It’s a fact that real estate investments are often very lucrative. And it gets even better when the investment is a rental property.
But, as a rental property owner (especially if you’re a newbie), it’s pretty easy to make mistakes. Some of which can be awfully costly.
That’s why we wrote this article. We’re here to help you avoid common pitfalls that rental properties owners often make.
Keep on reading to find out more!
1. Trying to manage everything on your own.
It’s true that property management can seem easy to someone who’s never tried.
“Well, what’s so hard about collecting rent and effecting a few repairs here and there?”
That’s probably something you’ve heard before, right?
Sadly, what you don’t know is that rental property management can be very demanding.
Aside from rent collection and maintenance, you have to factor in other aspects of property management, such as:
- Awareness and compliance of relevant laws and regulations
- Tenant welfare and complaints
- Health and Safety concerns
- Security and so on
Unless you have the letter “S” (for Superman or Superwoman) on your chest, being able to manage all these without a hitch can be close to impossible.
Luckily, you don’t need superpowers to smoothly. All you need is a reputable property management company to professionally run your rental property.
We know what to do, when, and how to do it in order to keep your rental property in mint condition and profitable.
2. Hiring a management company that handles leasing only.
A company that only deals in leasing may not be eager enough to find you the best tenants.
Why? They often operate on a “first come, first serve” basis mainly because whatever happens after the signing of the lease won’t be their responsibility.
For example: If the tenant is unruly, rude, or doesn’t pay rent on time, the company cannot be held accountable because that’s not part of the arrangement.
Basically, all they were hired to do was to lease the property, and they did that. Their work is done; of course, until there’s a new vacancy to be filled.
That’s why you need to find a company that deals with every aspect of the tenancy. Such companies will be inclined to find the best tenants in order to make their work easier. It’s a win-win!
3. Not knowing the difference between a real estate agent and a property management company.
A real estate agent is someone who helps you find and buy your property.
On the other hand, a property management company offers you professional help and advice in running your rental property.
Obviously, both are good at what they do, but neither of them can do both jobs without a hitch. Therefore, avoid hiring a real estate agent to do work meant for a property management company.
You may end up incurring losses.
4. Failing to get the right insurance package.
You may be wondering; “Do I really need premium insurance?”
Yes, you do! Why?
Well, an insurance cover acts as a safety net to catch you when things go wrong, or your investment takes a nosedive.
Without it, you are not protected from any unexpected damages or losses.
Also, if you aren’t well versed with these kinds of things, you may end up getting the wrong type of insurance; which is almost the same as being without it in the first place.
So, why risk it?
Fortunately, you don’t have to do this alone.
With the help of a competent property management company, finding the best insurance plan for your rental property becomes easy.
We walk you through it to make sure your investment is safe and properly insured.
5. Failing to strategically price your rental units.
Generally, the rent amount is not just something you come up with out of thin air.
Thorough analysis and comparisons are necessary to come up with a price that’s acceptable and within the market range.
The reason why this is so important is that poor rental pricing can cost you in many ways.
- A lower rent price reduces your rental income.
- And higher prices scare away potential tenants leading to vacancies.
In both instances, you lose! So make sure to do your research and to get a second opinion before listing your rental unit.
6. Avoid being a “Jack of all Trades.”
It’s a fact that maintaining a rental property can sometimes be very expensive. And that’s why it’s normal to have a strong urge to fix things on your own.
Sometimes, you may find yourself wondering “Why should I pay $300 for a simple plumbing repair yet I can try to do it myself?”
Without proper skills and enough experience, performing DIY maintenance is always a risky move. Risky in the sense that you may end up worsening the problem instead of fixing it.
And when that happens, you not only incur extra expenses hiring a professional to come and fix your mess but you also greatly inconvenience your tenants.
7. Being too friendly with your renters.
Landlord-tenant friendships are great, but only if you know how to separate friendship from business.
Getting too friendly with your tenants can loosens the boundaries and rules you set when the tenant was signing the lease agreement.
You’ll start to become lenient with you tenants by doing things like:
- Allowing them to pay rent late
- Failing to charge them for the damages they cause on your rental property
- Allowing tenants to fix issues in their rental units (sometimes worsening the situation)
- Not penalizing them for late payments and so on.
This, in turn, ends up limiting your control over your rental units; which is not good for you or your investment.
8. Prolonging conflicts.
When a dispute arises between you and your tenant, it’s always wise to deal with it as soon as possible.
When these disputes are prolonged, they tend to escalate. Bringing in more parties and more complications.
Sometimes, the cause of the dispute isn’t even that big. To avoid these situations, it’s good to calmly talk with your tenants. Listen to their side of the story as you explain yours.
By the end of the day, you’ll have already reached an agreement.
9. Failing to set tenant rules.
Imagine living in a big city where everybody owns a car, but no one follows the traffic rules. Things would be chaotic, right?
Well, it’s a similar case when it comes to tenant rules.
Without them, your rental units can become a circus because there are no limits to what the tenants can do. Then, if any of their actions end up affecting other tenants or your rental property, there’s very little you’ll be able to do.
And that’s why it’s always wise to ensure the tenant has read, understood and accepted to abide by the rules outlined in the lease agreement.
Investing in real estate might be one of the best investment decisions you’ll ever make.
But if you don’t do it right, the outcome may be the exact opposite. With the help of these nine common mistakes, you now know what and what not to do when dealing with a real estate investment.
And to make it even easier, you can hire industry professionals, like property managers, to manage your rental units for you.