Top 5 Mistakes Inexperienced Landlords Make
With the way the housing market is today, many investors who have been fortunate enough to preserve their cash or to maintain an access to credit, with some finding incredible deals on residential property to try out a chance at rental investments. While this may seem easy enough at first, the reality of the situation is that there will be a few renovations you can do to rent it out and get your monthly budget worked out. Without experience in the field you are likely to lose money, sleep and plenty of time making newbie landlord mistakes. The following examples will explain the potential mistakes you can make as a new landlord:
As anxious as you may be to finally find a tenant and collect rent, it would be worth it to not rush ahead without checking the credentials of your future tenants. Use a rental application form that will provide you with enough information, paying the money needed to obtain a credit report, to check out for delinquent accounts, late payments and the like. You will also need to be able to verify references, such as employers and former landlords as well. If your tenant is in a hurry to move in, you will still need to check out their background first, regardless of whether they have the deposit right away or not. Never allow yourself to feel rushed or else you will make costly mistakes in the process.
Before you close the deal on a property, you will need to deal with the financials and to ensure you can pay the mortgage in the event that your tenants are not around to pay the rent to cover it. Don’t risk potential financial failure and ruin because you failed to do your analysis and to maintain enough funds to cover your mortgage payments when your renters are few. You could however use the chance to do some house cleaning and window cleaning with a professional cleaning company when there are no tenants around.
If you want to keep your tenants interested in and paying for the property, you will need to maintain it. You should make sure you are charging enough in rent to at least help cover a part of the ongoing maintenance costs such as painting, carpet cleaning, and upholstery cleaning if your rental is furnished and so forth, even replacing appliances and dealing with structural damage. You should plan on pulling money either out of a business of yours or your own pocket in case you don’t have the money to handle major one time repairs.
Owning rental properties is one business that could turn a profit but only if you operate it as such and you take it seriously. That means you would do well to establish separate bank accounts for your expenses and deposits, using a bookkeeping system as well as consulting a tax professional so you can handle the smaller elements of your business. If you don’t setup the resources and connections you need you will eventually begin losing money in the process.
This is one business you can’t simply handle with promises. For your own legal protection you should have tenants signing a lease agreement to reside within the property and they should understand the terms of the contract. If you run into any issues that the tenant has you will need to have binding and legal documentation so you can make a ruling. Knowing the laws will greatly help you in that.