6 Mistakes New Landlords Make – Residential Property Management
Inexperience is nothing to be ashamed about, but a lack of knowledge can mean sticky situations when it comes to the ins and outs of finances and legal matters.
Unfortunately for new landlords, managing a property requires both kinds of knowledge, and while being a new to the job might be an explanation, ultimately landlords need to be prepared with an arsenal of knowledge before they find themselves dealing with a nightmare tenant, or renting an unsafe property.
Finding a great place to ask seasoned veterans of the job questions, and avoiding these 6 common mistakes, is vital to making your time as a landlord go smoothly.
#1. Failing to Fully Screen Tenants
Tenant screening is crucial to protecting your investment. Many new landlords will forgo a complete tenant screening process, instead relying on appearances of a well-rounded application and pleasant applicants. However, it’s entirely possible that what you thought was a dream tenant, is actually a wolf in sheep’s clothing
While even the most comprehensive vetting process will not be entirely fool-proof, tenant screening can help prevent against accepting tenants who have a past history of late payments and poor attention to other properties. Seeking a credit report, doing a past eviction search, and making inquiries from the tenant’s past landlords are all vital aspects of doing your due diligence to protect yourself and your investment.
The eviction process is both extremely time-consuming and costly; new landlords should save themselves the stress of dealing with a horrible tenant and instead spend the little bit of extra time to do proper research before allowing an applicant to sign on the dotted line.
#2 Not Knowing Local & Federal Laws
Not adhering to federal and local housing laws can put a landlord in the line of fire for litigation. While a comprehensive understanding of renters laws can seem daunting to explore, it is unimaginably important for new landlords to have a basic understanding of the federal Fair Housing Act and habitability laws before even accepting applications for renters.
Ensuring that you are following fair housing guidelines for accepting applicants and that your property is legally habitable and safe should be a new landlord’s top priority.
#3 Failure to Follow Through on Fees
As a landlord, you are bound to hear the occasional sad story from a tenant whose only real interest is to dupe you into allowing late rent. While it may be okay to accept a one-time late payment for verifiably exceptional hardships (if you are financially able), new landlords who allow tenants to “get away” with paying late simply because they don’t want to look overbearing, will not see any return on their investment in the near future.
A tenant willing to exploit circumstances to circumvent paying rent responsibly is not a tenant you want in your rental. Be steadfast in charging late fees, and ensuring tenants fully adhere to their lease agreement.
#4 Forgoing Regular Property Inspections
Regular property inspections may seem like a time-consuming nuisance–after all, if the tenant notices any maintenance issues, they will be reported, right? While an unseasoned landlord may be tempted to think that way, chances are, your tenants will not notice (or could even be the cause of) compromising damages that need to be addressed in a timely manner.
Creating a safety checklist and ensuring that all areas of the property are well-maintained can save you from having to make costly repairs down the road. Seasonal inspections can also allow you to remind your tenants to complete any maintenance they are responsible for, such as covering water spigots in the cold season or changing the air filters appropriately.
#5 Not Having the Right Insurance
New landlords don’t always ensure that their homeowner’s insurance covers their tenants. The worst possible situation is to end up without coverage because due diligence was not followed. Be sure that your homeowner’s insurance extends to cover landlord-specific situations (for instance if someone is injured on your property and attempts to sue).
Moreover, be sure to strongly encourage your tenants to acquire renters insurance. The cost is minimal, and the benefits include not only protecting their possessions but covers damage caused by negligence. This means that if your tenant floods their bathroom and causes water damage 3 floors down that you won’t be faced with damages that they don’t have the funds to cover. For this reason, some landlords require that tenants acquire renters insurance as a term of tenancy.
#6 Not Knowing When to Hire a Property Manager
Deciding to work with a property management company to represent your property is a big decision, and understanding the pros and cons is important for a landlord starting out. While a lot of owners do self-manage their homes, using a management company is an alternative way to secure rental income for less stress and less dedicated time.
If you find that small issues are taking up your time, or that you are not ready to dive into the nitty-gritty knowledge of landlord-tenant laws that is required, it might be appropriate to look into hiring a property manager. The trade-off, of course, is working with a property manager does mean less income from your property due to management fees. If a new landlord is hoping for a middle-ground, a property management software may also assist with organizing and maintaining day-to-day management needs without the fees involved with hiring a property management company.
Starting out and making mistakes can often go hand-in-hand, but when it comes to becoming a landlord and protecting your tenants and your investments, ensuring that you have a full arsenal of knowledge is vital to your success. Avoiding this 6 common mistakes can mean the difference between a legal predicament and smooth sailing with your investments.