Being a landlord is a tough gig — a respectable and worthwhile gig that requires hard work and determination.
Yes, managing your own investment property has its advantages, and they are great advantages.
Luckily, by being well informed you can avoid making the same mistakes some of your counterparts have made in the past. Sure, landlord tenant law can be somewhat complicated, but mistakes can be very costly for landlords. That’s why it’s worthwhile for you to be clear on your responsibilities.
Here are the top mistakes to avoid in order to be a more successful landlord (you’ll thank us later):
- Not doing a thorough background check
This is hands down the biggest mistake new and existing landlords make. Don’t rush the screening process! Take your time and select your potential, reliable tenants, and ensure that they will meet all of the contractual obligations you set forth. By having qualified tenants in your rental property, you will avoid the hassle of potential issues in the future.
To learn more, here’s a great How To Screening Guide.
- Prioritize ‘the paperwork’!
Take time to prepare and fill out all of the contractual documents thoroughly. Your documents should clearly outline what is and is not included under the lease agreement. At a minimum, your move-in package should include a comprehensive, state-specific lease, and a move-in checklist. Remember, this becomes the foundation of your relationship and typically lasts twelve months or more, so don’t go through the motions here.
The checklist should be used to document any property flaws the tenants may encounter upon their move-in. Make sure that you also take the time to review the documents in detail with your new renters as the move-in date approaches. Whatever you do, do NOT skip the review altogether, and make sure to properly set expectations early on.
- Be specific when handling rental payments
Keep a detailed record of all rental payments, and always provide your tenants with receipts. This allows you and your tenants to have a clear understanding of all rental payments, and this will help you stay organized come tax season when you need to pay property taxes.
It is important to have a clear plan in advance which includes how you want to be paid, what you’ll charge for late fees, any additional fees, and whether you should accept partial payments or not (generally speaking, no!). Regardless, cultivate a good relationship with your tenants, which will go a long way to ensure rent will be paid on time.
And, while most tenants still pay their monthly rent via check, they would prefer to pay their rent online. That being said, there are some helpful tips to help entice your renters to pay online.
- Be friendly, but not a friend
It’s OK to be friendly with your tenants, but do not develop a friendship with them. Friendships make it personally difficult to take action with a tenant who breaks the contract. It is important to remember to always remain professional since this is a business deal. And, don’t let personal feelings get in the way or cloud your judgement.
- Maintenance problems – Be ready
Always address maintenance issues in a timely manner. Don’t procrastinate! You want to be able to quickly identify and solve any maintenance issue that may arise.
As a respectable landlord, you will want to be proactive — inspect the property on a regular basis and make sure that your property has the following: adequate weatherproofing, available heat, water, electricity; and remains clean, sanitary and structurally safe.
Don’t underestimate the maintenance expenses and capital improvement outlays that you will encounter. There are many models to estimate repairs and maintenance – familiarize yourself and bake this into your plan. One popular rule of thumb model is the “50% Rule”, that half of what you charge for monthly rental income will go to expenses — not counting the mortgage. So according to this school of thought, if rent is $1,200, then $600 would go to expenses. If your mortgage is below $600, you might have positive cash flow.
Be smart and plan accordingly.
By following these simple rules you will avoid the common pitfalls, and will be well on your way to becoming a successful landlord with tenants who respect and appreciate you.
Rent Marketplace helps independent landlords and local property managers save time and money with our integrated one-stop shop solution suite. With online applications, tenant screening, state-specific leases and more, users can move in better residents, faster.