Investing in rental properties can be a rewarding venture, but it’s not without its fair share of challenges – especially if you’re a first-time landlord.
By learning more about common mistakes shared by first-time landlords, you can set yourself up for a much smoother experience. Here are the biggest missteps to avoid:
Failing to screen tenants
You may trust your “gut instincts” a lot when it comes to business but don’t make that mistake when it comes to your tenants. Failing to thoroughly vet your potential tenants can lead to problematic occupants who pay rent late, cause damage to the property or behave in ways that cause conflicts with other tenants. Always do thorough background checks, verify a prospective tenant’s employment and income, and contact previous landlords for references.
Using generic or “boilerplate” leases
Another common mistake is using a generic or poorly drafted lease agreement. A comprehensive lease agreement is essential for protecting your rights as a landlord and clearly outlining the responsibilities of both parties. Tailor your lease agreement so that it covers essential terms such as rent, security deposit, pet policies, maintenance responsibilities and eviction procedures. (Remember: If it isn’t written down in your agreement, you can’t hold your tenant to it.)
Failing to keep lines of communication open
Inexperienced landlords often overlook the importance of clear and timely communication with their tenants, and that breeds resentment and leads to trouble. Establish an open line of communication with your tenants and respond to their inquiries or concerns promptly. Consider using technology such as email, texts or property management software to both streamline and document your communications.
Not understanding landlord-tenant laws
Not understanding the intricacies of the Fair Housing Act or other landlord-tenant laws, including those on the local level regarding things like security deposits and eviction procedures, can result in major legal issues and financial losses.
With these guidelines in mind and a little legal guidance, you can navigate the landlord role with confidence and better ensure that your investment stays profitable.