How to Avoid 5 Common Problems Faced by First-Time Landlords
People become landlords for many various reasons. Some are “accidental landlords” who has decided to rent out their former residence, others became landlords through an inheritance. Still, some looked for properties for sale tirelessly and chose to buy one (or more) as an additional income source. Irrespective of how or why you became one, being a landlord can be a worthwhile endeavor— or a fruitless one if you make some mistakes.
Here are five of the most common errors landlords make and how you can avoid them.
1. Over-Estimating Rent Rates
The majority of landlords purchase a rental property, undertake some repair work and greatly increase the rent after the renovations. Yes, you’re going to get a higher rate of rent, but not as high as anticipated.
You can judge how in-line you are with the market by the response rate and adjust your prices accordingly. Most of the most profitable landlords maintain below-market rates for their properties. This is because it’s more worth it if you get a good renter who pays on time and manages the property properly. In addition, vacancies and turnover expenditures are enormous costs. By maintaining your property below market rent, you secure your property at 100% occupancy.
2. Not Communicating and Documenting
Having forms and paperwork is one of the most essential components of success as a landlord, which is sadly overlooked by many first-time landlords. This can later lead to serious problems as there will be no documents to support the claim. To solve this, develop a suite of common forms for renters to submit and a systematic approach for filling them out.
Have a report that details any issues or damages to the property for each house. You will also need a lease in line with local laws. You may need to make tenants aware of asbestos, mold, bedbugs or other legal disclosures.
All tenants should be issued with a copy of the lease after they sign as well as certain other legal documents that you are required to provide.
3. Not Running Credit/Background Checks
If you don’t run credit and background checks before leasing to someone you never quite know who you are letting into your property. So, it is important that your screen, background and credit check any potential new tenants.
Look for any bad credit history patterns. It is also recommended to verify employment and obtain from an external source a copy of their most recent pay stub or other income verification. Have the prospective renter sign a verification release to obtain information from employers and former landlords and then follow up for validity on sources.
4. Not Knowing your landlord responsibilities
It’s a huge milestone to find a tenant for your house. Your job, however, is not completed. As a landlord, honouring the terms of the lease agreement is your job. Check-in with your tenants, keep tabs on the property’s condition, complete routine preventive maintenance, and seasonal maintenance, and quickly respond to requests.
Make sure your home is a safe and healthy place to live and keep up with your taxes and financial reporting. Neglecting your tenants and property can lead to higher turnover, higher vacancies, lower rental income, or even legal action.
If you are unable to handle the pressure ds responsibly of r private landlord then consider using a letting agent to handle your property instead, as this will take some of the weight off of your shoulders.
5. Not Treating your rental like a business
Your rental property, however you got it, is an enterprise and a source of income— and you have to treat it like that. Record all your processes and correspondence with tenants to ensure that your policies are adhered to.
Successful landlords integrate skills from a variety of areas, including marketing, customer service, home repair, and accounting. Reduce the risks of being a landlord by preparing yourself and interacting with other seasoned landlords and professional associates. Join landlord associations to stay updated with evolving regulations and rules and share your experiences in order to avoid the most common landlord errors.