As a first-time landlord, you might think that you’re bound to make a few mistakes. While being a new landlord might mean a slip up here or there, there’s no reason to make big mistakes that can cost you money, time and major headaches.
We understand you’re excited about your new role but taking a little bit of time to learn the ropes before you get going can change the way you do day-to-day activities like background checks and more. Continue reading this article to learn about the biggest mistakes you should avoid when you’re just getting started.
1. Failing to Understand Fair Housing Laws
When you’re looking for tenants, you want to find the best of the best. Before you start approving people to become a tenant, you need to make sure you understand the Fair Housing Act and other tenant rights.
Even though you own the property, you can’t discriminate against people due to their race, religion, sex, disability and more.
While there are federal laws, you also need to be aware of the local laws of your city and county that may provide further protection for tenants. Failing to understand these laws can land you in a heap of legal issues and cause major issues for you long-term.
To avoid any legal bombshells, avoid targeting certain groups of people with your marketing. Instead of targeting certain groups with your marketing, focus on showcasing your property in the best way possible by talking about amenities, location and other attractive things about your property.
2. Failing to Understand Your Local Market
Even if you own properties in other areas, that may not be enough to make it in a new location. You’ve probably heard the saying “location, location, location” when people talk about real estate.
There are a couple of reasons why it is so important that you understand your local market.
The first reason you need to understand your local market is that your property needs to be desirable for the people looking to rent in the area. Even if you place an attractive price on the rental, people might not be interested in living in that location.
Look at how easy it is to access transportation, business, food and more. If it’s difficult to reach any of these essentials, you might find it hard to market to people that don’t have reliable transportation.
The second reason you need to understand your local market is that you need to know about things like taxes and what you can charge for rent. When you know about this, you’ll be able to figure out how much of a return you’re likely to get on your investment.
3. Failing to Market Like a Master
If your property sits empty for too long, that isn’t good for business. You want to have as high an occupancy rate as possible. One of the pieces to the puzzle with getting good tenants into your property quickly is what you’re doing to market your property.
Invest in high-quality photos, so people are interested in coming to view the property. If you snap photos that aren’t well-lit and are lacking in composition, you won’t get as many people to click to view your property online. If you’re marketing offline then most people won’t pick up your flyer or look closer at your advertisement.
Add as many details to your marketing as you can. People might have questions about your property but oftentimes, they don’t want to call to ask them. You can even create an FAQ for your property to go over as many questions as possible.
4. Failing to Complete Accurate Paperwork
You’ve excited to get your new tenants into your building, but don’t make the rookie mistake of messing up on paperwork. The lease agreement is legally binding and you want to be as specific as possible with all of the terms.
Include policies, rules, and conflict resolution procedures in case there is any misunderstanding. Define any and all responsibilities on both the part of the landlord and the tenant to make sure there isn’t any miscommunication.
If you aren’t sure how to put everything together, you can find many generic lease agreements online. Before you decide you want to use one of these leases, make sure they will hold up in your location since some states have different laws in place.
5. Failing to Thoroughly Screen Tenants
Screening tenants might not be fun and if someone “seems alright”, you might just want to let it slide this time — but don’t. Outline and document the process you’re going to use to find, screen and secure your new tenants.
Everyone that wants to live on your property should fill out a rental application. Verify all of the employment information as well as their past addresses. If you can get references from their past landlords then that’s a bonus.
Don’t forget to check their credit and to run a background check. Make sure your new tenants haven’t caused problems for their employers or for past landlords.
6. Failing to Calculate Maintenance Costs Properly
While you hope that you’re able to keep people in your rental property, that isn’t always the case. You need to make sure you’re prepared to pay maintenance costs as well as the mortgage and any other expenses that go along with the property.
Even if your property is fairly new, you should count on something major breaking and keep cash on hand — just in case.
Look at how your cash flow is going and then keep a special account on hand to be able to pay for any expected or unexpected expenses. Every time you have to pay out money, track it so you know if you’re in the black on the rental.
7. Failing to Understand Your Landlord Responsibilities
That’s not on me!
You might be thinking this — but are you sure?
After you’ve secured your first tenant, your work has just begun. You have to keep up with the terms of your lease agreement. To make sure that you are keeping up with the terms of your lease agreement, keep in contact with your tenant and see if there is anything you can do for them.
Ask them about the condition of the property and also perform preventative maintenance to make sure as few things break or cause problems as possible.
If you don’t take proper care of your tenants, you’re likely to have people moving in and out, vacancies and even lawsuits.
8. Failing to Treat Your Rental Like a Business
Even if being a landlord isn’t your full-time job, you need to take it seriously. Having rental properties is a business and you need to treat it like a business.
Protect yourself by setting up an LLC (limited liability company). If there are any legal actions of claims, you want to have an LLC set up or your personal life could be in shambles quickly.
Another important part of treating your rental like a business is keeping up with the numbers. Consider using accounting software so you know exactly what is going where and when.
It’s important to keep track of your income and expenses so you can see what your return on investment is. You’ll also need this information so you’ll be able to take care of taxes properly.
Another important part of doing business is networking with other professionals in your industry. Getting to know other landlords can give you some insight into the area where your rental is as well as important information that might have recently developed.
When you have other people that have important knowledge that can help you in your corner, you’re less likely to find yourself in trouble. Join landlord associations and attend continuing education if you can find it.
9. Failing to Hire a Professional for Certain Work
You’re trying to save a few bucks so when something breaks, you’re pretty handy. Why don’t you just take care of things?
If you’re not a professional at plumbing, electrical work and other important parts of keeping the rental running, give a professional a call. If you don’t do the job properly, you could cause major problems for yourself.
Achieving Success as a First-Time Landlord
Now that you know more about the responsibilities of being a first-time landlord, you can be more confident in your abilities. Before you head off, why not learn some other helpful things that will allow you to be an even better landlord?
Read our article about the signs of a bad tenant today and save yourself a lot of trouble.