People become landlords for various reasons. Maybe you have the opportunity to rent out your former residence, or maybe you have inherited some property; Maybe you just purchased a property for an extra source of income. Regardless of the reason, investment property can be very profitable or very costly.
Here are 10 ways to avoid the mistakes landlords make:
Understand your local market-
Remember the real estate motto – location, location, location. A desirable area attracts more potential tenants. Get to know the neighborhood, including access to transportation, stores, restaurants, and other businesses. In addition, understanding your location means learning about the dynamics of the local market, researching area taxes and determining what you can charge for rent. All of these are key to estimating the return on investment for your property.
Understand fair housing laws-
Fair housing laws are federal statutes that ensure equal access to housing for everyone. It is illegal to discriminate against anyone on the basis of race, color, religion, national origin, sex, familial status or disability. The bottom line is to treat and communicate with every applicant and renter in the same way.
Do high-quality marketing-
Feature high-quality photos on your ad and make sure there are plenty of pictures. If possible, take your photos during the spring and summer months when the landscape will look its best. You may even wish to hire a professional. Make sure all of your ads are accurate, easy to understand, and free of errors.
Conduct a thorough tenant screening-
While getting your property rented as soon as possible is important, finding a qualified renter is more important. It doesn’t do you any good to find a tenant quickly if they can’t pay their rent on time. Insist that each potential renter fill out an application and verify everything on it including (but not limited to) landlord references. Perform a tenant background check and credit report.
Create and utilize a good lease-
If it isn’t in writing, it doesn’t exist – a verbal agreement will not hold up in court. For you to have a binding legal agreement between you and the tenant, you must have a signed lease.
Know your responsibilities-
Getting a tenant for your property is just the beginning. As a landlord, it’s your job to meet your terms of the lease. Respond quickly to tenants and fix any repairs that need to be done as soon as possible. Ensure that the property is a safe place to live. Neglecting your residents and your property can result in higher turnover or even lawsuits.
Anticipate maintenance costs-
Budget for maintenance costs assuming that your property won’t always be occupied. Make sure you have enough money set aside to pay for the mortgage, utilities and other maintenance costs if the property is vacant. There are also other unforeseen expenses, such as damages and unexpected repairs, that you need to add to the budget. Creating a budget on the “Worse Case Scenario” to stay in the black.
Know when to hire a professional-
If you are handy and can respond to requests quickly, you can keep up with some of your property’s maintenance. However, if you are not handy or are too busy, you may need to hire a professional to do repairs. You may also need a property management company.
Manage your time-
Managing any investment property can take a lot of time. You must show the property to secure a tenant and then screen any applicants. Maintenance takes time (even if you don’t do the work as you will be calling and scheduling the handymen) as well as keeping the books. Make sure to take time for yourself and have people you can rely on for backup. Another way to save time is to hire a property manager or property management company – of course this takes more money and cuts into your bottom line.
Treat your rental property like a business-
Consider using an accounting application or a spreadsheet to keep close track of your income, expenses and your return on investment. Landlords should utilize skills from many different areas: customer service, marketing, accounting and home repair, among others. Consider joining local landlord associations to keep up with changing rules and regulations so you can avoid the most common landlord mistakes.