All experienced rental property owners will tell you that mistakes are just part of the learning process, especially if you’re new to the field.
Unfortunately, mistakes can be costly; something I’m sure you’d rather not experience.
If you want to shield yourself (and your investment) from bad decisions, then you should start by learning about the most common landlord mistakes. Luckily, this post covers some of these mistakes so you can be prepared for rental property success.
5 Common Landlord Mistakes You Should Avoid
You’re probably wondering, what do I need to do to keep my rental property investment safe?
If so, here are a few mistakes that are commonly made by other landlords that you can learn from.
1. Charging the wrong rent amount.
The first and most common mistake that landlords make is asking for the wrong amount of rent.
Basically, you need to know two things:
- One, owning an expensive property alone is never reason enough to charge a higher rent.
- Two, charging extremely low rent might keep your rental occupied, but it doesn’t guarantee a good return on your investment.
Your rent amount is highly dependent on a number of factors, including the neighborhood, rent averages, market trends, and demand. Before you come up with your rent amount, you should make sure that you factor in all these determinants.
Generally, charging low rent can attract more tenants. However, you won’t be earning as much as you should. Plus, management and maintenance expenses may end up eating up all your profits.
On the other hand, high rent amounts will make it hard for you to fill your vacancies. Therefore, you won’t be able to properly recoup your investment.
Make sure you come up with an ideal rent amount for your property by striking a balance between the two. Do your due diligence and evaluate the number of applications you get for your rental unit within the first few weeks that it’s on the market.
Once you get an idea of the type of response your unit receives from prospective tenants, adjust accordingly and make sure you stay on top of it to not leave it vacant for too long.
2. Assuming that you can do everything on your own.
Rental property management is never as easy as just collecting rent. Real estate investments can become quite demanding and time-consuming when you manage them on your own.
Being a landlord comes with a long series of responsibilities. And unless it’s the only job you have, you risk having a very busy schedule that doesn’t allow you to enjoy the returns on your investment.
As a DIY landlord, you should know that you’ll:
- Be expected to take care of all repair and maintenance requests.
- Have to collect your own rent and warrant late fees when necessary.
- Be expected to respond promptly whenever your tenants have an emergency.
- Handle all evictions and tenant conflict resolutions.
And so on.
Basically, you should be available 24/7 and well-versed in all matters concerning rental property management.
Are you? Do you want to be?
If not, you’re bound to make mistakes, unless you consider hiring a professional property manager to remove these chores from your to-do list.
3. Hiring the wrong person/company/service to manage your investment.
If you do choose to hire someone to manage your investment, you need to find the right person for the job.
Note that a realtor or real estate agent is different from a property manager. They are both experienced and specialized in doing different things.
When you want to buy a property, a realtor will be the right person for the job. However, only a property manager can look after your property in the best way because they are specialized to do so.
You should also note that not all property managers are effective and guaranteed to help you grow your investment. So don’t just go for any management company, go for the best and most reputable one available in your area.
Good property managers will usually offer you comprehensive services that cover all aspects of your property; including the legal stuff. They’ll also help you to grow your investment by taking care of your property and protecting your interests.
4. Not getting an insurance cover.
The easiest and fastest way to lose your investment is by failing to get an insurance cover. You’ll never know when calamity will strike. One day you’re collecting rent, the next your property is getting burnt down due to a fault in the electrical wiring.
In such an event, what happens next? Or better yet, how will you get back on your feet?
The only way to shield yourself from these types of losses is by taking up insurance against common misfortunes like fires, floods, earthquakes, vandalism, crashes, and so on. That way if something like that ever happens, you won’t have to bear the losses on your own.
5. Getting too friendly or attached to your tenants.
Yes, landlords are human too. Wanting to have a strong and healthy relationship with your tenants might be on your wishlist.
Sadly, it’s not always a good thing. Forming strong emotional connections with your tenants can be bad for you in a number of ways including:
- You become more lenient with the rental agreement.
- Tenants feel entitled to preferential treatment.
- You won’t be able to enforce the terms of the lease.
- You’ll have a more difficult time evicting bad tenants.
- Tenants can start taking advantage of your friendship by failing to pay their rent on time and so on.
When these things happen, it becomes harder for you to run your rental property effectively. With time, you may start to incur losses.
To avoid this, make sure you remain professional when dealing with your tenants. Simply put, keep friendship away from your business.
Bonus Tip: Make sure you set clear and specific tenancy rules and guidelines.
Failing to set rules is also a common landlord mistake. Rules make rental property management easy and more convenient for you. That’s why you need to make sure there are rules and guidelines to be followed by your tenants.
You also need to state what will happen when any of the rules are broken. That way, your tenants will know what to expect from you whenever they breach the lease agreement.
In conclusion, rental property management comes with its share of mistakes.
Knowing these mistakes helps you to avoid them. However, if you are a first-time landlord, hiring a skilled and experienced property manager would be wise. That way you’ll be able to learn from the best.