Congratulations on being a rental property owner! Your patience, persistence, and hard work have finally paid off, and you’ve now set the right groundwork to earn passive income for many years to come.
However, there is one crucial thing that you ought to understand. Owning a property and managing it are two vastly different things. While anyone can certainly do the former, the latter requires certain skills and experience.
Sure, self-managing your property can save you in management fees and give you a sense of control. That said, it can be difficult, time consuming and fraught with immense challenges – especially if you lack prior rental management experience. It’s for such reasons that savvy property owners usually opt for professional management services.
But is self-management really that difficult? Not at all, it isn’t exactly rocket science. The more knowledge you acquire about property management, the better off you’ll be.
Here are the most common mistakes that new property owners make.
Mistake #1: Thinking you can do everything on your own.
This is a common mistake that many property owners make when managing their rental properties. You see, to succeed as a landlord, you need to treat your investment as a business.
And one such way of doing that is by ensuring you surround yourself with the right team of experts.
That may include:
- A contractor. You need someone you can count on to do the occasional repairs and renovations at your rental property.
- A property inspector. To minimize potential disputes, you’ll need a qualified inspector to help inform you about issues that can impact your property’s safety, health and building Codes.
- An insurance agent. Lawsuits, natural disasters, and accidents are common liabilities that impact landlords. An insurance agent can help protect you and your property against common perils you may not know about.
- An appraiser. Looking to refinance or even sell your property, then a trusted appraiser should be your go-to person. Their verdict may also prove valuable whenever you’ll be looking to remodel or renovate your property to increase its value.
- A lawyer. Hopefully, you’ll never need one. But should the need arise, you’ll definitely need a qualified person to represent you in court.
- An accountant. Tax laws are often intricate, obscure, and at times even contradictory. To navigate the smorgasbord of tax codes at both state and federal level, you’ll need a real expert.
And again, if this is your first time managing a property, hiring a property manager can be in your best interest. In fact, hiring a good property manager can be the only professional you’ll need to succeed as a rental investor.
Mistake #2: Failing to craft a detailed and comprehensive lease or rental agreement.
Tenant management is one of the most difficult tasks for landlords. More so, if you don’t have a foolproof rental agreement. And as a result, the ensuing consequences can be anything but good.
To minimize potential disputes and protect your investment interests, you’ll need to craft a foolproof rental agreement. One that includes important details such as:
- Legal names of all tenants and other occupants
- The term the lease or rental agreement will be running
- The amount of rent, security deposits and all other fees
- Responsibility in regards to maintenance and repairs
- Your rights and responsibilities, such as, right to access the unit with set notice.
- Rules and important policies, for example, smoking in the unit, subletting, and pet rules
Setting clear and specific tenant rules is a great way to ensure a tenancy runs as smoothly as it can.
Mistake #3: Overcharging your tenants.
Setting a high rent may seem like an easier way to maximize your rental income. However, this may prove to be counterproductive.
Overpricing your rental will make your rental property uncompetitive. Consequently, you’ll have a difficult time filling your vacancies. And as you probably know, rental vacancies are costly. Besides missing on a rental income, a vacant unit will also force you to look for money elsewhere to pay for other costs, such as property taxes and mortgage payments.
If you are not sure how much rent to charge, consult a professional. A real estate agent may be able to help you carry out a comparative market analysis to know how much rent to charge.
Mistake #4: Failing to be thorough when screening tenants.
Being lax with tenant screening is also a common property owner mistake. A thorough screening process is the only way to properly differentiate between the good tenants and the problem ones.
The last thing any landlord wants is to evict a tenant for violating the lease agreement.
A good screening process is one that vets tenants on the basis of their monthly income, credit rating, as well as criminal, employment and rental background.
Again, if you find this daunting, consider hiring an experienced property management company to thoroughly screen your tenants. Professionals will also ensure that your screening process is legally compliant with Residential Tenancies laws.
Mistake #5: Discriminating against your tenants.
It’s against the Residential Tenancies Act to discriminate against a tenant on the basis of their protected characteristics. All over the country, tenants are protected against discrimination on housing-related matters in regards to their race, color, disability, sex, religion, familial status, and national origin.
As a first-time property owner, you are likely to make a number of mistakes that will hopefully help you learn and grow. However, mistakes can be costly reminders, and in order to mitigate as much risk as possible, you might seriously consider the services of a professional property management company.
Cressman Realty & Property Management can help you with all aspects of managing your rental property. Call us today to find out how we can help you!