Common Mistakes Typically Made By New Landlords

Being a landlord sounds easy enough; you buy a home, make some renovations, and rent it out for more than your monthly mortgage payment. But in reality, becoming a landlord requires you to master a variety of skills: business, interpersonal communication, property management, and a keen understanding of legal and financial responsibilities. 

With little experience and so much to keep in mind, it’s no wonder many new landlords make the same mistakes. To help you start your journey with as much success as possible, here are some of the most common mistakes new landlords typically make and how to avoid them. 

Please note that this is for informational purposes only and is not intended as legal or financial advice. Laws may vary depending on your location. 

Not Screening Your Tenants

As a new landlord, you’re probably anxious to find a tenant as soon as possible so you can have rental income coming in. However, it’s not worth skipping tenant screening. Tenant screening is one of the most important steps you can take to ensure you find responsible tenants who will not only be able to afford the rent but also regularly pay rent on time. 

Even if the tenant seems like a good fit and is eager to move in as soon as possible, don’t let them pressure you into putting off or delaying the screening process—it could end up being a costly mistake! With our RentalConnect service, you can find the perfect screening package for your property—and the cost of the screening is deferred to the applicant!

Believing Your Property Will Always Have Tenants

Optimally, your property will always have tenants; the reality, though, is that you may have months where your rental isn’t occupied. For this reason, it’s important to make sure you’re comfortably able to pay the mortgage without rental income. Take some time to do a simple cash flow analysis and keep some backup funds available as a safeguard against when renters are far and few between. 

Underestimating the Cost of Maintaining the Property

As a landlord, you have a responsibility to your tenants to keep your property well-maintained. Whether you currently have tenants or you’re trying to attract new tenants, no one will see the value of paying rent for a property that’s in poor condition. Failing to budget properly for maintenance and repairs, however, can quickly affect your finances and your relationship with your tenants. 

To ensure you’re prepared for whatever your property might need, make sure you’re charging enough in rent to cover at least a portion of the ongoing maintenance costs. You should also set some money aside (either out of your own pocket or your business fund) for unexpected expenses and repairs. 

Viewing Your Business as a Hobby

If you want to turn a profit with your rental property, you’ll need to treat it as a business. To avoid treating it like a hobby, be sure to set up a separate bank account for deposits and expenses, implement a reliable bookkeeping system, and consult with a tax expert to ensure your taxes are completed accurately. 

Relying on Verbal Agreements

You may find someone who seems like the perfect tenant, but with a business, you can’t rely on verbal agreements and a handshake. To protect your business and property, it’s essential to have a formal lease or rental agreement and make sure your tenant understands the terms of the contract before they sign it. That way, if you have any legal issues with the tenancy, you’ll have written, binding documentation to present in court. 

Take some time to review your state’s laws regarding leases and make sure you’re using the right form for your state. You can find free rental agreement forms for each state on our website. 

Asking Your Tenant Illegal Questions During the Interview

As a landlord, it’s vital to familiarize yourself with the Fair Housing Act to ensure you’re not inadvertently being discriminatory to prospective tenants during the interview process—otherwise, you run the risk of legal issues. The Fair Housing Act, enacted in 1968, prohibits landlords from denying applications based on the following protected groups: 

  • Race
  • Color
  • Religion
  • National origin
  • Sex
  • Marital Status
  • Disability
  • Family status

Keep in mind that some states, like California, have additional protected classes as well. During interviews, avoid asking questions that relate to any of the protected classes—keep your questions focused on the tenancy and your rental property. 

Neglecting Your Tenants

If it’s been a while since you’ve heard from your tenants, but they’re still paying rent on time, it might be tempting to leave them alone. However, without checking in on them from time to time, there could be any number of issues brewing, from unaddressed maintenance or repair issues to lease violations. Make sure you’re checking in with them every few months and scheduling annual property inspections—it will save you time, money, and hassle in the long run!

Neglecting Property Inspections

We’re touching on property inspections again because they’re so important for keeping your properties well-maintained. Regular inspections help you address minor issues before they become more serious and expensive problems. For example, it’s much easier and more cost-effective to repair a fallen gutter than it is to repair the fallen gutter and the cracks, leaks, or rot it caused. 

Tenants won’t always let you know when something needs maintenance and repairs, so it’s best to make annual inspections a regular occurrence. Just be sure to review the legalities in your area and give your tenant the appropriate notice before showing up at the property.  

Being Too Nice to Your Tenants

It’s important to have a good working relationship with your tenants, but you don’t want to be a pushover, either. For example, if your lease agreement says that you charge a late fee after the rent is five days late, or that you don’t allow pets at your property, make sure to enforce those rules. Don’t change your rules to accommodate your tenants because it can lead to a pattern of them taking advantage of you. 

Delaying Evictions

Once you’ve decided to evict a tenant, don’t wait—serve an eviction notice as soon as legally possible. Too many landlords wait too long, only to lose money in the process. If you run into any issues or aren’t sure about your rights or how to proceed with the eviction process, consult with a qualified eviction attorney. 

Neglecting Documentation

Hopefully, you’ll never need to take any of your tenants to court—but if you do, it’s essential to have the right documentation to support your case. Make sure you’re documenting every interaction with your tenants in writing. Take notes on your phone conversations, and file away copies of emails, text messages, notices, and any maintenance or repair invoices or receipts you have. That way, you’ll have ample proof to support your claims. 

Not Having the Proper Insurance 

If you’re still paying a mortgage on your rental property, you’ll likely be required to have hazard insurance, but you should make sure to have liability insurance protection as well. This will ensure you’re protected if your tenant decides to sue you for damages due to some sort of negligence. 

If you don’t have liability protection on your policy, you may want to check whether you can have your homeowner’s insurance extend liability protection to your rental. If this isn’t an option, consider buying an umbrella policy that includes liability insurance. 

Avoiding Costly Pitfalls

As a first-time landlord, you’re likely not to get everything right during your first tenancy. Like any new business venture, investing in real estate comes with a learning curve, no matter well-prepared you are. However, by understanding some of the most common pitfalls, you can avoid costly mistakes that can jeopardize the success of your business. If you do find yourself making mistakes just remember: every mistake is an opportunity to improve your business and processes. 

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