When it comes to actively managing a rental property, it’s all in the details, as they say. This especially rings true when it comes to the screening process. Seemingly minor issues, if ignored, can eventually lead to big trouble later down the road. Here are some common mistakes newbies make:
Lack of familiarly with state and municipal laws/codes. Some regulations may seem cumbersome, but if you ignore them, you can end up with big financial and legal troubles. For example, when screening tenants, you need to base your decisions on things such as credit history, income and debt levels, and past rental history. You’re not allowed to take into account (or discriminate against) an applicant’s race, religion, national origin, gender, age, family status or sexual orientation. A seemingly innocent oversight, such as asking an applicant’s age or marital status and using it to make a tenant decision could put your business in jeopardy.
Don’t forget about legislation related to the condition of the property. As a landlord, you’re required to make sure the property meets health and safety standards. If you don’t satisfy the requirements, your tenants may have grounds to break the lease or even take legal action. Ignorance on your part is not an excuse for inaction in the eyes of the law!
Bypassing the rental application. You just met who you think is the ideal tenant. Maybe your friend’s cousin wants to rent from you. What harm could there be in skipping the formal rental application? Short answer: There’s too much at stake to be lax. Don’t skip any steps in the screening process, no matter the nature of the relationship. Always ask prospective tenants to complete a rental application and provide you with information such as name, address, work and rental history, and references to cover your bases.
Not checking and verifying references. You’ve reviewed the rental application and your prospective tenant looks great. You’ve done all the “big” things, such as verifying income and inspecting their credit report. So is it OK to streamline the process and eliminate the hassle of calling references? That’s not such a great idea. Sometimes, it’s the very last detail you check that could help you avoid taking on a nightmare tenant.
Underestimating the cost of repairs or ongoing property maintenance. In order to keep tenants happy and loyal, you will need to maintain the property. This is where your financial calculations come into play. The rent should cover a portion of ongoing maintenance costs. Also, plan on having enough money set aside in a rainy day fund to cover any emergencies.
Viewing it as a hobby. Owning rental properties is a business and therefore you must treat it as such. That means relying on professionals such as bankers, lawyers, accountants, insurance agents and more. You may be tempted to employ a DIY approach at first, but that isn’t a viable long-term strategy when profitability is concerned. Leave complex matters to the experts and you’ll reap the rewards.
Neglecting tenants. The properties you are renting out reflect on your professional image. If you do not regularly check in with your tenants and on the condition of your properties, you may encounter some unpleasant surprises. However, take care that you’re not in violation of your state’s laws regarding tenant privacy before stopping by the property unannounced.
Delaying an eviction. Procrastination when it comes to eviction can be a very costly mistake. If you run into problems with a tenant and are unsure of your rights, seek legal counsel as soon as possible.
Not consistently enforcing lease terms. If you’ve indicated in the lease that late payment will result in a penalty, charge it. The same goes for policies regarding pets. Again, it’s important to be consistent and fair across the board to avoid the appearance (or reality) of favoritism or discrimination.
Not keeping good records. Keeping thorough records, whether electronic or hard copies, can keep you in good legal standing. For example, note phone conversations and keep a paper trail so you’re able to defend yourself in court, should it come to that.
While a real estate portfolio can be lucrative, it does come with serious responsibility. Don’t leave anything to chance. Our property management company is well equipped to manage your tenant load and your properties from start to finish! These services include property maintenance and compliance, vacancy marketing and tenant placement, rent collection and accounting, on-call property managers, web-based portals for property owners and tenants, and other services that can make your life easier. In other words, we specialize in full-service property solutions. We have three goals for our clients: maximize profitability, keep operating expenses low without sacrificing tenant satisfaction and build value by protecting your investment. Contact our office today to find out more! https://www.propertymanagementinc.com/
