To be a successful landlord, you need to have the mindset of an experienced businessman.
It’s easy to lose money, time, and sleep as a new landlord by making these common blunders.
Performing Insufficient Background Checks on a Prospective Tenant
Before rushing into a deal, it’s important to make sure that your new tenant has the proper credentials.
A rental application form should provide you with the necessary information, and you should also pay for a credit report so that you can see whether you have delinquent accounts, a history of late payments, etc.
No matter how “desperate” a potential tenant seems, even if they have the money to pay the deposit right away, it’s always best to do some research on them first. Take your time and think things through before making a decision that could end up costing you money.
Thinking That the Property Will Always Be Rented
Make sure you can afford the mortgage (if you’re taking out a loan) even if you don’t have a tenant for months at a time before closing on a property.
To avoid foreclosure and financial ruin, do a simple cash flow analysis and keep enough cash on hand to cover your mortgage payments even when tenants are few and far between. Don’t take the risk!
Underestimating the Cost of Repairs And Upkeep of the Property
You’ll need to keep the property in order to keep tenants interested in renting it and paying for it. The rent should at least cover some of the costs of ongoing maintenance for your home (i.e., painting, cleaning and carpet cleaning between tenants).
Consider that major one-time repairs may necessitate money from the business or from your own pocket if you don’t have access to that money (such as replacing appliances, repairing structural damage, etc.).
Treating It Like a Hobby
As an owner of rental properties, you must treat it like a business in order for your endeavors therein to succeed. Establishing separate bank accounts for deposits and expenses, keeping detailed records, and consulting a tax professional are all part of this process. You’ll almost certainly lose money if you don’t arm yourself with the right tools and contacts.
Relying on a Handshake
You can’t rely on promises in business. Having your tenants sign a lease agreement before they move into the property is essential for your own legal protection. If you have a dispute with your tenant, the judge will need written, binding evidence (such as a lease) to make a decision. Check your state’s laws on leasing to make sure you’re following them correctly and to make sure you’re using the correct form.
Asking Illegal Interview Questions
By asking the wrong questions during a screening interview, you may give a potential tenant sufficient grounds to sue you for discrimination. There can be no discrimination against a tenant’s application because of their race, color, religion, national origin or sex. There can also be no discrimination because of their marital status (i.e., if they plan on having children).
You are responsible for the properties you are renting out. If you don’t keep an eye on your tenants and the condition of your property, you’ll be the only one to blame if something goes wrong. Before making an unannounced visit to the property, check to make sure you aren’t violating any laws regarding the privacy of the tenants in your state. As a result of your actions, they could sue you or be released from the terms of your lease agreement.
Failing to Meet Housing Codes
A landlord must ensure that the property is safe and meets building code requirements. By failing to meet the terms of the lease agreement, you could be held liable for any damages or injuries caused as a result of your tenants’ disregard for the terms of the agreement.
Delaying an Eviction
If you want to end a tenancy, putting off the process of eviction until the last minute can be a costly error in judgment. As soon as you have a problem with a tenant and don’t know what your options are, contact an eviction attorney.
Not Enforcing Lease Terms
A late fee should be charged if you specified one for nonpayment of rent on time. Enforce the penalty if your new tenant purchases a Great Dane despite your notice that pets are not permitted. Tenants may follow suit if they see that you are lenient with the terms of the lease. Decide on the standard you want to be held to and make sure it is followed.
Not Writing Things Down
Your tenants’ interactions should be documented in writing in the event that a legal dispute arises. To back up your claims, keep a record of all communications, including phone calls, emails, voicemails, text messages, and so on.
If you’re unsure of how to get started as a landlord or fear that you don’t have enough time, consider working with a professional property management company. Interview a number of companies, verify their credentials, and confirm that you, like your tenants, understand and agree to the terms of a contractual relationship by checking references and background information.