People enter the landlord business for a ton of different reasons. Regardless of how you did, being a landlord can be a profitable and rewarding venture, or a dangerous one if you come into some pretty common pitfalls. Here are 10 of the most common mistakes landlords make and how to avoid them.
1. Not Understanding Your Market
One of the most important concepts when it comes to real estate investments is always going to be, location. First of all, you'll always have to make sure your rental is in a desirable area so you can attract an appealing amount of tenants. Just because its a good deal doesn't necessarily mean the location is. Second, definitely make sure you know the neighborhood you are investing in. Paying attention to transportation, grocery stores, and featured areas help understand the dynamic of the local market. Researching area taxes help determine what you can charge for rent to maximize the return of investment.
2. Not Understanding the Fair Housing Laws
Before you even begin to look for tenants, understand the fair housing and discrimination laws, if not, you could run the risk of getting into legal trouble. Fair housing laws are federal statutes that ensure equal access to housing for everyone. It is illegal to discriminate against anyone on the basis of race, color, religion, national origin, sex, family status or disability. Many local and state governments have protections in place so you may want to become familiar with them. Bottom line, treat every applicant and renter the same way.
3. Not Putting Your Best Marketing Foot Forward
While advertising may not seem like such an important thing to stress, you're rental property is as only as good as, "the box it comes in." Just like the best product ads, you’ll want to feature high quality photos of your rental and the more you have, the better. It’s worth every expense to have photos taken during the spring and summer months so your property is at its best. You’ll also want to have clearly written, accurate and error-free descriptions of each property.
4. Not Conducting an Extensive Tenant Screening
While quickness is something you desire when filling your home, you definitely want still choose a qualified renter. You’ll want to perform a tenant background check and run a tenant report. Confirm that renters have paid the rent on time and have not caused problems for their previous landlords or employers.
5. Not Completing Accurate Leasing Paperwork
A lease serves as a binding, legal agreement between you and the tenant. As such, you’ll want to make sure it thoroughly addresses the rules, policies, and conflict resolution procedures for living in your property, and making sure it clearly defines tenant and landlord responsibilities. Remember to put everything down in writing. You can find many generic leases online, but you’ll want to review the lease requirements specific to your state or rights and incorporate them into your rental agreement. Have it examined by a legal professional to ensure that the terms protect your interests and comply with local and state regulations.
6. Not Knowing Your Landlord Responsibilities
Securing a tenant for your property is a huge. But, your work isn't done. As a landlord, it’s your job to come to an agreement with your lease.: Check in with your tenants, keep tabs on the condition of the property, complete regular and seasonal maintenance, and respond quickly to requests. Make sure your property is a healthy and safe place to live, and that you keep up on your taxes and financial reporting. Neglecting your residents and your property can result in higher turnover, more vacancies, lower cash flow and even lawsuits.
7. Not Anticipating Maintenance Costs
Be prepared for the possibility that your property won’t always be occupied. If you aren’t able to fill a vacancy right away, do you have enough cash set aside to pay for the mortgage, utilities and other maintenance costs? Maintaining a rental property comes with unforeseen expenses, such as damages and unexpected repairs, and the bills still need to be paid. Complete a cash flow analysis and establish a budget so you’ll be able to cover these potential costs, then track your expenses to ensure you’re staying above water.
8. Not Knowing When to Hire a Professional
If you live in the area, are handy around the house and have the time to quickly respond to requests, you can keep up with some of the general maintenance and management of your property. However, if you have several properties or are juggling an investment on top of a full-time job, you may be better off enlisting the services of a professional property manager. Also, depending on your experience and the condition of the rental after a tenant leaves, you might want to hire a contractor to make significant improvements or repairs.
9. Not Managing Your Time Efficiently
For many landlords, managing even one investment property can be a full-time job. Between securing a tenant and keeping up the books, you should understand that any investment property is a big time commitment. No matter how much you love what you do, make sure to take time for yourself and create a list of people you can rely on for backup. Having a network of people who can help in a pinch is important for the maintenance and safety of your property.
10. Not Treating Your Rental Like a Business
However you got into landlording, your rental property is a business — and you need to treat it that way. Consider setting up a Limited Liability Company (LLC) for ownership. This can help protect you personally from legal actions or claims. In addition, consider using accounting software or spreadsheets to keep close track of your income, expenses and ultimately your return on investment. Document all of your procedures and communications with applicants and tenants, and make sure to stick to your procedures. When you’re renting a property, you will hear a lot of different stories, and some of them may be rough. There are many opportunities to help your community, but you want to make sure any action you take makes good business sense.
With all these things in mind, Suncoast Property Management has thorough measures in place to prevent you from having these 10 common headaches while managing a home. Get in touch with us to ensure all these issues are kept to a minimum and you get the most out of your rental properties!