6 Mistakes Novice Landlords Make
Becoming a landlord can be a process of trial and error. You will learn how to communicate with tenants, how to handle situations in which you must exert your authority, and how to maintain your property in an efficient manner. You have the potential to become an excellent landlord, but you will have to learn the ropes and become successful in the long-run. Here are six mistakes novice landlords make and how to avoid them.
- The Rent is Too High. When you are just beginning as a landlord, your first property is your baby. You have probably invested a lot of money in a mortgage, home insurance, renovation, and ongoing costs. It is tempting to start the rent rate high, because after all, it’s your baby, and it deserves only the best. To properly gauge what your rent price should be, browse Craigslist or apartments.com to compare your unit to similar units that feature the same amenities. Most landlords will pitch their units at slightly below market prices, because it will ensure that their units get snatched up quicker to avoid accruing costs.
- Failing to Properly Screen Potential Tenants. Screening your potential tenants is a critical—if not the most crucial—of the renting process. The quality of the tenant can make or break your experience as a landlord as well as your finances. Do not jump into a lease agreement just yet—do a proper background check to make sure their history will match their future with you. First, it is essential that you obtain a credit report. Checking on evictions beforehand will give you better perspective on their character. The candidate may be able to hand their deposit and first month’s rent over immediately, but take the time to handle it properly to avoid headaches and financial complication in the future.
- Not Taking into Account Gaps in Tenancy. Whether you own one unit or twenty, there is a high likelihood that you will have to endure a gap in tenancy at some point. Factors out of your control will dictate whether renters will sign a lease with you. The economy will go through highs and lows, the national number of renters may decrease or increase with time, and the market demand will grow and shrink depending on the availability of units in your area. It will be wise of you to put funds aside in case this does happen to fill the gaps—this may happen for a few weeks to several months. Prepare yourself to save yourself the worry.
- Underestimating Costs of Maintenance. Just like any property, yours will need ongoing maintenance. The garbage disposal will malfunction, the plumbing will fail, a bathroom may flood, and the list goes on and on. Hopefully, you will not encounter too many repair and maintenance issues. However, you will probably deal with some of these throughout your career as a landlord. These repairs will become costly, and if you do not take care of them as quickly as possible, you will have some angry tenants. One tip is to put money aside from your monthly rent dues to add to a fund in case of an emergency.
- Inadequately Documenting a Lease. Everything you need from the tenant and everything the tenant needs from you must be outlined in the lease. If you have certain rules you want to enforce—such as non-smoking and no pets—you will have to get it down in writing. Otherwise, the tenant will have the right to do either of these things and more. In addition, you will be leave yourself open to lawsuits, such as if you enter your property without following state and city law. Examine your local laws regarding tenants and landlord to be sure you tighten any loose ends.
- Not Enforcing Lease Terms and Conditions. As a first-time landlord, it may feel uncomfortable to enforce the rules you have set in place, but you must in order to maintain what you need. If your tenant is paying rent late, demand a late fee. If your tenant brings in a dog without notifying you, you have grounds to evict them. Be firm—remember that they are not your friends, and that you have terms you have to enforce to protect the integrity of the property you worked so hard to make successful. If you’re struggling with laying down the iron fist, hire a property manager to do the “dirty work” for you.
Disclosure: The content in this article has been provided as a guest post by Adam Pepka.
More about Adam:
“Adam is a real estate doyenne and finance guru currently residing in Tucson, Arizona. His real estate investments in several states keep him constantly on the go, and his passion for writing has found him penning pieces with unique insights on everything from landlording issues to investment advice.”