business is a very specific one. You need to have experience and keep up with recent industry trends in order to hand out advice to other people. Given this, it becomes rather clear that suggestions from your relatives or friends are not likely to work. However, managing property can be challenging, and some questions might arise every now and then. When in doubt, refer to professional communities online, ask experienced landlords, or try to come up with the best solution based on all data you have.
Not running credit reports & background checks
The worst thing you can do as a landlord is select tenants based on your personal preferences. Such an approach might lead to an array of problems. Things are not always what they seem, and the most easy-going and friendly applicants will not necessarily make the best tenants. The smartest approach you can take is to perform a thorough tenant screening. You need to make sure that your prospective tenant is a financially liable person, who tends to pay rent on time and keeps a property clean. That is basics of landlording. You need to make sure that your prospective tenant is a financially liable person, who tends to pay rent on time and keeps a property clean. All you need to do on your part is to choose the most successful candidate.
Relying on verbal agreements
If it’s not in writing, it did not happen. Although we all are familiar with this statement, a lot of rookie landlords make this mistake. They go for verbal agreements not thinking about the possible consequences. As a result, they face problems related to security deposits, monthly payments, and maintenance costs. If you want to avoid misunderstanding, make sure to cover all important points in your rental agreement.
Not solving maintenance issues
When your tenants ask you to fix something, it is crucial for you to reply quickly. Ignoring such requests is one of the biggest mistakes you can make as a landlord. In fact, there are state and local laws that oblige landlords to deal with maintenance requests within a certain timeframe. Plus, there are local building codes meant to regulate adherence to safety standards. What’s more, you have an ethical responsibility to provide your tenants with comfortable and secure living conditions. If you fail to deliver this responsibility, your relationships with tenants might go down the line.
Charging too much rent
It is a human nature to try to make as much money as possible. However, it is crucial to stay reasonable and think big. Most of the landlords decide to increase their rent dramatically after they make some renovations to their properties. Although it might look reasonable at first glance, a deeper analysis reveals the truth. Statistics tell us that those tenants who are ready to offer more money for your property, have lower credit scores and may hide spots on their reputation. It is much better to rent your property quickly and to quality tenants instead of waiting for a better offer to come. If you find it difficult to decide what a fair market price is, feel free to establish an average price and adjust it later depending on the custom offers your prospects will make.
Violating tenants’ rights to privacy
If it is rented out, it is not entirely yours. Keep this in mind and respect your tenants’ right to privacy. As a landlord, you need to know that in nearly all cases you need to send your tenants a prior notice before entering the property. The regulations differ from state to state, but at an average, it needs to be done at least 24-48 hours prior a scheduled visit. What’s more, some states allow visits only during the ordinary business hours. These rules, however, do not apply to the cases of emergency such as a fire or a flood.
Misusing security deposit or failing to return it
In nearly all cases, landlords believe that they can keep the entire security deposit when tenants break a lease. In fact, tenants’ violation of a rental agreement does not empower you to act this way. What’s more, landlords are not legally allowed to use a security deposit for buying new appliances or redecorating. In the majority of states, landlords are required to document absolutely all uses of a security deposit and return the remaining money to the tenant.
Terminating rental agreements incorrectly
Relationships between you and your tenants should always be businesslike, meaning that both parties have their rights and responsibilities. What you have to do as a landlord is to deal correctly with a lease termination. First and foremost, there is a precise list of reasons that allow you to terminate the lease of your tenant. You have no legal right to ask your tenants to leave unless there is a valid reason for that. What’s more, you should bear in mind that state and local laws set out requirements as to how exactly you must write and deliver a lease termination notice.
Not starting the eviction process right away
As a property owner, you are the one to make the rules. And it is you who hold the right to initiate tenants’ eviction in case they fail to come up with do’s and don’ts mentioned in your rental agreement. While it might be too impulsive to ask your tenants leave because of one little issue, it is also not good to close your eyes to problems. Said another way, it’s ok to evict your tenants if they constantly fail to pay rent on time, produce too much noise, cause damage to your property, or do not comply with any other rules you established. If you decide to let it all hang out, be ready for further problems. If you happen to deal with unreliable tenants, there is a fair good chance to lose a large sum of money and say goodbye to a peace of mind.
Ignoring your tenants
When it comes to communication with tenants, it is crucial to find a happy medium. Although you should not go heavy on calling or visiting your renters (hope you remember about tenants’ rights to privacy), it is advisable that you check on your tenants and the condition of your property once in a while. It’s ok to give your tenants a call to find out if everything’s fine and they don’t need any help. Your tenants will be glad to realize they can count on you.
Not meeting the standards
Complying with the state laws on safety and health is mandatory for all the landlords. It is crucial to make sure that the walls are not cracked, the pipes are not leaking, the heating functions well and smoke detectors are intact. If you fail to do so, tenants can make a complaint about the violation of the safe housing conditions. You should also take care of the insect infestation, make sure that bathing facilities are good, and that cold and hot water distribution works properly. Do it in time to avoid negative consequences.
Not enforcing the contract terms
It is crucial to get your tenants used to follow the terms of a rental agreement. Given this, you should not accept partial payments if the contract presupposes a single transaction per month. You need to stay authoritative in the eyes of your renters, so it is right to enforce a penalty in case they fail to pay on time without a prior notice. Also, you should not turn a blind eye if your renters sneak in their pet when they are not allowed to. Rules are made to be followed, so make sure both you and your tenants agree upon that.
Building personal relations with a client
‘Nothing personal, it’s just business’ should become your keystone. Friendly relationships have a lot of advantages, but they can become a serious threat to your business. They say that familiarity breeds contempt, and this quote fits perfectly into the context. While it is not a big deal to ask your tenants to pay on time or to find them for a breach of a lease, things get harder when you need to do the same to your friends. There is nothing wrong with being friendly to your renters, but try to stay down-to-earth and unprejudiced.
Not having a depreciation schedule
You are strongly encouraged to invest a few hundred dollars on this today if you want to save thousands in tax later on. A depreciation schedule is a specific inventory of items that can be depreciated at a certain point to claim a tax deduction. A lot of people believe that this only works for new properties, but it is not so. There are certain requirements you property needs to meet in order to be qualified for a tax deduction, but this topic is worth a separate article.
Heavily exploiting your property
It is a very common situation when landlords heavily exploit the rental unit without renovating or refreshing it from time to time. You might think that your property still has a well-functioning stove, and there is no need to replace it. But burn marks and uncleanable stains will certainly distract potential tenants from the advantages of your rental. It also crucial to instantly replace plumbing and old electric wiring as soon as any sign of potential problems emerge. You don’t want your property to get flooded or burn-down.
Not living up to market trends
You might think that colonial townhouse with old-fashioned interior will always sell itself, but don’t be so fast to judge. Modern yuppie tenants prefer open spaces and minimalism in furniture and decoration. Millennials are very demanding about the efficiency and comfort the rental unit can provide. They tend to migrate to the new housing development that can offer hi-tech solutions: chatbots that can take a maintenance request, smart locks, voice controlled devices etc. Tech disruption is tremendously changing the game in renting, and you need to keep up to stay on top.
If you are reading this, there is a fair good chance that you know significantly more than an average landlord. Take advantage of all knowledge you’ve gained to sidestep your rivals and make the most out of your rental business.