No matter what industry you look at, you’re bound to find independent entrepreneurs. Rental property management is no different! While some DIY landlords are great at taking care of their rental units and tenants, some also find it very challenging.
You may not initially plan to become a landlord, but you may have a vacant property that you converted into a rental as another income source. Read this article to avoid some of the mistakes that DIY landlords often make.
8 Common Mistakes of Self-Managing Landlords and How to Avoid Them
1. Failing to Set Aside a Budget for Vacancies
Since tenant turnover can happen suddenly, it’s important for self-managing landlords to set aside a certain amount of money to tide them over when they’re faced with a vacancy.
A three-month budget is a good start to cover maintenance costs, such as repairs and cleaning fees, while waiting for a new resident. You can also use the funds for marketing your property and getting the unit ready for the next tenants.
2. Ignoring Necessary Evictions
Running a rental requires making decisions that will be good for the business. Your goal is to ensure that you make consistent returns. Thus, it’s critical to enforce the lease and collect the rent on time. If you have a renter who is failing to pay rent month after month or breaking other rules, an eviction may be necessary.
However, evictions are a legal process and that can be a stressful experience to navigate. Property management companies can start the eviction process right away since they are representing the property owner professionally. This means that landlords who hire property managers reduce income losses and are able to find new renters faster.
3. Skipping Credit and Background Checks During Tenant Screening
While it takes effort to evaluate a renter’s background and verify their credit information, it’s a vital step. This is a great way for landlords to avoid future problems. Looking over the tenant’s background and learning about their financial health can save you from bad renters who are not able to pay on time.
Low credit scores tell you that the renter cannot manage their finances well. If a former landlord informed you that the tenant candidate left some damage to their rental and didn’t pay for it, you can expect that they will also do the same as your renter. When screening tenants, always take the extra step to do an employment verification.
Properly vetting tenants can save you from ever having to deal with an eviction. It might seem like a lot to cover in the initial screening, but it can save you a lot of issues down the road.
4. Not Taking Time into Account
Managing a rental property while working a demanding job can be stressful. Some people think that being a landlord is just collecting the monthly rent. However, landlords have to perform plenty of tasks, like conducting property inspections, arranging repairs, marketing vacant units, resolving tenant disputes, and handling property maintenance requests from renters.
Hiring a property management company is advantageous, especially for new landlords who lack both expertise and experience. It’s also beneficial for busy landlords who have less time to attend to daily property management tasks.
Having a reliable partner with robust resources and property management skills is worth paying a management fee, considering that you gain peace of mind and can allocate your time better to other essential areas of your life.
5. Forgetting to Create a Written Lease or Rental Agreement
Leases may mean dedicating extra time to working out the details of the rental agreement, but they can protect you. Conflicts are bound to happen over the course of managing a rental business, so it’s best to draw policies in black and white.
Having a written lease helps you enforce the rental terms and conditions. It’s also accepted as evidence in court should that ever be necessary. A property management company typically can help craft leases to ensure that important rental conditions are covered and state laws are followed.
6. Failing to Perform a Detailed Property Inspection
When checking your rental space, you must ensure that you remain compliant with building codes and safety procedures. As a landlord, your chief task is providing a habitable living space to renters.
Conduct an orientation during move-in to inform renters of their responsibility in maintaining the rental. Remind them that trash must be discarded properly and any damage reported immediately, to minimize costly repairs.
7. Failing to Research the Local Market
Your goal when setting the cost of rent for your property should be to provide a reasonable amount for the space while still getting a solid return on your investment. Sometimes, DIY landlords make the mistake of only checking a couple of similar properties before setting the rental property price. However, it’s crucial to do in-depth research and do a comparison of multiple listings to figure out the optimal rental rate to assign.
8. Forgetting to Give a Lead-Based Paint Disclosure
If your rental property was constructed before 1978, you must hand a disclosure on lead paint to tenants. Otherwise, you’ll be facing a fine of $10,000. Renters must be informed that a rental space may have potential lead paint, so they are aware of the perils and can request the landlord’s approval before decorating or painting the unit.
DIY landlords may be excited to handle the challenges of managing a rental property on their own. However, without experience it can be easy to make some common mistakes. Once you've corrected these mistakes, though, there's still more to learn!
Hiring a property management company can make a huge difference in terms of following industry best practices, remaining compliant with state laws, and having extensive resources and support.
Paying a low management fee is better than facing hefty costs as a result of making mistakes due to inexperience with running a rental property. Property managers can streamline a lot of rental operations as they’ve invested in advanced systems and have a professional team handling the details.
If you’re seeking a committed partner who’s always available to handle tenant requests and property needs, contact Action Properties today!