Running a rental can be a risky business. If you don’t know what landmines to look out for, you’ll run the risk of making mistakes that will cost you time and money. In this post, we’ve put together the seven deadly sins in property management that you need to avoid whatever it takes.
#1 Not Screening your Tenants
Empty homes may be your number one enemy, but that doesn’t mean you should say yes to the first tenants that you find. One of the worst things you can do as a rental property owner is not screening your potential tenants properly, as this can lead to a whole range of problems such as the non-payment of rent. As much as you’d like to fill your rental fast, do your due diligence and check each applicant’s credentials. Remember, your tenants can make or break your investment, so it’s best to be strict when it comes to who you’re going to fill your vacancies with.
Smart landlords understand the importance of partnering with a property management company that follows its own tried-and-tested tenant screening process. Professional firms will be able to conduct a background check, credit score check, and more to make sure the applicant is really who they say they are. In turn, this will allow you to ensure that your potential tenant is a responsible and reliable person who’ll pay their rent on time and maintain your property.
#2 Setting a Made-Up Rental Rate
The rental rate shouldn’t be a made-up or random number. You may be tempted to inflate the rate to earn more money, but keep in mind that tenants know what number can be considered reasonable. If potential tenants think your rental isn’t worth $3,000 a month, they’ll surely look elsewhere.
The key is to make sure the rental rate is competitive within your market. One way to do this is to compare your property with similar properties in the vicinity (e.g. if you own a two-bedroom home, compare it against a two-bedroom home with the same amenities). The rental rate of those properties should become the baseline for your property. Or, for a more accurate calculation, you can seek the help of local professionals to conduct a real estate market analysis.
#3 Failing to Communicate With Tenants
Being a landlord is a social job. You’ll have to maintain an open line of communication with your tenants, as this is one of the best ways to stay up-to-date in case of rental-related problems. Let’s say a flood ruined your Boca Raton property’s basement, but your tenants failed to inform you about this. It’s only when you visit the home months later that you discover mold has grown in the walls, as well as other signs of water damage. Or, if a tenant spots a potential issue but can’t tell you, it may already be too late by the time you find out.
The solution is to use a portal or app where tenants can forward their concerns in real time. This way, you can keep track of which issues have been resolved and which have yet to be dealt with. In addition, this will allow you to consolidate all rental-related communications, which can come in handy in case a tenant claims you failed to address their concerns.
#4 Not Writing a Lease Agreement
Word-of-mouth won’t do. Without a written contract, your tenants won’t be compelled to abide by the rules, because the rules simply don’t exist. From their point of view, there’s no written document to prove that they said yes to these terms, so why should they do as you say?
If you simply seal the deal with a handshake, you will not be able to tell your tenants to clean the property, stop subletting, pay their rent, and more. You may not be able to evict them, either. Simply put, renting to tenants without a written lease agreement puts you wide open to a slew of issues.
Remember, when tenants sign a lease agreement, they’ll be legally bound to their responsibilities. They’ll have no choice but to care for the property, or else they may find themselves in court. With that said, it’s best to write a lease agreement and have it reviewed by a real estate lawyer or property management agent.
#5 Being Too Lenient
As a landlord, you need to be friendly (after all, no tenant wants to deal with a rude landlord), but at the same time, not too lenient. If you aren’t firm, your tenants will walk all over you. For example, if you don’t impose a penalty for late payments, your tenants will think that it’s OK not to pay their rent on time. Or, if you don’t call out your tenants for failing to care for the property, you’ll soon find your rental in complete chaos.
You can be friendly with your tenants, but always remember you’re their landlord first. If you don’t, your profits will surely suffer, and you’ll continue to find yourself picking up after your tenants.
#6 Allowing Tenants to Conduct Repairs
While your tenants need to do the bare minimum (e.g. cleaning the home, mowing the lawn, etc.), you should not burden them with bigger responsibilities. The reason for this is that your tenants may create more issues, forcing you to pay for costly repairs. For instance, if a tenant tries to repair the roof, they may end up damaging it more, to the point where the whole thing needs to be replaced instead.
As a rule of thumb, your tenants should only attend to relatively minor issues that anyone can handle, even without the skills. However, other matters have to be dealt with by you or a vetted vendor.
#7 Forgetting Rental Laws
Don’t want to land in legal trouble? Be sure to read up on all rental-related laws. A common mistake that property owners make is saying, “I’ll do my homework later”, when understanding the law should in fact come first. Laws such as the Fair Housing Act will tell you what you can and can’t do, saving you from costly lawsuits down the road.
In general, you should never try to run a rental if you aren’t well-versed with the law, or if you haven’t partnered with a professional property management firm.
Avoid The 7 Sins of Property Management
All of these seven sins can be avoided by enlisting the services of an expert property management company such as Luxury Property Care. We will run your rental property will run as smoothly as possible and make sure you don’t commit these common mistakes. If you own a rental property in South Florida, dial (561) 944 – 2992 or complete our contact form today to guarantee the best property management money can buy.