5 Mistakes Landlords Make
With home prices skyrocketing, more homeowners are looking to subsidize their mortgage by becoming landlords. The decision to become a landlord is not one to be overlooked. Many first-time landlords make the mistake of assuming that all they need to do is wait for the checks to start coming in. As you’ll soon see, there are plenty of mistakes you can make along the way.
Mistake 1: Not Remembering Time is Money
As the saying goes, time is money. As a landlord, you want to bring checks to the bank. When your property is vacant, your tenants are delinquent on their rent, or you’re doing repairs between tenants, you’re losing rent. Instead of pushing the envelope and asking for a really high rent, you’re better off asking for rent that is in the ballpark of comparable properties. You’re not making any money if your property sits on the market for six months without any interest from tenants.
Mistake 2: Not Property Screening Your Tenants
All it takes is one bad tenant to ruin the cash flow on your rental property. Not only is evicting tenants a headache, it can take months and cost you thousands in rent. Screening interested tenants ahead of time is time well spent. Asking for the contact information for the previous two landlords, proof of employment (letter of employer and/or paystubs), and performing a credit check, is a good idea. If any tenant hesitates to provide this information, it’s a red flag, as this is standard information most landlords – and Agents representing landlords – request.
Mistake 3: Not Knowing Landlord-Tenant Laws
As a landlord, it’s your responsibility to keep up to date with the latest landlord-tenant laws. Tenants have right – you can’t simply enter your tenant’s premise unannounced. In most cases you’ll have to give your tenants 24 hours’ notice. The law is different depending on the state in which you reside. It’s important to take the time to familiarize yourself with the law.
Mistake 4: Assuming Being a Landlord is a Passive Investment
With great power comes great responsibility. The decision to become a landlord is not one to be taken lightly. When you’re a landlord you have a lot of responsibilities. If you aren’t willing to wake up at midnight to repair a burst pipe, you’re probably not suited to be a landlord. Being a landlord isn’t as simple as owning an investment portfolio – you must be willing to dedicate the time and money to take care of your property.
Mistake 5: Forgetting to Budget for Maintenance and Repairs
Owning a home is expensive. Not only do you have to cover the utilities, you’ll also need to cover ongoing maintenance and repairs. Homes need TLC – repairs like a new roof and windows can set you back thousands. How much should you set aside for repairs? A good rule of thumb is to budget 3% to 5% of the value of your home every year on maintenance and repairs. For example, if you have a home valued at $600,000, you’ll need to budget up to $30,000 each year.