Simple First-Time Landlord Mistakes To Avoid
According to John Stuart Mill, Landlords grow rich in their sleep without working, risking or economizing; but in order to achieve this, you need certain knowledge.
We all know that “knowledge is power,” but do you know WHY that is? Because it gives us control.
The more knowledge we have, the more control we have – and every business owner in every industry is fighting for that #1 spot. So is every landlord or property owner.
In the property business, the ability to rent it out is always positive; your asset has the potential to continuously generate income.
This might sound easy enough; simply put home up rent and start earning money from it right away. But the reality is quite different. There are a few mistakes that new landlords often make which can quickly result in a loss of income.
Let’s take a look at a few common mistakes that new landlords, make and how to avoid them.
Charging too Much Rent
A very common mistake made by new Landlord is just after buying or renovating a property, they increase the rent; a lot. There is nothing wrong in that, but there is a limit which you must not cross.
No matter how high the amount of money that you have spent on your property, it is advisable that you know how to read the market and follow market trends before you put a figure or price tag to that rental property.
One way to do this is by comparing your rental property to others in the local area; get an idea of how much they are charging their tenants and set the rent of your property accordingly. Experienced landlords will often set their rent a little below average. They might get a little less money from their investment in the short term, but their properties never stay unoccupied for long.
Expecting a cash flow as soon as possible is a common landlord mistake to avoid as a first-time landlord. Do your research, fix a price that would fly yet won’t hurt
Landlord’s Inadequate Involvement
Owning and maintaining a rental property is not just a hobby. It’s a business, and you need to treat it as such to gain profit from it.
Requirements such as opening a dedicated bank account solely for rental deposits and expenses, consulting professionals for handling and paying taxes are all necessary. You will also need a good understanding of the tenancy rules and regulations which concern renting a property.
Lack of Maintenance
Don’t get complacent. You may be having a good relationship with tenants, but that doesn’t mean the property will stay rented indefinitely. Maintenance of the property is very vital. A landlord should attend to problems promptly.
We have cases of tenants quitting because the landlord usually takes months to attend to simple repair or maintenance issue.
Have contingency plans ready to attend to maintenance and repair.
Not Keeping Documents
This is a common mistake –made by newcomers and experienced Landlords alike. It’s essential that you keep important documentation between you and your tenant in written format. You never know what’s coming your way, and in court, almost nothing is accepted except written documents.
So, be sure to keep payment receipt, conversations, e-mail, WhatsApp chats, voicemail, or SMS records in order to support your allegations in case you ever need to.
Inadequate Tenant Screening
Having the right tenant can make all the difference as a landlord. Conversely, a bad tenant can be a huge headache. Inexperienced property owners will not give this vital point due attention, but it’s important to check your tenants’ rental history.
You’ll need information such as employment, income or salary history. You might want to call their former landlords.
Real estate is an excellent business, but there are always stumbling blocks. The key to success lies in learning from your mistakes.