So you’ve decided to get into the real estate game. Good for you! Owning property is one of the best ways to increase your income and build wealth via passive means. It’s a step not many get to take and you’re lucky to have the opportunity.
However, just because you’ve taken the plunge doesn’t mean you’ll do everything right. If you want to maximize your investment and see things work out in the long-run, you’ll have to take the proper steps and avoid common landlord mistakes.
What sorts of pitfalls should you work to avoid? Read on and we’ll walk you through everything that you need to know.
1. Not Running Background Checks
Getting into real estate can be a huge investment and not one you want to take lightly. You wouldn’t trust just anyone with your money, would you? The same idea should pertain to your investments and property.
Yes, you might be more than eager to get a tenant into the place you’ve spent so much money getting set up. However, there’s no reason to rush if it’s going to end up hurting you in the long-run. You want to be sure that the tenant you do go with will be able to pay rent for the many months and years to come.
Build this all into the rental application you get set up. Make sure it has all the important information and don’t skimp out on paying the fee for the credit report and overall background check.
Get references from your potential tenant and actually take time to verify these references. Reach out and make sure the previous landlords had a good experience and there is no bad blood. Ask specific questions: were there late payments? Did they leave the place a mess or damage anything seriously?
Even if the potential tenant puts pressure on you to allow them to move in, don’t waiver. Make sure you get the background check that you need first.
2. Underestimate the Commitment
Many people make the mistake of underestimating just how much time they’ll need to put into their rental property. The term ‘passive’ income leads people down the wrong road of expectations. (thesouthafrican.com)
Just because it isn’t your full-time job doesn’t mean you’ll be responsibility-free, either. Owning a rental property is still a business at the end of the day and in order to create a consistent profit, you’ll need to treat it as one.
There’s a very good chance you’ll be doing some sort of work for your property nearly every day. Weekends might be spent doing repairs and tending to the needs of your tenants. It’s going to require a lot, and if you’re not prepared for the commitment it can really catch you off-guard.
Don’t underestimate other aspects you’ll need to stay on top of as well. You’ll likely want to open separate bank accounts, keep up with bookkeeping, and hire a tax professional to make sure you’re keeping everything above the boards.
Running a rental property can be a lot of work but it’s worth it at the end of the day if you do it right.
3. Not Following the Law
This one should be obvious, but you’d be surprised to find how often people attempt to skirt around local and state regulations when it comes to housing properties. Don’t let yourself fall into this trap, as the punishments can be costly.
As a landlord, it is your legal duty to make sure the property that you rent out meets the health and safety standards of the area in which you live. Failure to provide these standards could have you at the other end of a lawsuit from your tenants if something were to happen.
At the very least, it will give your tenants grounds to break their lease, leaving you with an empty home and no income coming in.
If you want to do the right thing and avoid being caught legally negligible, following the codes and provide housing of quality. Make sure you don’t overlook anything: it’s easy to accidentally break the law without even realizing it.
4. Start Evictions Early
Have a tenant who isn’t paying you rent? You’re going to want to get the eviction set up as early as possible. While you might think that waiting things out will resolve the issue, this can be a costly mistake.
The eviction process can take time, and all the weeks it takes will be time that you can’t get another paying tenant into the building. This can add up fast.
If you’re serious about getting a troublesome tenant out of your property, it’s best to get the ball rolling as soon as possible. If you think eviction might be necessary, you can contact an eviction attorney and have them look over the situation for you.
There are many reasons for eviction and if one or more are evident, the attorney can help get you the results you need as quickly as possible. This speed will help to delay the time it takes for you to start making money again.
It’s no fun to have to evict a tenant but sometimes it is the only option.
Common Landlord Mistakes to Avoid
If you’re running your own rental property, you’re well on your way to financial independence. However, you’ll need to avoid a few common landlord mistakes like the ones above if you hope to make it through the other side to profitability.
Need more financial advice? Keep scrolling our blog for more information.