5 Mistakes Rental Property Owners Make & How to Avoid Them

There are a Few Common Mistakes Landlords Make When Dealing with Tenants and Rental Properties:
But Here's How You Can Keep From Falling Victim to These Typical Pitfalls...

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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.

Not Screening Tenants Thoroughly

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:

  • First, you should determine your criteria.
  • At a minimum, this criteria should include:
    • Tenant’s credit history and public records, a criminal background check, checking previous addresses and eviction history, interviewing applicants, asking screening questions, then verifying employment and employment history.
  • There are multiple software programs to help landlords evaluate tenants predictability of on-time payments and predicting positive outcomes.
  • Be sure to disclose your rental criteria upfront so tenants know what to expect in order to save you time.
  • Tenant interview questions should include whether they are pet owners, what type of pets they have (so it’s in alignment with your pet policy), as well as questions to ascertain if they are a good fit such as why they are moving and how long they intend to stay. Avoid asking any questions in conflict with people of protected classes or that would break any fair housing rules.
  • Be sure you have a tenant application to collect all pertinent information you will need, such as personal details, past addresses, and employer information.
  • Also, check income by verifying with the employer verbally that they are employed by the company they put down in their application. You should also request at least two pay stubs and two bank statements or utilize a service that can verify income by connecting with the potential tenant’s bank account.
  • Finally, leave emotion out of it. Tenants have many different stories, but the most important thing is to stick to the facts.

Failing to Create a Solid Lease Agreement & Not Enforcing Lease Terms

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:

  • Names of all tenants
  • Limits on occupancy
  • Terms of the tenancy
  • Pet policy
  • Maintenance policy & responsibilities – Who is responsible for which various repairs and maintenance, such as mowing the yard, changing air filters, etc.
  • Rental price and late fees
  • Specify ramifications for non-payments
  • Include specific dates of payments
  • Security Deposits and fees
  • Entry rights to lease property
  • Restrictions on any illegal activity
  • Any Landlord Disclosures required by federal, state & local laws

Then, you should make sure to enforce lease terms. Common lease violations may include:

  • Unpaid rent, late rent
  • Unauthorized pets
  • Property damage
  • Long-term guests.
  • Breaking the lease or moving out early

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.

Setting Price Too Low or Too High

Price Setting for Rental Homes and Tenants

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.

Tenant Relations - Being Too Friendly

Tenant Relations and Landlord Tenant Relationship

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.

Not Properly Budgeting or Planning for Maintenance

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.

M&D Property Management Logo all services

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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