Top 7 Mistakes New Landlords Make
While owning property and being someone’s landlord sounds super exciting at first, there’s so much more to it than you think.
If you are a first-time property owner, read through the list of top mistakes new landlords make so that you can try and avoid them when you handle your property:
Not Running Adequate Checks on a Potential Tenant
No matter how desperately you need a paying tenant, rushing things can only cost you in the long run. One of the most important things to do before letting someone occupy your property is to check their credentials first. Rely on a rental application form to give you all the information you need. Also, take the time to double check your potential tenant’s references – everything from their employers to their former landlords.
Thinking the Property Will Always Be Rented
Most first-time property owners take loans to buy properties thinking they’ll always be rented. While it’s nice to be positive about your future rentals, be smart first. Before purchasing the property, make sure that you can pay the mortgage in case you happen not to have a paying tenant for several months. If you count on ALWAYS having someone, you are potentially risking foreclosure and financial ruin.
Viewing It as a Hobby
While the property you own may not be your primary source of income that doesn’t mean you should treat it as secondary. Renting properties is a business, and you should treat it as such if you want to make a profit. For starters, that means:
• Establishing separate bank accounts for deposits and expenses
• Consulting a tax professional to help you handle your taxes
• Using a bookkeeping system
• Being realistic about ongoing costs and repairs
Trusting a Handshake
No matter how well you click with your potential tenant, you can’t let your rental agreement end on a handshake or a promise. Make sure your tenants sign a lease agreement for your legal protection. That way you are sure they understand the terms of the contract and that they will honor all rules set by the agreement.
Not Writing It Down
Similar to having a rental agreement sorted, you want to have the paper trail of all transactions made between you and your tenant in case you need to sue them or are sued by them. Keep copies of emails, text messages, voicemails, note phone conversations, keep a track record of all payments, etc. These documents are for your protection.
Asking Illegal Interview Questions
The Fair Housing Act of the Civil Rights Act of 1968 notes that you can’t deny a tenant's application based on religion, color, race, sex, national origin, marital and family status, or handicap. If you are negligent during an interview, you may quickly make yourself vulnerable to being sued.
Not Meeting State and Local Housing Codes
If you don’t make sure all health and safety standards are met, your tenants not only have the grounds to break the terms of your lease agreement but they also have the right to sue. So, keep your property squeaky clean if you don’t want to get to court.
The tips above are just the tip of an iceberg. For more information, you may reach us at info@LLCPM.com