Owning a rental property and managing tenants can be complicated. In order to avoid common pitfalls, there are a few key things to have in place, consider and ensure you are doing in order to get the best ROI on your property with the least amount of stress long-term.
This blog outlines the common mistakes property owners make when managing a rental, and how you can avoid these pitfalls to ensure you are doing the right things in the right way.
Eighty-four percent of landlords reported payment problems rank as a top concern. Screening tenants and ensuring they make the standard three times the income to rent ratio is of utmost importance when selecting a tenant to alleviate these concerns.
In order to properly screen a tenant, you should perform the following:
Not only do you need a lease agreement in place, but it should be written, up to date and non-generic. Make sure the lease agreement that does not violate any tenant rights.
At a minimum, the lease agreement should include:
Then, you should make sure to enforce lease terms. Common lease violations may include:
If the tenant violates the lease, you can serve a written notice to the tenant sent by registered or certified mail to the tenant. Before confronting the tenant, ensure you have evidence of the infraction. If the tenant does not respond within the allotted time, the landlord can proceed with filing an eviction if all other means of reconciliation and ensuring compliance have been exhausted. Any questions or issues you do not know how to handle should be referred to a property management company or an attorney.
To determine how much you should charge for rent, you should be sure to look at available comps in the area. This means looking at similar size rental homes with similar updates and in a similar location. Some of the main factors that determine rental value are location, curb appeal, number of beds and baths, appliances and amenities, pet policies and nearby entertainment. This is your starting point.
Also, account for seasonality. You may have to adjust the price if it’s during the winter season. Most people move during the spring and summer.
You can also comb through sites such as Zillow, apartments.com, Trulia or Craigslist to get an idea of comps in the area.
Then, consider how much interest in the home you are getting. If you are not getting any requests for more information or having any showings, your property may be priced too high.
On the other hand, be careful not to price too low and lose out on rental income. This is why it is so important to do your research or consult the help of a professional, such as a property management company or real estate leasing agent.
A good landlord-tenant relationship is crucial for good retention. However, sometimes it is easy to cross a line to being too friendly with your tenants. It could lead to one late payment that becomes two because it was initially overlooked.
Also, if you manage multiple tenants, they should all be treated the same way.
The landlord/tenant relationship should be kept professional.
When it comes to rent increases or making repairs, you need to be able to respond as a landlord and not as a friend.
Getting too friendly could get you in trouble in the long-term and also sway you from making good business decisions.
A good rule of thumb is to set aside half of your rental income each month for maintenance costs.
There are multiple types of maintenance, including routine, seasonal, appliance and emergency.
For tenant maintenance requests, troubleshoot the problem first. Then, be sure to check whether or not the issue was caused by the tenant.
You should plan for major projects in advance and also account for unexpected damages or issues. Examples of major projects may include a new roof, which the typical lifetime for is 15-25 years or new exterior paint, which typically lasts 4-10 years. The HVAC system also may need replacing or perhaps it’s time to repave the driveway. Many times, property managers will begin budgeting for these expenses 3-4 years in advance, depending on the property and market.
Also, make sure you know which repairs you can truly handle and which need to be referred to an expert, such as complicated electrical work. Many times DIY repairs can turn into a disaster if you do not know what you’re doing and lead to tenant dissatisfaction as well.
Get multiple bids and quotes before choosing a vendor. This is one area where property managements are very helpful as they either have their own handyman or are in frequent contact with good vendors that charge them reasonable prices due to the volume of properties managed.
But if you’re going it alone, be sure you check around before going with a certain provider to ensure you’re getting the best deal possible.
The good news? Maintenance and repair costs are tax-deductible for landlords. In some cases however, they may be considered a property improvement.
According to experts, most homeowners and landlords should be prepared to spend 1 to 2% of the purchase price of the home each year for routine maintenance.
All of these issues can be resolved by employing a good property management company who is experienced in leases, maintenance and working with tenants.
If you are looking for a good property management company, consider M&D Real Estate‘s Property Management Group – rated all 5 Stars on Google.
Give us a call to learn more at (972) 772-6025.
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