Mistakes That Can Hurt First-Time Rental Property Owners

Being a landlord can be an exciting and rewarding opportunity, but it’s also important to treat it like a business. Otherwise, you could find yourself in a sticky situation that can cost you money and your reputation.

It’s essential to screen potential tenants thoroughly so you can be sure they will pay their rent on time and won’t cause property damage. Here are a few mistakes that can hurt first-time rental property owners:

1. Not Conducting Proper Tenant Screening

When renting out property, you want to make sure that the tenants who move in will be able to pay rent on time and maintain the property well. The best way to do this is to conduct a thorough tenant screening process. This involves checking the applicant’s credit, looking at their job history, and asking questions about any red flags that appear.

This is important because there are many people who seem nice enough to become good tenants when they meet you, but have a past that indicates they will cause problems. Screening the tenant properly will save you a lot of money and headache in the long run. It will also help you build a positive reputation as a landlord. Tenants themselves also benefit from this process by knowing you have done your due diligence.

2. Not Writing Down Rules and Guidelines

It’s important for first-time rental property owners to have a good understanding of what is involved in renting and managing a home. If they do not, they may find themselves making costly mistakes that can ultimately derail their rental property business before it even gets off the ground.

For example, some landlords fail to set clear rules and guidelines for their tenants. This can result in a tenant breaking a lease agreement and could lead to legal action being taken against the landlord.

Another mistake that some landlords make is failing to properly calculate their expenses before determining a rental rate. This includes taking into account all of the costs associated with owning and operating a home, such as mortgage payments, taxes, utilities, and any necessary repairs or upgrades.

3. Becoming Too Close to Your Tenants

Many new landlords fall into the trap of becoming too familiar with their tenants and their daily lives, believing that it will help them maintain a better business relationship. This may seem harmless at first, but it is important to remember that the landlord-tenant relationship is a business one and you should keep it that way.

When you become friends with your tenants, they will treat you like a friend and not an authority figure and this can lead to problems in the future. They will expect more leniency when it comes to things such as late payments or lease violations. This can lead to you losing out on necessary fees and money. Instead, you should make sure to enforce the terms of your lease and conduct regular inspections.

4. Not Checking the Credit of Potential Tenants

One of the worst mistakes that first-time landlords can make is not checking the credit of potential tenants. This can lead to problems such as not receiving rent payments on time and a decline in property value.

Fortunately, it’s easy to check the credit of applicants these days. And many services offer low-cost ways to do it.

It’s also important to note that each applicant has a unique credit score. Therefore, evaluating applicants differently on the basis of their marital status can be considered discrimination and may be illegal.

There are a few things that you can do to check the credit of an applicant, including calling their employer and speaking with previous landlords. In addition, using a tenant screening service can help you get information about an applicant’s financial history, which can be helpful in making an informed leasing decision.

5. Not Having a Lease Agreement

Whether a rental property provides supplemental income or is the sole source of cash for a new landlord, it is important to make sure that all upfront expenses are taken care of before any rent checks start coming in. This includes property management fees, mortgage payments, insurance, and condo or homeowner association dues.

Many first-time rental property owners attempt to save money by managing their properties on their own instead of hiring a professional. However, this can lead to a number of mistakes that can hurt a landlord’s bottom line. For example, not having a lease or rental agreement can have serious consequences. If a renter breaks their lease agreement, they may be sued by their landlord or face derogatory marks on their credit report.