Whether saving for college, retirement, or just some rainy day spending money, many Marylanders are looking for ways to build an investment portfolio.
Being a landlord seems like the perfect way to start making some easy, passive income. All you really have to do is find tenants, collect monthly checks, and occasionally call in a contractor for repairs, right?
Not so fast.
Unfortunately, until you become a landlord, it’s difficult to predict just how complicated property management really is.
It is incredibly challenging and time-consuming, and a large percentage of new landlords fail in their duties when trying to manage it all on their own.
If you are considering leasing property in Montgomery, Prince George’s, or even Baltimore County, property management in Maryland involves far more than what meets the eye.
From filing tax paperwork to lead paint compliance and managing tenant disputes, many landlords are often under-prepared to deal with common rental property issues.
Here are some of the top issues we see with new income property owners.
Common Mistakes New Landlords Should Avoid
1. Failing to Remain Empathetic
Imagine this: Last night at 11 o’clock, Lucy knocked on your door because she got locked out again. Then, at 1:30, Bruce phoned to say he had a sputtering radiator. By 5 in the morning, you had fielded four more calls, and you have meetings all day! As you can imagine, nights like that are highly frustrating.
It’s important not to take those frustrations out on the tenants; after all, these are routine issues that occur, especially if you are managing more than one property. It’s important to remember that one of the fastest ways landlords alienate their tenants is to avoid their needs, respond too slowly to a situation, or ignore calls.
2. Buying a Fixer-Upper to Rent Out
Unless you spent years flipping homes, the challenge of doing it on your own can be overwhelming. The idea is attractive enough: buy a home on the cheap, put money into repairs, and then bask in the home’s new estimated value – all while tenants pay you rent.
The problem is that the work is much harder than most investors realize.
First, do you really know how to handle plumbing and electrical matters? How long will these projects take? How soon will you bring in tenants? How do you handle contractors who do not complete their jobs in a timely manner? How do you manage cost overruns? Do you have someone on site to make sure work is being done properly?
Second, when will you make the repairs given your full-time job or other duties? Tenants expect repairs to be completed in a timely fashion and won’t care about your personal schedule. Many property owners end up having to sell the home sooner than planned because they cannot handle the extra work. Often, it means working nights and weekends.
Finally, what is the neighborhood like? Be sure you will be marketing to the right audience for that neighborhood. Features that are important to tenants in Baltimore County may differ from those in Montgomery County.
3. Not Building a Network
Tenants expect to have maintenance issues addressed quickly by a licensed professional who knows what they’re doing. If you’re not licensed for plumbing or electrical work, it’s best to call in a reliable team of experts who can deliver results in a reasonable timeframe.
Have a list of go-to contractors you can contact for quality work and a quick turnaround time. You should even have a backup list of repair companies in the event that your usual contractors are overbooked or on vacation.
4. Not Doing the Proper Homework
How much do you know about the property you rent? What is the demand for housing in that area? What are competitors charging for rent? What are your potential clients like? Are they college students or new families saving for a permanent residence?
Being a good landlord is more than simply owning a space and filling it with people.
You are starting a business, and you need to be aware of the fundamentals in order to truly succeed; otherwise, you will own a vacant building.
5. Disregarding Tenant Rights
Sometimes, when a landlord gets frustrated with a nightmare renter, the first reaction is to resort to unscrupulous practices. No matter how the tenant behaves, there are certain rules you cannot break. If you do, you may wind up owing your ex-tenant money for damages.
Skirting Eviction Rules. Eviction is a process that has specific steps; you cannot just toss someone out without justification and due process. You can evict someone for failure to pay rent, not leaving the property after a contract ends, or for ignoring the rental agreement. Eviction processes differ by state. Nearly all require a termination notice and a certain number of days for tenants to prepare. These can be overwhelming responsibilities for landlords unfamiliar with them.
Keeping the Deposit. Tenants pay security deposits to the landlord as informal insurance. It gives the landlord a slight cushion in the event renters abuse the property. After the lease expires, the landlord gives the tenant a list of things they required cleaning or repair, drawing the cost from the deposit. The landlord returns any remaining deposit money to the tenant. It is against the law for landlords to keep this money without reason.
Ignoring Privacy Rights. All residents must receive a 24-hour notice before you or your property management representative visits the home. After giving notice, the landlord can conduct inspections, give tours to prospective tenants, or bring in contractors. Most tenants want the chance to clean and make other preparations before you arrive. Do not barge in.
6. Trying to Manage Too Much at Once
Landlords that self-manage properties often find themselves quickly overwhelmed by the amount of time, energy and resources that regularly go into maintaining a rental unit.
Consider using a property management company to help you balance all of the duties related to your rental property. They manage the troublesome paperwork and tenant hunting, so you do not have to. They run efficient background checks, inspect properties to ensure tenants are adhering to rules, interview prospective renters, collect payments, and fight on your behalf in court.
They can be an irreplaceable resource and practically pay for themselves in the amount of time they save landlords, not to mention the money saved through the larger pool of reliable maintenance and legal resources available to them.