There are many different moving parts to conquer in order to be a successful rental property owner.
Enlisting the help of property management in Philadelphia will take a great deal off your plate, and help you avoid making too many mistakes.
Though making mistakes is often part of the learning process in the rental property business, there are things all property owners should avoid, as they are some of the most costly mistakes that can be made, especially when just starting out.
Not sure what those mistakes are?
Today we are going to cover some of the biggest mistakes new landlords make that cost a lot of money in the long run, in the hopes that you learn from the mistakes of others, and avoid making them yourself as you build and grow your investment property portfolio.
7 Expensive Mistakes New Philadelphia Landlords Make
People don’t enter the rental property business to lose money – that much is obvious.
However, if you make any of the following mistakes while starting out as a new landlord, you may risk losing money rather than making it.
1. Not Having Insurance
There are two types of insurance that must be in place at the beginning of your tenant’s lease term to ensure you don’t become the victim of a legal dispute that empties your pockets in more ways than one.
- Homeowners Insurance. This insurance policy is under your name and protects the structure of your rental property, should anything happen to it, such as a fire, flood, or natural disaster. Homeowners insurance will cover the cost of the property damages so you don’t have to pay out of pocket.
- Renters Insurance. This insurance policy is under your tenant’s name and should be required of all tenants that lease your rental properties. Renters insurance covers the costs of your tenant’s personal belongings in the case of an emergency, any medical costs incurred should anyone become injured while on your property, and any other damage that is the fault of your tenant.
Making sure you and your tenants have enough insurance coverage will save you the headache of arguing in court over who is responsible for damages.
It will also save you a great deal of money, should an emergency happen and cause great damage to your rental property.
2. Overpricing Your Philadelphia Rental Property
It is important you understand the market when entering the rental property business.
As mentioned earlier, no one gets into leasing properties to lose money. However, overpricing your rental in hopes of garnering a huge profit may backfire on you as well.
Knowing what similar rentals in the area are charging for rent will help you gauge whether your rent rate is appropriate.
If you overprice your rental in an area with many available rentals, chances are your property is going to remain vacant for a long time. Prospective tenants do their research too, and will not pay over market value, if possible.
This is where having an experienced property management company is helpful.
A good Philadelphia property manager will know what price to set your rental at to garner a positive cash flow without squeezing your tenant too much (and risking an early lease termination).
3. Not Collecting a Security Deposit
The security deposit you collect from your tenants prior to move-in is a way to protect yourself come the end of the lease term.
This money serves as a replacement for any lost rent or damages to your property.
Without it, you will have to front the money for your monthly mortgage, should your tenant not pay their monthly rent. Worse yet, you will have to pay out of your own pocket for any damages beyond normal wear and tear that your tenants incur in your investment property.
Without a security deposit in place to help lessen the financial burden a bad tenant leaves on you at the end of a lease term, you may end up breaking your own bank account and hurting your positive cash flow.
4. Not Periodically Checking Your Property
A reliable property management company in Philadelphia such as Bay Management Group always stresses the importance of seasonal inspections of rental properties they manage.
Regular inspections provide the perfect opportunity to check in on your tenants to ensure they are fulfilling their responsibilities as your tenants
They also help reveal maintenance issues that, when taken care of right away, do not cost nearly as much as they would if they were neglected and handled down the line, once the small issue becomes a big one.
5. Discriminating During the Tenant Screening Process
If your property manager is not aware of the Fair Housing Act and how it relates to the tenant screening process, this is a sign you have enlisted the help of a bad property management company.
There is a federal law that prohibits discriminating against protected classes during the tenant screening process that must be adhered to every single time you or your property manager interview a tenant to lease your rental.
You could face a serious legal battle (that you will likely lose) if found to be violating this law.
Not only will a landlord-tenant dispute that lands in court cost you money in legal fees, your property will remain vacant, and you may even earn a poor reputation as a landlord that might affect your future in the rental property business.
6. Not Enforcing the Lease Agreement
There is a reason your property manager meticulously puts together a lease agreement to meet your specific needs, and goes over it line by line with your tenant come move-in time.
This protects you, your investment property, and your tenant.
If you fail to enforce the lease agreement from the beginning, your tenant will not view you as a professional to take seriously.
And, in the end, this will cost you money.
If your tenant fails to pay the rent on time, and you let it slide, without starting the eviction process as is outlined in the lease agreement, or not charging the late fee that both you and your tenant agreed to at the start of the tenancy, your tenant may begin to feel as though they can be late every time.
If you set a rule, such as a late rent payment charge, enforce it. Every single time.
This way you aren’t taken advantage of, and won’t lose out on money in the long run.
7. Not Using Reliable Philadelphia Property Management
Employing a bad property management company can lose you just as much money as trying to self-manage your rental property without having a clue what you are doing.
If you want to use a property manager to help enforce lease terms, collect rent, handle maintenance and repair requests, and even conduct seasonal inspections of your rental property, make sure you research the property management company before hiring them.
For instance, Bay Management Group has years of experience in managing rental properties. The property managers we employ are knowledgeable about all rental property laws, rules, and regulations.
In addition, we understand what it takes to make it in the rental property business, including how to find high quality tenants that will care for your property, and when to enforce lease provisions against bad tenants.
Plus, we know how you should market your vacant rental when you are ready to jump into the rental property business and place a tenant in your property, how much your rent rate should be, and how to draft a legally compliant lease agreement that caters to you and your tenant, ensuring that everyone is satisfied.
If you are looking to avoid making costly mistakes that many new landlords make, as well as recruit help managing your Philadelphia rental property, call Bay Management Group today.