Some people may assume that being a landlord is a simple job. However, a lot more goes into the position than you may think. That said, when investors first begin their career as landlords, they’re bound to make at least a few minor mistakes. After all, nobody is perfect. But still, the goal is to avoid costly errors and run a successful business. So, if you’re starting out in the rental industry and need some tips, keep reading to learn about ten common landlord mistakes to avoid in your career.
What Does it Take to Be a Landlord?
Being a successful landlord is not always an easy job. In fact, not every person has what it takes to run a rental business. To be a prosperous landlord, you need to possess a few essential qualities, including:
- Staying Organized
- Being Reliable
- Maintaining Professionalism
One of the essential qualities to have as a landlord is staying organized. When you don’t follow a set schedule or keep documents together in a safe place, you are bound to run into some inconveniences. Although, these days, you don’t necessarily have to keep physical copies of paperwork or important documents. It can be stored digitally, which makes things a little easier for busy landlords.
Your tenants will appreciate your organization, and it will help you run your rental business more smoothly. However, if you don’t keep accurate records or misplace things often, you may find yourself doing more work than you need to.
Another quality that all landlords should have is reliability. If your tenants, managers, maintenance workers, and business partners can’t rely on you, then who can?
When you commit to something, it’s crucial to follow through. For example, if you schedule a rental home tour with a tenant at 10 am, you should try to arrive early or at least on time. If you’re late or forget to show up, it sends a message to your prospective tenants that maybe you’re not the most reliable landlord.
Maintaining professionalism through every interaction with your tenants and employees is another critical quality of a good landlord. Even if you don’t have the greatest relationship with some of your tenants, you still need to treat them with the same respect you give everyone else.
Similarly, if you run into issues with one of your employees, you must handle the situation calmly and professionally. Neglecting to do so can put a bad taste in someone’s mouth or give off the wrong impression of you. Additionally, it may turn away some people from working with you in the future.
Now that we’ve gone over some qualities that good landlords should have let’s explore some common landlord mistakes to avoid during your rental business career.
What are the 10 Most Common Landlord Mistakes?
Inevitably, people—even landlords—will make mistakes at some point. However, a lot of the most common mistakes are avoidable. If you’re thinking about beginning a rental business career, keep reading and try to avoid these landlord mistakes:
- Underestimating Costs
- Neglecting Tenant Screening
- Drafting an Unclear Lease Agreement
- Overcharging Tenants
- Not Accounting for Vacancies
- Disobeying the Law
- Ignoring Maintenance Issues
- Keeping Inaccurate or Outdated Records
- Forgetting to Inspect Properties
- Trying to Manage too Many Properties
Most people who invest in rental properties look for a decent return on their investments. However, it takes a certain amount of capital to start your business successfully. That said, if you underestimate the costs you need to create and maintain a rental company, you’re going to run into trouble.
Landlords need to think about the initial cost of purchasing a property and the cost of maintaining it over the years. That said, it’s wise for landlords to set aside some cash for any expenses that pop up. Some of these expenses may include:
- Routine maintenance and repairs
- Larger renovations
- Hiring employees or contractors
- Advertising and marketing
- Property taxes
- Mortgage interest
- And more
Neglecting Tenant Screening
One of the most prominent landlord mistakes is neglecting tenant screening or rushing the screening process. Although most landlords aim to keep their properties occupied quickly, if you don’t screen your potential renters, it could end up costing you time and money.
Before you allow a tenant to occupy your property, consider the following screening criteria:
- Perform a criminal background check
- Verify their employment and income
- Check their creditworthiness
- Look into their past rental history
Additionally, you’ll want to treat the screening process almost like an interview. Don’t be afraid to ask them specific questions to get to know them better. Some appropriate questions may include:
- When would you like to move in?
- How many occupants will live in the unit?
- Have you ever been evicted before? If so, why?
- Why did you decide to move from your current living situation?
- Do you have any pets?
- Can you commit to a 12-month lease?
Drafting an Unclear Lease Agreement
A lease is a legal contract between a landlord and tenants that outlines the responsibilities and expectations of both parties throughout the lease term. Every lease must have a few basic details, including:
- Landlord’s full name and contact information
- Tenant’s full names and occupants
- Property address
- Start and end dates for the tenancy
- Contract terms
That said, the contract terms are pretty subjective to each landlord’s property and expectations. Landlords need to state the financial specifics of the lease clearly. So, within the lease, all fees, deposits, and other expenses must be clearly stated. This also includes:
- Security deposit amount, due date, and refund terms
- Rental amount, due date, and late fees
- Utility fees, parking fees, etc.
Finally, your lease should also outline policies for the landlord and tenants. These may include:
- Lease renewal terms
- Maintenance responsibilities
- Pet policies
- Guest policies
- Lease termination penalties
If you’re a new investor, you’re probably eager to start making money on your rental property. However, this is one of the biggest landlord mistakes. Even though the goal is to make a profit, you don’t want to overcharge your tenants. If you do, you’ll notice your prospective tenant pool shrink, and current tenants will be less likely to renew their lease.
To make sure you’re asking for a fair rental price, research the average prices in the area. That said, if you decide to work with a property management company, they will have insight into current market trends and rates that similar properties are going for. This will allow you to stay competitive while not overcharging or undercharging tenants.
Not Accounting for Vacancies
Even the most successful landlords should account for vacancies in their properties. After all, you never know when a tenant will leave or when your property will fill back up again. If you expect your property to be occupied at all times, you may end up disappointed if it’s not. Similarly, you could end up in a tight financial situation.
Within your budget as a landlord, you should account for vacancies where you will need to cover the property’s insurance, mortgage, utilities, and other maintenance costs.
So, to avoid putting yourself in an unwanted financial situation, save up enough money to cover the property expenses for up to three months. That way, you don’t have to scramble to find a new tenant immediately, and you can take your time with the screening process. After all, you don’t want to fill your property with someone that will leave unexpectedly or fail to pay rent on time.
Disobeying the Law
Even if you are a new landlord, you are expected to fully understand and follow local, state, and federal housing laws. Some of the most important laws to become familiar with include:
- Discrimination Laws– Landlords cannot refuse to rent to someone based on factors such as race, religion, national origin, sex, disability, gender, or familial status.
- Privacy Rights- You may need to enter your tenant’s unit for a maintenance issue or repair, but it’s crucial to give them at least 24 hours’ notice before doing so.
- Wrongful Evictions- Although it’s a hassle for both parties if you must evict one of your tenants, it needs to be done correctly.
It can be easy to accidentally break the law if you don’t educate yourself on the expectations in your local district. To avoid legal trouble, make sure you comply with all the laws that apply to leasing rental properties.
Ignoring Maintenance Issues
Keeping your rental property up-to-date, well-maintained, and safe for tenants is your responsibility. That said, when tenants move into a rental, they expect a clean, safe, well-maintained property, just as you would if you were moving in.
Additionally, when you have tenants occupying your rentals, and they have maintenance issues pop up, you must take care of them promptly. Leaving tenant requests unanswered or poorly taken care of can damage your tenant relationships and ultimately harm your rental business.
When you have a trusted property management team, you can worry less about taking care of all your tenant needs—they can do it for you!
Keeping Inaccurate or Outdated Records
For any business venture, it’s critical to keep up-to-date and accurate records. This may include tax information, rental inspection reports, lease agreements, eviction documents, and more. That said, things like lease agreements and property inspection reports need to be updated when changes are made.
If you change a lease agreement and don’t update your records, it can confuse you and your tenants later on. Similarly, you could get caught up in unfortunate legal situations if you keep inaccurate documents that don’t support your claims.
Along with accurate and updated information, you also want to keep detailed documents. Leaving out even the smallest details can lead to inaccuracy or a lack of transparency.
Forgetting to Inspect Properties
When you purchase a property to rent, you have to complete an inspection to ensure it is compliant with all the local building codes, fire codes, and safety standards. This process is mainly focused on tenant safety and the livability of the rental unit. If anything of concern pops up during a property inspection, landlords must make the necessary repairs before allowing a tenant to live there.
Additionally, the move-in and move-out inspection process is one that all landlords should not neglect. During these walkthroughs of your property, you can document all the damages, issues, and concerns within your rental. If you fail to inspect your properties between tenant stays, you may end up being responsible for significant damages that cost you more money than you anticipated.
If you have long-term tenants living in your rentals, you’ll also want to do annual or semi-annual inspections to ensure the property is still in good condition and well-maintained. Just remember that, even though you own the property, you have to inform your tenants ahead of time before entering the rental unit.
Trying to Manage too Many Properties
Finally, it can be a lot to manage when you own more than one property. That said, one of the more common landlord mistakes is trying to manage too many properties at once. Even though the goal of rental investing is to make passive income, being a landlord can quickly turn into a full-time job if you don’t streamline the process.
So, if you find yourself managing too many things at once, consider hiring a property management team like Bay Property Management Group. When you find a reliable management company, you don’t have to worry about the tedious day-to-day tasks of running a rental business. Some of the benefits of a rental management team include:
- Tenant screening
- Move-in/Move out reports
- Rental registration
- Rent collection
- Eviction services
- Lead paint compliance
- Financial statements
Need Management Help for Your Rentals?
If you’re new to the industry and want to avoid making some of the most common landlord mistakes, hire a trusted management company. After all, when you don’t have to worry about completing all the grueling tasks of running a rental business, you can be a better landlord and create better tenant relationships.
Bay Property Management Group offers full-service property management in Richmond, Philadelphia, Washington D.C., and other surrounding counties. So, if you could use help from our reliable and qualified professionals, contact us today!