Whether you are a brand new landlord or an experienced one, your main goal is to maximize the profits you receive off of all your rental properties. However, it is important to remember that there is a right way of doing things, and some very wrong ways of doing them. Many inexperienced landlords find out the hard way through negligence or a complete lack of understanding what not to do. Here are the top seven landlord mistakes all landlords should avoid making.
1. Allowing Security Deposits to Be Paid in Increments
One of the more common landlord mistakes of inexperienced landlords, you should never allow your tenants to pay their security deposit in increments. A security deposit by design is there to protect your investment in your rental property. If a tenant damages your property, moves out unexpectedly, or fails to pay rent, the security deposit is there to help offset these occurrences. It is important to always make sure to collect the full amount of the security deposit before allowing a new tenant to move into your rental property.
2. Failure to Know Laws and Regulations
For all landlords it is vital to always know the laws and regulations that pertain to rental properties in your designated market. These laws are ever-changing and can be hard to fully grasp if not closely monitored. The verbiage and details are often challenging to understand for most, especially for newer landlords who are unfamiliar with these types of laws and regulations.
The notion of having to learn and know all the laws and regulations can seem tedious and time consuming, but the alternative of unknowingly breaking these laws can be devastating for any rental property owner. For example, if you are not up to code and a tenant happens to be injured on your property, you are putting yourself at risk for personal injury lawsuits and substantial damages. Because of this, it is always worth taking the necessary time and effort to stay on top of the latest property laws, both federal and local, to make sure you are current and protected.
3. Pricing Rent Too High or Low
Another one of the most common landlord mistakes that new landlords often make, pricing rent too high or low. It is important to know your rental property’s true value and to price rent accordingly. Many landlords assume that pricing rent low initially will attract higher quality tenants when in fact, the exact opposite is true. On the other hand, a lot of newer landlords want to instantly try to maximize their profits and miss out on a chance to secure high quality, trustworthy, and responsible tenants. Make sure to do the necessary research to ensure you are setting your rent costs accurately. This is an area where an experienced property management company can really help save landlords time, stress, and money.
4. Cutting Corners to Save a Little Extra Money
Most landlords realize that having to deal with property repairs and upgrades is inevitable. However, many landlords will go out of their way to look for the cheapest plumber, handyman, landscaper, or cleaning company to try and save as much money as possible. While this may seem like a good idea at first, the cost of both lost time and subpar workmanship can be much more damaging to your bottom line than paying a little extra ahead of time.
Wasting too much time trying to cut corners to save a few extra bucks can lead to inadequate repairs and a strained relationship with your tenants. It is important to avoid these types of landlord mistakes altogether. Take the right approach and show both your tenants, as well as your rental properties, that you care as a landlord. Having repairs done in an efficient and proper manner will also go a long way with your efforts to retain good tenants.
5. Failure to See the Value in Marketing Your Rental Property
Next up on this list of landlord mistakes to avoid is failure to see the value in marketing your rental property. You have undoubtedly heard the saying “you need to spend money to make money.” This definitely holds true when it comes to marketing your rental properties. By marketing your rental vacancies through the appropriate channels, you can get the word out much quicker and more effectively than by not marketing at all.
Additionally, the efficiency of marketing directly to the specific type of tenant you are looking for is extremely valuable. Whether your ideal tenant is a family, a single adult, established senior citizens, or another demographic, targeting specific markets through precise marketing efforts is the best way to ensure those groups are aware of your rental properties. Once landlords understand the value of good marketing and start to invest in the appropriate channels, the number of quality applicants almost always increases.
6. Not Thoroughly Screening Tenants
Wanting to fill a vacancy quickly can tempt many landlords to forego a full screening of rental applicants. If an applicant initially seems pleasant, responsible on the surface, and has the funds to at least get in the door, more inexperienced landlords are tempted to consider that to be enough. However, not properly screening tenants can prove to be a huge mistake down the road.
It is important to do a full and proper screening that includes pulling a personal background and credit check, applicant rental history check, and employment verification. Ask certain questions such as, does this applicant have a strong history of making payments on time? How long does this applicant typically stay at each rental property? Is there a steady income in place that will cover the price of rent? These are just a few of the best indicators as to whether or not an applicant will be a reliable tenant. It is important to cover these areas thoroughly when vetting an applicant, rather than opting to go with the first applicant that comes your way.
7. Not Knowing When to Hire a Property Manager
For most landlords, trying to manage rental properties by themselves is too overwhelming and time consuming. For these reasons, many landlords opt to hire a professional property management company to help manage their rental properties. It is all too easy for important details to slip between the cracks when a landlord is facing an overwhelming workload. There is an abundance of ways a professional property management company can provide extraordinary value and simplify the management process, including ironing out the common landlord mistakes outlined above.
If you do not have the time or desire to commit to thorough tenant screenings, learning the latest property rental laws, creating dynamic marketing strategies, or effectively tending to repairs; it is time for you to consider hiring a professional property management company to manage your property in order to avoid these common landlord mistakes.
