If you are venturing into property management, you are in the right business as long as you get it right from the start. For starters, you should know that there is more to the business than just collecting rent, renovating the property, and paying utility bills. If you are not careful, you might lose a lot of revenue on mistakes that could have been avoided! Well, it helps if you know some of the pitfalls to avoid as a new landlord. Here are some of the costly mistakes you ought to watch out for as a new landlord.
Inadequate estimation of the repairs and maintenance costs
The rent you charge your tenants should be enough to cover ongoing maintenance costs, one-time repairs, and pay your salary. Therefore, it would help if you used the proper cost estimation methods to ensure you have enough cash to go around. We also recommend you keep money in an emergency fund if you run out of cash.
Taking too long to evict a tenant
Eviction is never easy, no matter how difficult the tenant is to manage. However, the longer they stay on your property, the more complex things will become for you. If they are not paying rent, your bills will continue accumulating, and you might not be able to settle them. You can contact an attorney if you are unsure how to handle an eviction situation.
Not having written agreements
It is not enough to rely on a handshake when dealing with tenants. A lack of written agreements could lead to misunderstandings and confusion during your landlord-tenant relationship. The tenant might also feign compliance and promise to follow the rules, only for you to later find out they were lying. Therefore, it would be wise to have a written lease agreement that is legally binding.
Assuming the property will always have tenants
Another grave mistake landlords make is assuming all the units will have a tenant at any time. We recommend you make arrangements to ensure you can settle the bills and pay the mortgage in case your property doesn’t have a tenant for a few months. A cash flow analysis will help you get your figures right and reduce the risk of a potential foreclosure.
Failure to run background checks on the potential tenant
The excitement and anxiety of getting a new tenant on your property shouldn’t deter you from running a thorough background check on them. It is important to tell whether a potential tenant has a history of eviction or doesn’t pay their rent on time. A good property management software can help you obtain all this crucial information to help you determine whether an individual is an excellent fit for your property. A property management software will also make it easier for you to collect rent from your tenants. It helps you give them a nice online experience plus you can also do things like schedule regular maintenance.
Not keeping written documentation of interactions
If a tenant decides to take you to court, it would be wise to have an ace up your sleeve and keep copies of your interactions. Important documents you should have include copies of email messages, telephone call logs, and any text messages you have exchanged since the beginning of your relationship. These documents will act as solid proof to help you build a strong case and support your allegations.
Asking the wrong interview questions
A potential tenant might sue you for asking inappropriate or discriminatory questions during an interview. According to the Fair Housing Act of the Civil Rights Act of 1968, the tenant can also sue you for rejecting their application based on religion, race, gender, sex, marital status, and handicap. Therefore, we urge you to respect other people and appreciate their diversity.
Neglecting your tenants or violating their privacy
One of your responsibilities as a landlord is regularly checking on your tenant and inspecting the property’s condition. You will have yourself to blame if something goes wrong and you don’t solve the issue as quickly as possible. However, it would be best to maintain the delicate balance between not neglecting your tenants and invading their privacy. You wouldn’t want them to take you to court for violating their private space.
Failure to enforce the terms of the lease agreement
If your tenants notice you don’t take action when they violate the terms of the agreement, they will continue with their bad behavior. Therefore, it would be best to let them know there are consequences when they break the rules. For instance, if the lease agreement states that tenants should pay a fine for late rent payments, ensure you follow through with the rule. When you enforce the terms of the agreement without fear or favor, you set a standard that everyone should uphold.
Property management can seem daunting at first. Fortunately, you will get the hang of it once you gain more experience. Don’t hesitate to seek help from experts to avoid making costly mistakes that will hurt your new business.