Are You a New Landlord? Don’t Make These Costly Mistakes
Owning a rental property is a very smart move. It can be a reliable source of additional monthly income, not to mention the potentially large payoff when it comes time to sell the property and cash in on it’s equity. But it’s not all fun and games. Failing to properly manage your rental property can be a massive source of headache, and extremely costly both from a time and financial perspective. If you’re new to the game, be aware that this is a business, and as such, remain business minded. Recognize areas where other landlords have failed, and use them as learning experiences. On that note, avoid making these costly mistakes:
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Failing to Properly Screen Tenants
The most important aspect of landlord management, is properly screening your prospective tenants. Failing to do so is like playing Russian roulette. You may get lucky…or you may bite the bullet. Think of your tenant as the arms and legs of your business. They are living in the space, and therefore have direct impact on the properties maintenance and liveability. The last thing you want is for your tenant to run a muck on your property, as this will leave you with the headache of fixing the space up, and the bill that comes along with it. More importantly, you are relying on the tenant to pay their rent for your investment to be worthwhile. If a tenant fails to pay their rent, it can take months for you to evict them, and there is no promise that you’ll ever be paid out on the months of back rent – so be smart and screen your tenants thoroughly.
Allowing Tenant Renovations
Some landlords think to themselves: “my tenant wants to renovate? Fantastic, free service for me!” That’s a potentially dangerous thought process. For starters, you should be heavily involved in any renovations or fixes being done to the space. Once the tenant leaves, you’ll need to find a new tenant; what if the renovations or fixes from the old tenant were performed poorly? Then you’re going to be stuck cleaning up the mess. Moreover, tenant renovations can potentially cause damage to your property, or even tenant injuries that may lead to legal trouble. If your tenant is offering to pay for certain renovations, that’s fantastic, but make sure you pick the professionals to do the work, and make sure you know exactly what work is being done.
Lazily Written Leases
Take your time when writing up the lease. The lease is your failsafe in case of disputes. The lease should thoroughly outline what is expected of the tenant, and what steps can be taken if the tenant fails to live up to the lease requirements. If the lease is missing vital details, or lacking specific required information, it may be deemed null and void in the case of a legal dispute. Do not skimp on the lease.
Verbal Lease Agreements
Some landlords settle with a verbal lease agreement. A verbal agreement will not hold up legally, and causes a ton of grey area. Without proper documentation, you have no leg to stand on if need be. A written, and signed lease agreement, is the only way to protect your rear end.
Not Having Insurance
Like any business, you need to be covered legally as legal disputes can arise with your tenants; rent can go unpaid, damages can arise, liability issues can come up; understand that a landlord can be held liable in the case of injury to your tenant or one of their guests. A good insurance plan will protect you and your investment.
Not Requesting Tenant Insurance
On the same note, you’d do well to ensure that your tenants have tenant insurance. It’s not uncommon for tenants to cause damage to a landlord’s property. Fires, floods, broken structures etc. are all possible, and if your tenant doesn’t have insurance, you will likely get stuck with the bill.
Accepting Alternative Methods of Payment
Why did you purchase a rental property to begin with? To make money, right? So why on earth are their landlords who accept alternative methods of payment? In some cases, tenants will offer to pay for certain renovations or repairs. In this case, how do you know the job will be done well, or at all? Accepting anything other than money for rent, negates the very purpose of renting out the space to begin with.
These are just a handful of big errors that many landlords make. If you’re new to the game, be smart and avoid these common mistakes.
