Managing a rental home takes experience, knowledge and a lot of patience. If you don’t employ a property manager and choose to self-manage your rental, it is essentially like running your own small business.
Even if you don’t yet own a rental property and want to learn more about what mistakes to avoid, here are the top mistakes new landlords commonly make and how you can avoid them.
Not Comprehensively Screening Potential Tenants
One of the quickest to notice mistakes for any new landlord is not having adequately screened your tenants. Your number one goal is, of course, to secure tenants and start collecting rent as soon as possible, but not thoroughly screening your tenants might end up costing you more money in the end.
Prior to selecting a tenant, you should verify their personal information through the use of a rental application, check their background for prior convictions or criminal history, and verify their financial stability by checking for past bankruptcies, credit worthiness and income. Make sure to also contact all of the references listed on the rental application.
Not Budgeting for Maintenance & Repairs
No matter if your rental property serves as a supplementary income or as your primary source of income, you’re looking to have it make money. But, many new landlords fair to calculate the true costs of maintenance and repairs and can end up in debt.
You need to make sure that you spend a little on ongoing maintenance throughout the year, as well as small repairs yearly in order to keep the rental home in good condition. Keep in mind, any upgrades that you make to your property will only increase its value and allow your rental price to stay the same if not grow. If you let the property slip into a state of decline, you’re going to have to keep lowering your rental price and soon reach a point where you will have to spend big to get everything back up and running.
Not Following the Law
It is your obligation as a property owner to have a comprehensive understanding of all of the federal, state and local laws applicable to you and your property. It’s easier than you think to accidentally break the law when it comes to rental property, and if you don’t educate yourself it could cost you big.
Not Putting it in Writing
No matter who your tenants are – even if it’s family or a friend – for both of your sakes you need to draft a written lease agreement. This will provide both parties with the security that they need to rent worry-free. Everything you have agreed upon for that tenancy, including any additional discussed conditions, should be written down in a formal agreement.
Charging Too Much Rent
Probably the most common of all the mistakes that new landlord make is trying to charge too much money for their rental property. It’s natural to want to achieve the most positive cash flow possible, but charging too much may see you have a vacant property for too long. Educate yourself on the market, area trends and get a clear understanding of what a reasonable rent price for your property is.
In the end, becoming a new landlord is going to be filled with lots of little mistakes. The most important thing to do is learn from them and eventually you’ll become an experienced landlord that can easily grow and mange more and more property investments.