Let’s face it, if you’re a new landlord, there are probably questions you have about how to ensure you’re doing everything properly so you don’t fall victim to classic first-timer mistakes. While there are several resources for new landlords that can help point you in the right direction (for example, joining a landlord’s association, BiggerPockets, and a variety of literature), below we’ve compiled a list of the top landlord mistakes real landlords say they made as a new landlord.
Importantly, being a landlord requires a lot of financial and legal know-how, so always be sure to consult your financial or legal advisor for the best advice on how to appropriately adhere to local, state, and federal laws.
So, what are the top landlord mistakes?
1. Renting to the first tenants who saw the place, not the best ones
Some new landlords feel obligated to rent their property to the first people who see it, however, it’s more important that your rental properties go to the best applicants, not just the first applicants. Remember, you are placing your property with a stranger who you’re entrusting to take care of it, so you want it to be someone you can expect to do just that! Prequalifying tenants can help you weed out prospective tenants who won’t or don’t meet your minimum requirements.
2. Not screening tenants enough
A thorough screening process is key to vetting prospective tenants, yet many landlords just starting out mentioned being too lax in their early days of screening tenants. It’s important for your finances and your property to ensure that your tenant screening process is thorough and you are renting to a trustworthy tenant. Verifying all their information—including income, employment, credit, and criminal history is critical to making sure you get a tenant who can cover the rent.
3. Not running a credit report
Even if you know a tenant might not have the strongest credit, running a credit check is still important! Credit checks can provide you a better insight into why a tenant has acquired bad credit (i.e., filing for bankruptcy, multiple loans, etc.) If you use a landlord management software like RentRedi, you can send the tenant an invitation for a tenant-paid screening (only $35!) to get full credit, criminal, and background reports from TransUnion.
4. Using a lease that wasn’t approved by a lawyer
While it may be cheaper upfront to get a boilerplate lease from a website than to work directly with a real estate lawyer, gaps in the lease could cost you more in the long run. Consider this: if the unfortunate case should occur where you need to evict a tenant who has violated the lease, you’re going to want to make sure the lease can hold up in court. Investing the time, money, energy upfront into ensuring your lease is ironclad will definitely save you money in the long run in the case of ruined property, court proceedings, lawyer fees, etc.
5. Not researching rents in the area before buying
Be sure you’re not overpaying for a property! When purchasing a property you intend to turn into a rental, make sure you’re double-checking the rents in your area before buying. Overpaying for a house that you think you can rent for $1200 in a location where the going rent is $900 might eventually cause you to have to sell due to an inability to fill the room(s), which can drain your savings and ruin your credit.
6. Didn’t evict quickly enough
As human beings who most likely have experienced financial hardships in our life, landlords tend to be sympathetic when tenants have similar issues. However, it’s important to remember that you are running a business. While it may occasionally occur that tenants are a few days late with rent, if those days start to accumulate, it may be time to write an eviction notice. Allowing tenants to get months behind on rent can drain you of your finances when you eventually have to pull the plug and cover costs from your own pocket.
7. Breaking your landlord process
In a similar vein as sticking to your guns about late rent and evictions, all your processes should be strictly adhered to. The longer you are a landlord, the more efficient your process will become, and it’s important to not deviate from them. Remember, while it may be tempting to slack about late fees or let certain things slide here and there, it is a slippery slope. Once you figure out a process that works for you, stick to it!
8. Letting tenants make renovations
While it may be tempting to let tenants make renovations—especially if they’re offering to pay for it themselves or are willing to do so for some money off their rent—doing so could be costly. Several landlords have gotten into sticky situations where tenants were either then unable to complete their renovation projects or their DIY ambitions turned into a shoddy job. Keep your alternation allowances to a minimum.
9. Not charging late fees
As mentioned earlier, part of keeping a good process in place is not getting complacent, especially where late fees are concerned. If you want to curb the urge to get behind on late payments, make sure you set up and enforce a late payment process. Services like RentRedi allow you to automatically set up late fees so your process can become less manual and even more streamlined and efficient.
10. Not vetting all personnel—including property managers and contractors
If you’re a distance landlord or just looking to hire someone to help you manage your properties, make sure you’re properly vetting all potential employees. Importantly, even if/especially if you’re a distance landlord, conducting regular inspections ensures that you’re aware of all the going-ons in your building, and that property manager is doing their job. For contractors, get estimates for the jobs you hire them for and doublecheck with other services to make sure you’re getting an accurate estimate of the work. Additionally, make sure you thoroughly research any person or company you’re looking to hire to help you manage your properties.