Top 5 Mistakes Landlords Should Avoid When Managing Rental Properties

Investing in real estate is one of the best ways to generate passive income and build long-term wealth. However, managing multiple rental properties isn’t for the faint of heart. 

There’s a whole bunch of real estate and tax rules you’ve got to keep up with. Plus, dealing with tenants comes with its own pitfalls. 

So, if you’re on the fence about owning and managing rental properties, this guide is for you. In this article, we’ll explain everything you need to know, including top mistakes and how to avoid them.

Let’s dive in. 

What is Property Management?

When a landlord or property manager oversees all aspects of a property or building, that’s known as property management. Property managers collect rent, oversee maintenance activities, run business operations, and hire staff.

Property managers are also responsible for:

  • Conducting tenant screenings
  • Marketing vacancies
  • Drafting leases

Property managers work side-by-side with property owners (also known as landlords). In fact, many property owners offload most day-to-day tasks and hire property managers to run their properties for them. However, a property owner can still do this work if they choose.

Real estate investors who have multiple ventures usually opt to hire property managers. That way, they can focus solely on buying and selling their properties. The best property managers run rentals like a tight ship.

Types of Property Management

Not all property managers are the same. There are rental, commercial, and industrial properties across the United States. These properties have many different requirements property managers have to fulfill.

Residential Property Management

Residential property management is the process of managing single and multi-family homes. Houses, townhomes, and apartments typically fall under this spectrum. 

The main role of a residential property manager is to:

  • Find people interested in buying or renting an apartment to live by marketing vacancies through real estate websites like, Trulia, and Zillow.
  • Conducting regular inspections to stay on top of building maintenance. 
  • Screen tenants to ensure they’re qualified to live in a rental unit. 
  • Keeping tenants satisfied to maintain long-term partnerships. 

Residential property managers are also heavily invested in maintaining tax compliance and minimizing liabilities. 

For example, property managers prioritize the importance of landlord insurance policies and asset protection strategies for real estate investors.

These safeguards offer landlords a vital layer of protection against unforeseen challenges, helping shield their investments from potential threats like property damage, tenant disputes, and legal issues.

Commercial Property Management

Commercial property management entails managing buildings designed for businesses and non-profit organizations. These buildings are usually larger than single and multi-family homes.

As a result, commercial property managers have more responsibilities and risks to worry about. The most common commercial properties are public accommodations, retail spaces, office properties, and co-working spaces.

The best commercial property managers ‌prioritize proactive property inspections, move-in/move-out checklists, and the handling of security deposits. However, they do have to handle more stringent business operations.

Regulatory Compliance for Commercial Properties

Diving head-first into commercial property management is a much larger fish to fry than residential properties. Why? The legalities and regulatory compliance requirements can be overwhelming, to say the least. 

That’s why enlisting the assistance of a registered agent is often necessary — especially if your property management company is registered as an LLC or corporation. 

A registered agent acts as the liaison between the business and the state. They help you track all essential documents, legal notices, and tax information. So, here’s why your commercial property management business might need a registered agent’s support:

  • Stay updated on the latest legal changes, varying state regulations, and property laws. 
  • Access to a physical address for service of process, safeguarding your business from unwanted solicitation, and maintaining privacy.
  • Timely notifications of important documents on your behalf, such as legal notices, tax forms, and compliance reminders.

Plus, offloading these tedious tasks to a registered agent frees up your schedule to focus on marketing and growth initiatives. It’s a win-win. 

Industrial Property Management

Industrial property management is the highest caliber of property management and involves all the business operations necessary for running manufacturing facilities, warehouses, and distribution facilities. 

Regarding industrial property management, landlords must prioritize two major tasks:

  1. Landlords need to address property maintenance issues immediately. Industrial facilities run essential operations for the public and can deal with hazardous materials.
  2. Landlords should also have the funds available for significant repairs. Roof, foundation, HVAC, electrical, and plumbing repairs can incur exorbitant costs.

Proactive measures can help avoid costly repairs, such as:

  • Performing seasonal service on heating and cooling systems
  • Documenting the property’s condition
  • Conducting regular inspections

Top 5 Mistakes Landlords Should Avoid

Making costly landlord mistakes can jeopardize your business. If you want to avoid this outcome, here are five common mistakes landlords make and how to avoid them. 

1. Skipping Background Checks on Tenants

Running background checks on tenants is vital to selecting reliable and responsible individuals for your rental property.

Tenant screening and background check software

If you neglect performing background checks on prospective tenants, you can encounter several long-term issues, such as late rent payments, property damage, and neighbor dissatisfaction.

As a result, landlords should develop a comprehensive tenant screening process, which includes performing credit and background checks, contacting previous landlords, and conducting in-person interviews.

2. Drafting an Incomplete or Unclear Lease Agreement

Successful property managers should also know the importance of drafting a complete and clear lease agreement when managing rental properties.

To create a clear lease agreement, consult a real estate lawyer and include key elements such as rent payment time, eviction procedures, and security deposit.

sample lease agreement

(Image Source)

When you’re done with your draft, review the lease agreement with the tenant to ensure understanding and prevent future disagreements. 

And to make it easier for everyone, offer electronic signatures. That way, tenants can sign their leases on mobile devices for faster turnaround times. 

3. Not Budgeting for Vacancies

Vacancies are common for any real estate business — there’s no getting around it. For the third quarter of 2023, national vacancy rates were 6.6% for rental housing.

Residential vacancies and homeownership third quarter 2023

(Image Source)  

As a result, you should begin budgeting for vacancies in property management the moment you sign on the dotted line.  

If you fail to budget for vacancies, your rental properties could suffer, including lost rental income and increased marketing expenses.

As a result, you should implement a wide range of budgeting techniques for your rental properties. These can include estimating average vacancy rates, setting aside funds for marketing, and proactively finding new tenants. One way you can do this is by creating a website to market your properties to new 

4. Ignoring Regular Maintenance

Regular maintenance keeps buildings up-to-date and compliant with code regulations. It also keeps tenants satisfied for the long term. 

Regular maintenance can also help prevent emergencies and costly repairs by addressing minor issues before they become major problems.

To stay on top of building maintenance, you should add a wide range of tasks to a maintenance checklist, such as:

  • Performing yearly tasks like changing filters and flushing the water heater
  • Inspecting for water damage
  • Checking for pests
  • Testing detectors

On top of those regular maintenance costs, always take your tenant’s maintenance requests seriously. To help streamline the process, invest in property management software that offers a premium maintenance experience.

You no longer need to wake up in the middle of the night or disrupt your work schedule — just let your tenant contact a third party, and they’ll take care of the repairs. 

The best part? Tenants are happy. And you save 80% of the time you normally take to coordinate maintenance repairs. 

5. Underestimating Costs

One of the most important aspects of running any business is tracking expenses. You can stay on top of your core accounting procedures when you track your expenses properly. 

For example, you can accurately create financial statements like profit-loss (P&L), balance sheets, and income statements to understand the financial health of your business.

As with all businesses, the goal is to maintain high-profit margins. If you don’t know how much you spend every month, it’s easy to overspend on marketing to bring in new tenants.

Real estate investments are an excellent way to grow your portfolio. But you want to make sure you’re avoiding the red. So, something as simple as tracking your monthly expenses can help prevent you from overspending and running your business into the ground. 

Bonus: Providing Poor Customer Service

Delivering exceptional customer service keeps tenants happy and maximizes the profits of a real estate venture. 

There are many factors to delivering quality customer service, which include effective communication, prompt response to maintenance requests, and addressing tenant concerns promptly.

If you neglect customer service, you can run into serious problems, such as increased turnover, negative online reviews, and potential legal issues.

Pro tip: Get a mobile landlord app, and you can take your customer service to a whole new level without lifting a finger. ​​With RentRedi, you can:

  • Send in-app push notifications to tenants
  • Tenants can schedule rent reminders
  • Receive maintenance requests

With access to a 5-star customer support team, you’ll kiss those tenant complaints goodbye once and for all. 

Wrap Up

Managing multiple rental properties isn’t a walk in the park. But it’s not impossible either. 

Following the strategies in this guide can give you a great starting point for making your real estate ventures profitable. 

And if you’re ready to step up your property management game with an all-in-one platform, request a demo with RentRedi today.

To your success! 

About the Author

Vergine Melkonyan is a content writer & Marketing specialist experienced in writing SaaS and marketing content to help customers easily perform web scrapings, automate time-consuming tasks, and stay informed about the latest tech trends with step-by-step tutorials and insider articles.