Whether you're a new landlord or an experienced one, you are still bound to make mistakes as a property owner. No matter your experience level, it’s always wise to revisit the basics. Read on to learn which habits and practices to avoid that could damage your reputation and bottom line as a landlord.
Mistakes You Should Avoid as a Landlord
Lenient Tenant Screening Process
Conducting tenant screening ensures that your applicants will pay rent on time, maintain their rental unit, and follow all the rules in the lease agreement. Make sure you don't skip certain criteria like credit and background checks, criminal history, employment verification, eviction history, calling former landlords, and so on. By being thorough, you will avoid potential tenant disputes down the road.
Ineffective Marketing
One of the mistakes landlords make is marketing aimlessly. Just because you release advertisements or listings, doesn't mean it will reach your target audience. You have to research the current rental demand, the rental market, and who your target tenants are to reach prospective tenants.
Unrealistic Rent Pricing
Knowing the value of rental property allows you to set your rental price right, but you also have to consider other factors like rental demand and your competition. If other rental properties offer lower prices for practically the same rental space, potential tenants would opt for other listings.
Having a professional conduct a rental market analysis can benefit you significantly in this regard. We offer a rental analysis tool that you can take advantage of right here on our website.
Poor Communication
Simply communicating with your tenants does not automatically mean you have good communication with them. Sometimes it goes beyond being polite when you enforce lease terms. Sometimes it could be in the form of being considerate with unexpected repairs or maintenance issues.
Not Keeping Records
From rent payments to routine maintenance costs, you have to keep records for various reasons. New property owners might keep basic records like the rental agreement, but one of the most common mistakes landlords make is discarding inspection reports, receipts for late fees, records of property taxes, and so on. These documents can help set the record straight in the event of a dispute.
Refusing Management Assistance
This is especially true for new landlords. Managing your rental property is no easy task, and if you have no prior experience, you might end up being overwhelmed. Hiring a property management company to oversee your rental property can help you learn the ropes before taking on the tasks yourself.
Hiring the First Property Manager You Find
There are a lot of property management companies out there, and many landlords choose to opt for assistance to earn passive income. However, you have to research your choices of property managers first. Performance Asset Management, for instance, is a professional property management company with 15 years of experience that can help increase the monthly rental income of your investment property.
Drafting a Poorly Written Lease Agreement
The contents of your lease agreement lay out the rules and conditions your tenants will agree to. A non-comprehensive rental agreement can eventually lead to disputes or legal issues. Landlord mistakes you have to avoid range from excluding terms for the security deposit to property maintenance for the rental unit.
Not Knowing Your Laws
Being knowledgeable about landlord-tenant law contributes to being a successful landlord. Whether it's local or federal laws, knowing about things like tenant rights and eviction rules can help you prevent running into legal trouble. If you feel like such information is too complicated, you can always consult a lawyer or hire a professional to handle this aspect of the business.
Ignoring Rental Market Trends
The current rental market condition greatly affects your rental units. If the landlord fails to acknowledge factors like the average household income or increasing home construction costs, their property will suffer the consequences which could lead to lower cash flow.
Failing to Diversify Your Investments
Investing big on just one property can be risky. If the business doesn't do as well as you hoped, you won't be able to rely on income sources. If you're a new landlord, invest in a property you know you can finance, and diversify your investment portfolio once you can do so. if you're not sure when the right time is to invest in another property, you can always consult a real estate professional.
Having an Unclear Exit Strategy
Once you decide that you finally want to exit the rental business, you need to have a clear plan for selling or refinancing your investment properties. This will help you achieve your long-term financial goals, and not creating one might lead to you selling the property for a lower amount than its purchase price.
FAQs for New Landlords
What are the landlord-tenant laws I should know in my location?
There are trusted government sites online that you can browse to learn about the local laws you have to consider. When in doubt, you can always reach out to a property manager like us or a lawyer to guide you through your decisions.
Do I need a rental license in Milwaukee?
Yes, and there are requirements to get one. In Milwaukee, there are certain requirements landlords need to achieve before renting their property out such as passing inspections, as well as meeting local health and safety regulations. These are a few of the steps to take before you can obtain a rental license.
What are the responsibilities of a landlord?
The extensive responsibilities landlords have to fulfill include screening tenants, rent collection, property maintenance, addressing maintenance issues, and complying with laws regarding rentals. Landlords have the option of hiring a property manager to oversee all of it.
What should I include in my lease agreement?
The basics are monthly rent price, lease term, security deposit, maintenance responsibilities, and consequences of lease violations. If you have specific terms for your property, you should also add them to the lease, provided that they comply with the laws.
With the Help of Property Management Companies
If you're a new landlord, you might be more prone to common mistakes that experienced landlords and experts won't make. Being new to the rental industry can be hard, which is why many landlords opt for help from property management companies like Performance Asset Management.
We offer services from conducting tenant screening to handling the eviction process when needed. Not only will you earn passive income, but you'll also be able to focus on other business opportunities. You can contact us now to learn more about how you can reach your investment's maximum potential.
