Whether you’re an aspiring landlord or have an established portfolio, managing your own investment properties can be a daunting task – especially if you have little or no experience in property.
Here are 11 mistakes to watch out for that so many others make.
Not running relevant checks on potential tenants.
Rushing a tenant through the door and having them pay rent may seem appealing, especially if they are also desperate to move in. However, if you do not check your tenant’s credentials and references first then you may be destined for a bumpy start.
Thinking a property will always be rented.
This is a very common mistake that new landlords make. A property will almost certainly have periods where there is no tenant. This means it is important to make sure that you do your own financial planning to make sure that you are able to pay the mortgage yourself if you have a period without a tenant. A simple cash flow analysis can help you avoid financial problems that could haunt you for the rest of your life.
Underestimating the cost of repairs or ongoing property maintenance.
Make sure you’re charging enough rent to help cover a portion of the ongoing costs of maintenance. If you fail to do this and do not keep up with maintenance, it could result in the property falling below market standard and cause tenants to look elsewhere. Alongside having the rent cover some, it is also important to be prepared to dip into your own pockets to cover the other portion of the maintenance costs.
Viewing it as a hobby.
To make a property profitable, you have to view it as a business, not a hobby. There will be a need for a separate bank account, a bookkeeping system and also you will need to think about tax. If you do not establish these systems early on then there could be complex issues further down the line.
Relying on a handshake.
For your own legal protection, it’s essential that your tenants sign a lease agreement to ensure that they understand the terms of the contract. This will be a huge help if you run into problems with your tenant as it will provide written proof that the tenant was aware of the terms that they should be following. Knowing the laws surrounding renting will also help you know where you stand should any issues come up.
Taking on a tenant without meeting them.
Meeting any potential tenant in person will help you get an idea if they are trustworthy and also whether you would be happy with them living in your property. If you take on a tenant without meeting them, then you only increase the chances of there being problems in the future.
Regular check-ins with your tenants and on the condition of your property will help you be aware of any problems before they become too big of an issue. The property that a tenant lives in is your responsibility, so if there are problems that you are not aware of then you will have no one to blame but yourself. However, make sure that you are conscious of any laws regarding tenant privacy.
Not meeting building code and safety standards.
As a landlord, you’re required to make sure the property meets certain building codes and safety standards. Failing to meet these standards could mean that tenants have grounds to break the terms of your lease agreement, potentially sue you and even to be legally entitled to compensation for damage or injury due to your neglect.
Delaying an eviction.
If you run into problems with a tenant, make sure that you start the eviction proceedings as soon as possible. If you are unsure about your rights or how to proceed, seek legal advice.
Not enforcing lease terms.
Don’t be afraid to charge tenants. If you outlined at the beginning that there would be penalties for late rent payments, charge them. If you give your tenants any slack with the terms of the lease, they are likely to see how far they can keep pushing you.
Not writing it down.
It’s essential that you keep written documentation of interactions with your tenants in the event that you ever need to take them to court. Make a note of any phone conversations and keep copies of emails, voicemails and text messages as these may be useful in any court case.