8 Fatal Landlord Mistakes & How to Avoid Them
Being a new investor and offering your first house for rent may seem intimidating, but being a landlord doesn't have to be difficult if you follow these 8 simple steps to avoid landlord mistakes. Unfortunately, when you've never dealt with rental homes on the landlord side, it’s easy to make serious mistakes that can potentially cause major problems or cost you money. So, before you start handling rental homes, consider these 8 fatal landlord mistakes made by new landlords and how to avoid them by keeping in mind what not to do.
1. Not Screening Tenants
It’s easy to place your trust in people and assume everyone will take good care of your rental home. Unfortunately, this isn't the case. Even tenants who take care of the property may not pay their rent on time or at all. Make sure you complete a full background and credit check to ensure you are renting only to suitable tenants. This should be your rule #1.
2. Not Treating It as a Business
Offering a house for rent is just like running any other business. If you don’t approach it as such, you may find you aren't prepared for such a time-consuming business and could end up losing money. Make sure you don’t co-mingle funds with your personal accounts and always keep your receipts. Organization is key to making your rental home investment business a success, especially if you own more than one rental property.
3. Listening and Believing a Sob Story...Unsupported
Anyone can make up a heart-wrenching story, leaving you feeling sorry for them. I had one tenant who had a relative pass away once a month, it was always their grandmother; funny how she kept being "rejuvenated" after rent was paid late (I asked those tenants to leave). When you are a landlord, it’s important to separate yourself emotionally. This will help you think with a clear head and avoid believing a fake story. I usually get our residents to provide documentation that will support their story. If none can be provided, then I know for sure its fake and act accordingly. If documentation is provided, then your tenant is on the up-and-up and if it only happens ones, then you've made a right decision.
4. Not Getting It in Writing
Everything regarding your rental homes should be done in writing. Don’t accept a verbal agreement from any tenant for ANYTHING, regardless of how trustworthy they may seem or how small the agreement is. If it's not in writing, in will not be fulfilled, it also will prevent issues of “he said, she said.” So, remember, if it's worth talking about, it should be in writing and hopefully in your lease agreement as an addendum.
5. Not Understanding the Costs
Rental properties aren't an instant money maker. In fact, it can be a costly endeavor when you factor in a mortgage payment, taxes, property insurance, regular maintenance, replacements, repairs and vacancies. Make sure you set aside some of the money you make to cover these costs, especially in the event of an emergency.
6. Not Knowing the Law
As with other areas of life, ignorance of the law isn't an acceptable answer. If you have rental homes, you need to know the laws that protect both you and your tenants. This will prevent making serious mistakes that could land you in legal hot water, especially in dealing with evictions.
7. Failing to Do Inspections
You may feel like you’re invading the privacy of your tenants, but it’s important to complete regular inspections on your property to prevent damage, fraud or illegal activity. The provision for regular inspection should be written into your lease agreement and with about a 24-48 hours written notice, you should be able to inspect the property. This will also help you identify minor issues tenants may not report to you during tenancy, but if not repaired, can become a major expense later.
8. Renting to Friends or Family
It’s hard to say no to your friends or family members, but renting to these individuals can be a high risk. They may not intend to, but they often end up taking advantage. This can create a rift that may never be repaired.
Rental homes can be a profitable endeavor, but it’s important to know how to handle them correctly. If you’re looking for help managing your rental homes in Atlanta or the surrounding area, contact us. We can help you avoid these serious mistakes. ALH|Podland Rental Homes Property Management has been managing real estate investments since 2008. We offer a full array of property management services.
Marina Shlomov, a managing partner at ALH|Podland Realty & Rental Homes Property Management is the author of many articles on Landlording, Property Management, and Real Estate Investing. A residential builder in the state of Georgia since 1999, Marina is an investor herself. Her property management company is intended “For Investors” and “By Investors” for a simple reason – she knows what investors’ goals are and she works hard to reach their goals. In her spare time, Marina likes to spend time with her family, friends, garden, read and travel. Check her out at www.alhpodland.com. You can find Marina’s articles and comments at @rentalhomesatl on Twitter, on Facebook, Google+, Blogger. and YouTube, Bigger Pockets and REI Club and LinkedIn.
