As a landlord, you have a lot of things on your mind - finding and screening tenants, creating a rental agreement, collecting rent and fixing maintenance issues. For most DIY landlords, managing properties is not a full-time job, so it's easy to rush through important steps just to check another task off your to-do list.
Rushing important steps like tenant screening may not seem like a big deal, but you could end up renting your property to someone who never pays rent and causes thousands of dollars in damage. Avoiding these common landlord mistakes might keep you from worrying about expensive and stressful problems.
Here are the three most common landlord mistakes*:
- Deciding rental prices without doing research.
- Not spending enough time perfecting the rental agreement.
- Not enforcing rules, especially late fees.
Follow these tips so you can be a more efficient and profitable landlord.
Landlord Mistake #1:
Deciding a rental price without doing research.
Deciding your rent price affects tenant interest and how much profit you make on your investment. It's a common landlord mistake to recycle their rent price year after year, despite changing rental markets. To avoid this mistake, you should give your rental price careful consideration every time you're looking for tenants, advertising your property and looking to sign a new rental agreement. After all, your rent price is a business decision.
How do you make an educated decision when setting your rent price? Study the rental market. Do a quick search of other units on the market and how they're priced. Only compare your price to the price of units in your neighborhood since location is one of the biggest drivers of rent prices. Compare units that provide similar value, like how updated the units are and if they provide similar amenities.
Landlord Mistake #2:
Not spending enough time perfecting the rental agreement.
Your rental agreement is your guide to how your rental property will be lived in and managed. It's your opportunity to set rules. A common landlord mistake is not modifying the rental agreement to reflect your own rules.
To avoid this mistake, spend time modifying the rental agreement. You should research landlord-tenant laws to ensure you're following state and local laws and consider talking with a lawyer. The next step is editing clauses for specificity, adding clauses or even removing clauses.
A good rental agreement is specific. For example, if you allow pets, then your rental agreement should say that pets are allowed and specify what size, include a pet deposit amount and a monthly pet rent.
Landlord Mistake #3:
Not enforcing rules, especially late fees.
Letting rules slide is a common landlord error. This mistake reinforces bad behavior and decreases the validity of your rental agreement.
Late fees are the most important rule to follow. They are designed to motivate your tenants to pay rent on time. Tenants are more likely to forget to pay rent if there's no retribution for forgetting. To avoid this mistake, be firm about your late fee rule.
On the flip side, it's also important for landlords to follow rules on their end. Several rules in the rental agreement are designed to instruct the landlord on proper protocol. For example, the notice of entry clause specifies how far in advance you should warn tenants when you'll be coming in (usually 24 to 48 hours). When you follow the rental agreement's rules, you're setting a good example and saving yourself from legal issues.
These three common landlord mistakes could have a huge impact on your ability to be an effective, profitable landlord. Thankfully, they can easily be avoided. The steps outlined throughout this article can help set you up for success.