Nobody knows better than you that being a landlord or property manager is a big job. Chances are you’re tasked with maintaining multiple properties, though even one rental property can be a handful by itself. In addition, you may be dealing with difficult tenants or tenants who have fallen on hard times. On top of all that, filling empty units can be a full-time job. Managing regulatory compliance, filing taxes, doing good bookkeeping, and more all at once can be overwhelming. In all the hubbub, it can be easy to make mistakes that will cost you money. To that end, here are five common landlord mistakes, which could cost you big time.
5 Landlord Mistakes That Will Cost You Time & Money
Property management can be relatively simple for those with experience who have done their homework. But no one is immune to unforeseeable problems which will sometimes arise. So for your peace of mind, and your bottom line, keep these five landlord pitfalls in mind.
Poor Tenant Selection
Tenant screening is the single most common mistake landlords make, by far. Every landlord will inevitably get a bad tenant once in a while. But it’s up to you to make sure you do your best to vet each one before signing on the bottom line. You should:
- Screen each tenant thoroughly
- Check their rental background
- Check their credit score
- Ask for references
In some cases, it’s a good idea to do a criminal background check as well. Any tenant may occasionally be short on the rent or need extra help maintaining the property. These kinds of problems are understandable. But inadequate tenant vetting will make these kinds of issues a regular occurrence and cost you tens of thousands.
Inadequate Tradesman Connections
It’s crucial to have good relationships with local contractors. It would help if you had plumbers, framers, electricians, HVAC repair professionals, and more on speed dial. Better still is to have your own in-house team of handiwork experts. One of the most severe mistakes many landlords make is to try to be their own property maintenance crew.
Just doing the office work is a full-time job. If DIY is your thing, then you can be involved. But you will need an office team to take care of managerial business. Either way, avoid trying to do everything yourself.
There are many pitfalls in any investing. One of the most common in real estate is to leverage the entire value of a property. This means making no down payment. Unfortunately, the more you rely on financing services, the more you pay in the end. Zero-down loans always come with higher premiums, which means it will take longer to get out from under your debt. This route can be tricky if you’re starting out and have yet to build your maintenance and management teams. You will need to build out your systems before you can start making money. At the same time, you’ll be expected to pay those high premiums.
Inadequate Cost Calculations
Before going into any line of business, it’s vital to understand your operations. These costs will come out of your bottom line. Failure to make these calculations beforehand is a sure way to get into trouble with future investments. As a general rule, you should set aside at least 10% of all your income for use in the maintenance and other operational costs. Doing this will help ensure maintenance tasks are done on time, which is an important way to provide the value your tenants expect.
Lease Agreements Not Made in Writing
For legal reasons, not keeping track of leasing agreements is a problem. But that’s just the start of the trouble you can expect by leasing without a written agreement. Your contract should state the rules clearly. Your responsibilities and those of the tenant must be spelled out explicitly. In a legal dispute, many courts and judges will favor the tenant. This is especially true if you fail to protect your interests by getting the lease in writing.
At the end of the day, being a landlord is a tough job. There’s no such thing as a problem-free day in your line of work. So it’s a good idea to keep these and other potentially costly problems in mind, especially when things get hectic.
To learn more about how to make property management easier and more profitable, or to list your units with South Florida’s hardest working real estate firm, get in touch today. Our experienced and professional team is standing by to help.