It is exciting to own a rental and make a passive income from it. However, first-time landlords can also be vulnerable to plenty of mistakes. Learning what mistakes to avoid helps you save a lot of time and money. It also encourages tenants to stay longer in your rental unit.
Keep reading this article to learn the common mistakes DIY landlords make when managing their property:
Confining the Agreement to Verbal
A lease contract is binding and protects both landlord and renter. It also guides the residents on the property policies, clauses, and terms and conditions to abide by.
While verbal agreements may not require any signature and preparation, it is not the best option since conflicts between parties can arise at any time.
It will be hard to prove what terms have been agreed upon. Lease agreements are accepted by the court as proof that terms were acceptable.
If the renters only agreed verbally, they can argue that they understood the terms differently or have not agreed to anything. That’s why having a written lease safeguards a landlord’s interest.
Being Inconsistent with Property Inspections
There may be times when landlords are busy with other tasks and will postpone or forget to follow through with a tenant walk-through property inspection.
However, this can lead to more stress if you don’t spot signs of a leak or discover that the gutter is dirty. The costs of fixing damage can be hefty, so you end up spending more.
You also want to inspire renters to stick around for the long haul by ensuring that they live in a comfortable, clean, and safe rental space.
That’s why landlords need to keep a regular schedule of inspecting their rental homes. This is also to remain compliant with state laws and the current standards of safety.
Forgetting to Plan for Vacancies
Property vacancies are part of managing a rental business. Landlords have to be ready when the unit is empty of residents. They must come up with excellent marketing strategies to attract more high-quality tenants.
DIY landlords also need to set aside a budget for this scenario since the maintenance expenses do not stop even when the property is unoccupied.
Consider having a savings fund to tide you over for three months. If you have this fund, then you will not be pressured to accept a renter who does not pass your criteria of a good resident.
You can take your time assessing candidates and reviewing their tenant history. You can plan your ads and create outstanding images and property descriptions to engage more interested renters.
Pushing Back Evictions
When you allow renters to stay who violated the property policy or kept paying the rental late, then this can lead to more problems. DIY landlords can be more forgiving since they work closely with their renters.
Sometimes renters will ask for a grace period when paying the rent dues when they go through difficult situations but if this becomes habitual, this can affect your business negatively.
It is advisable to maintain objectivity since you are running a business. Strive to develop a professional landlord-tenant relationship to maintain respect.
When tenants ignore the terms and conditions of a signed lease, it can lead to problems. For example, you ban subletting but if they take in other renters without your knowledge, it can be difficult to manage other renters you have not screened.
Failing to Focus on the Right Target Market
DIY landlords may not have enough expertise to identify the best demographic for their rental spaces. They may simply copy the rental pricing they see online.
However, you can end up with an opportunity loss if you don’t conduct proper research. You may have in-demand amenities for a specific demographic that you can capitalize on, allowing you to set a higher rental fee.
DIY landlords can also hesitate to raise the rental price each year to make up for inflation and the higher costs of operating a rental.
This cuts off their projected profit. Adjusting the rent is a must to keep up with higher insurance premiums and taxes, including paying for property maintenance.
Forgoing Credit and Background Checking
While running a background check on prospective renters can require time and effort, it is necessary. A lot of issues can be prevented if landlords take the time to assess the tenant’s background.
Do they handle their finances well? Do they have a good record of paying the rent on time? What is their income source and are they capable of meeting the monthly rent?
You can request the renters to submit their employment contracts and bank statements to support the information they provided. You can also call up former landlords to check their rental history.
Failing to Keep Records
You need to keep important documents as a landlord. A renter may claim to have paid the rental due or you need to show them the repair receipt for the property damage they caused.
You never know when a court hearing may take place and require you to present specific documents to support your statements.
Always keep a record of your tenant screening, property inspections, rental maintenance, and rent collection so that anytime you are required to furnish evidence, you can show proof.
It will also help limit conflicts in case a renter requests an official receipt before paying repair charges.
Bottom Line
Managing a property can reduce your time and require effort to take on the day-to-day tasks. If you want a hands-off approach, you can always hire a property manager to take on the responsibilities and ensure your rental is successful.
If you are seeking a reliable property management company, contact Young Management today!