New landlords of rental properties need to be aware of the size of the commitment they’re taking on, in particular when it comes to financial and legal matters. Inexperience is nothing to be ashamed of, but it should be used not as an excuse but as an opportunity to seek out knowledge and experience from seasoned experts in the property management field and get their advice, so they are better prepared if they have to deal with safety issues or a troublesome tenant.
Here are six common mistakes for new rental property owners to avoid.
1. Failing to Screen Tenants Properly
Many inexperienced landlords will think they’re saving money and hassle by not undertaking a full tenant screening process. They may be easily convinced by pleasant people with everything appearing right about their application. But it’s vital to protect your investment with due diligence, doing a credit report, enquiring about the tenant with past landlords, and assuring yourself there’s no history of late payment or aggravation or prior evictions.
Any landlord will want to avoid the eviction process if they possibly can. It’s costly, time-consuming and unpleasant. A little extra time spent researching a tenant can save a lot of stress, and any honest tenant won’t mind you doing it.
2. Lack of Legal Knowledge
Any departure from local and federal housing regulations from the moment you begin accepting applications from renters can put you at risk of litigation as a landlord. You must have an understanding of local habitability laws and the Fair Housing Act on a federal level, and ensure your property is compliant and legally safe and habitable.
It may seem a daunting amount of legal material to learn, but expert help is readily available, and this should be a priority.
3. Not Following Through On Late Payment Fees
Don’t let any tenant get away with exploiting you by not paying rent responsibly and on time. An exceptional hardship as a one-off may be permissible if it’s verifiable, but if you allow repeated late payments out of a desire to appear kind, you will be losing out on any return on your investment.
Hold tenants to late fees and ensure they adhere to the terms set out in their lease agreement.
4. Not Having Regular Inspections
Inexperienced landlords of rental properties may be tempted to save themselves the nuisance of arranging a regular property inspection. It’s easy to believe the tenant will raise any maintenance issues promptly – but what if they haven’t noticed them, or caused the problem themselves, or are trying to conceal something else?
Beginning each tenancy properly by making safety and inventory checklists, and checking all areas are well maintained, can save you costly and unexpected repair bills in future. You can enlist professional help from property managers to make sure the inspections are full and thorough. Seasonal inspections can protect against any faults or negligence escalating into critical problems in hot or freezing weather.
5. Not Having Full Insurance Cover
The worst possible situation for a landlord is to be liable without a sufficient insurance cover. Be sure to include specific landlord’s coverage in your homeowner’s insurance to cover situations such as somebody suing because they sustained injuries while on your property.
You should also insist on tenants having renter’s insurance to cover damage on and off the property, as well as their own possessions. If your tenant accidentally causes water damage to the apartment below, you won’t be faced with damages that the tenant is unable to cover. Experienced landlords often require this protection to be in place as a term of the tenancy agreement.
6. Not Using A Property Manager
It’s a significant investment to hire property management for landlords to represent you in matters dealing directly with the tenant, but it’s one that can save time and stress particularly as an alternative to managing a property for the first time.
If you are not prepared to go into detail with all the required knowledge of landlord and tenancy laws, or you find minor day-to-day rental issues are occupying more time than they should, then it’s well worth considering investing in the services of a property manager. There is a trade-off between the management fees and the amount of time and stress property management will save you. If you have multiple rental properties to manage, getting professional help with the day-to-day running can pay off more.
These six common mistakes are part of the array of knowledge you should arm yourself with before investing in a rental property, and are a good starting point towards avoiding legal tangles and enjoying the returns that your investment brings you.