Being a landlord can be a lucrative investment, producing a steady stream of income with long-term capital growth potential. That said, if you’re not careful and strategic about managing your properties, it could end up costing you significantly in the long run. As they say, the best mistakes to learn from are those made by others. Let’s explore a few common blunders other landlords have made so you can (hopefully) avoid them yourself.
Not knowing the market.
Successful landlords are proactive about keeping their fingers on the pulse of the local real estate and rental markets. Failure to understand the best areas to invest in properties, as well as the going rate of rent, can result in poor and costly decisions. Before purchasing a rental property, do your homework and be strategic about it. This will help you get the most bang for your buck.
Cutting corners on screening.
Some landlords – especially those who are new to the industry – will rent to just about anyone. The problem with this is that you may (and likely will) end up with tenants who are less than desirable. Then, you’ll have even bigger problems on your hands, up to and possibly including the long and expensive eviction process. Avoid this by being diligent about screening tenants and always checking references.
Not knowing the law.
There are a number of laws, rules and regulations that apply to landlords. These are typically in place to protect tenants from being discriminated against or otherwise treated unfairly. If you aren’t aware of these regulations, you could inadvertently find yourself in serious legal hot water. Familiarize yourself with what is expected of you as a landlord and what is and isn’t allowed when screening, choosing and managing tenants. This will ensure you remain in compliance and prevent potential violations.
Slacking on your responsibilities.
If you don’t reside at your rental property, it’s easy to fall into the “out of sight, out of mind” trap and become lax on your duties and responsibilities as a landlord. In doing so, you could end up losing good tenants and have difficulty filling those vacancies. Be sure to adhere to the terms you agreed to in the lease and treat maintenance and repair requests as a top priority. In doing so, you’ll ensure that your tenants are happy, your properties are well-maintained and your investment is sound.
Not maintaining a business mindset.
Sometimes it can be difficult to view owning a rental property as a business. This is especially the case with owner-occupied properties. But the fact is, you invested in your property to generate income, which means you should be managing it as a professional. Using property management software can help you stay on top of important records and make this process much easier and more efficient. Likewise, as your portfolio grows, hiring a designated property manager might also make things easier.
Investing in real estate can be a great way to generate income, build wealth and hedge against economic downturns. If you’re not careful, however, it could end up backfiring. Avoiding the five common mistakes listed above should help put you on the right path toward becoming a successful landlord and ensure that you enjoy maximum return on your property investments.