When you first start out as a landlord, there is a huge learning curve. Finding the right tenant that will pay rent on time and take care of your property can sometimes be difficult. I’ve had mostly wonderful tenants living in my properties. But I also made several mistakes that cost me money and a few nights’ sleep.
While experience has made me a better landlord, there are some situations I wish I could have avoided completely. I’d love to save others time, worry and money by pointing out common mistakes that new landlords make.
Here are the Top 6 Mistakes new Landlords make when first starting out (from personal experience)
The Top 6 Mistakes New Landlords make
1.) Poor tenant screening
When you are first starting out as a landlord, you worry SO much about having a vacancy. Will anyone rent from you? How long will my property sit empty? I would say I worried about this more than anything else.
Now as an experienced landlord, I worry about this the least. I have had no problems filling my rental units. What I worry about instead is finding the right tenant for my property.
As a landlord, you will learn how important it is to take your time finding a tenant. Let a property sit empty longer if it means finding a tenant who meets your criteria. You will find out (often the hard way) that if you don’t, it will cost you a lot of money when that poorly chosen tenant moves out – or is evicted.
Always do a background check, credit check, and ask all potential tenants a series of questions that gives you an idea of what kind of tenant they will be.
We're going LIVE on Twitter at 7:30 CT — twitter.com
This evening we will be discussing these top 6 mistakes Landlord make!
Click here to set a reminder to join in 👇
2.) Ignoring red flags
This goes along with the first one. As you are screening tenants, there are several red flags that may pop up. Some common ones I’ve seen are:
- Asks not to have background check
- “In between jobs” but has rent money
- Wants to move in “right away”
- Won’t provide documents – proof of work etc.
- Has eviction on record – but it wasn’t their fault
- Drug convictions
These are just some of the red flags you are looking for when interviewing tenants. This doesn’t mean it is a hard “no” to a potential tenant but I’m going to ask some questions to better understand their situation. I may bend some of my criteria for tenants if they have a good explanation or are upfront with me.
One personal example: Last year, an applicant for one of my single-family homes did not meet my credit score minimum. She told me why her credit was so low (divorce), what she was doing to improve, and sent me bank statements showing her income. She met all my other requirements and I appreciated her honesty. She has been a great tenant and just resigned with me for another year.
3.) Think of rentals as a hobby not a business
Ok truth time: I was disorganized when I first started out in real estate. I was so excited about buying more rental property and looking at deals, I didn’t focus on organizing the rental business I was building. I made all the common newbie landlord mistakes like co-mingling funds, not keeping track of my receipts, and not tracking my income & expenses monthly.
I fortunately realized my business mistakes about 6 months in and focused on the organization side before I got too far behind. But I understand how easy it is to fall into bad habits, especially since accounting is not the fun part of real estate!
It’s important to remember that real estate is a business and not a hobby. As a landlord, we must set up systems to track the rental income coming in and our expenses going out. Otherwise, that cash flow will start disappearing and you will stop being profitable.
4.) Do not put everything in writing.
You must get everything in writing (I mean everything!) This cannot be emphasized enough. Memory is faulty. Verbal agreements, handshakes, or phone calls may be remembered differently depending on who is involved. Insist on putting everything in writing.
It starts with the lease. This seems obvious but you need to make sure that you use a lease that covers all the rules of your state/county. Then add in any other specific rules you want to implement. It is better to start off strictly and ease up on tenants than the other way around. I am specific in my lease about painting, putting up shelves, filling in large nail holes before moving out, etc. Think about what matters to you and add it to the lease. As long as it is reasonable, tenants appreciate the clarity.
Do a walk-through inspection at move-in and have them sign it. When I meet a tenant with keys, we walk through the property together room-by-room. I note the condition of everything in the room, the condition of appliances, and any noticeable issues. The tenant has a chance to add anything they notice as well. Then we both sign it. This alleviates the question of whether or not a tenant is at fault when something major gets broken.
5.) Never inspect their property or check-in with tenants
Newbie landlords think that if they never hear from tenants everything is ok. Often this is not true. There are tenants who will reach out when there is an issue, but a lot of tenants will not. They will just ignore the problem until it becomes a much bigger problem.
It’s a good idea to go to your property at least once a year and make sure there are no problems. I will drop off some new AC filters and ask tenants if there have been any issues. I’ll check on lawn care and if the house seems clean and maintained. I also include in the lease that I will give 48 hours’ notice before coming by the property and that I will come by every 3-6 months.
I try to frame these checks as a courtesy to the tenant. So they know I’m available and will take care of any issues they have. I don’t want them to feel like I’m spying on them, after all it is their personal residence. I want them to feel comfortable and will only come by when it is a good time for them.
If you have property management, ask them if this is a service they provide.
6.) Unaware of their states’ landlord laws
What do you do if a tenant stops paying? What if the cops get called to your property with reports of gunshots (I’ve had this happen)? What if your tenant’s boyfriend comes to stay and never moves out?
There are laws and regulations we have to live by and have the responsibility of knowing. Landlord/Tenant laws are different state by state and it’s important to learn the laws in your market. Anything from the eviction process, to a tenant breaking a lease early, to month-to-month leases have rules depending on your area. Ignorance does not hold up in the court of law, so it is good to learn the rules. Having a real estate lawyer on hand is also a necessity that every landlord eventually realizes.
Being a landlord is a skill that you start to learn and develop with time and experience. Over time, you start to trust your gut and learn the important things to look for in a tenant, how to run your real estate business, and the rights of you and your tenants. Until then, it’s good to rely on other landlords with experience to take their advice and try to avoid some of their mistakes.
Mary | Rentals to Freedom (@GetMoneySmarter) / Twitter — twitter.com
I teach how to invest in real estate & achieve financial freedom | Tips on spending less & making more | Get my free guide to buying your first rental👇