Running a rental property business can be a financially rewarding investment, but it isn’t a walk in the park. Instead of making money, some inexperienced landlords lose thousands of dollars because of unwise decisions and poor management strategies. If you are planning to become a landlord, here are some of the common mistakes to avoid:
1. Allowing emotions to blur purchase decisions
Buying a rental property is different from choosing your dream home. Remember that your goal is not to satisfy your sentimental preferences, but to look for a property that will suit the needs and taste of your target market. Research the demographics in the location and find out what services and amenities your potential tenants are looking for.
For instance, if the majority of the residents are seniors, you can consider buying an apartment on the ground floor. Alternatively, if you discover that your potential renters are students, you can consider investing in rental properties that are near restaurants, malls, and bars. Always wear the shoes of your tenants when choosing a rental unit. Never let your emotions get in your way of reaping the best value from your investment.
2. Foregoing a thorough tenant screening process
The best way to protect yourself and your investment is to find great tenants for your rental. You want tenants who are financially responsible and who will take care of your property. Make sure to run a criminal and credit check to know about their payment history, debt to income ratio, prior evictions, and previous significant offenses. Verify their income by asking copies of their payslips.
You also need to call their employers to confirm their employment, length of tenure, and attendance record. You want stable tenants, so do not forget to check their previous addresses and work history. If they have a pattern of moving or switching jobs often, you will likely deal with vacancy, non-payments, or eviction in the next three months.
3. Ignoring the needs of your tenants
Tenant turnover is a profit-draining event in the rental business. When a tenant moves out, you have to spend your time, energy, and cash to repair and update your property. Otherwise, it will linger in the rental market listing for a long time. Thus, when you find great tenants, you should take advantage of every opportunity to make them happy and satisfied.
To establish a trouble-free relationship, craft an explicit agreement that spells out the responsibilities of each party. Let them know that they are valuable to your business by holding routine inspections and doing timely repairs. Respect your tenants’ privacy. Sure, you have the keys, but never enter the property without their agreement.
Tenants are also concerned about their security. They will appreciate it if you go the extra mile to keep them and their possessions safe. You can do this by upgrading locks, improving lighting, installing an alarm system, reinforcing door jambs, and placing security cameras in common areas.
A rental property business has numerous perks, from passive monthly income to tax savings and value appreciation. Make the most of your investment by buying the right property, finding great tenants, and being an awesome landlord.