Leasing property is a complicated and challenging business, and even simple mistakes can lead to big financial or legal consequences. It’s important to be diligent and well-researched while sticking to proven business practices.
This is doubly true for new landlords entering the business. The first year is often the roughest, and you’ll need any leg up you can get during your transition. This isn’t to say that experienced landlords don’t make mistakes (everyone does), but you’ll be much better off if you can avoid some common mistakes in the beginning.
Lack of adequate insurance is a big mistake in any situation, and as a landlord, it can be a fast ticket to financial ruin. When looking for a landlord insurance policy
, there are two basic types that you’ll need: property insurance and liability insurance.
There are different levels of property insurance, but the purpose is basically what it sounds like. This insurance protects your property in cases of fire, flooding, earthquakes, and other natural disasters/occurrences. There are more advanced policies you might consider investing in depending on your area that protect you from wind damage, or even terrorist actions, but some form of property insurance is always needed.
Liability insurance, on the other hand, covers you in case of incidents occurring on your property. This includes things like tenants or visitors being injured on your property or anything else that you could be held responsible for. The general rule is that you should have insurance that covers you for at least one million per accident.
Basic maintenance is one of a landlord’s biggest responsibilities. You’ll always be legally required to maintain minimum standards of living
for your tenants, which includes ensuring a safe environment and keeping all appropriate appliances/amenities in working order. Having a routine schedule for maintenance can help you spot problems before tenants do and keep everything in order.
You’ll need to be sure you’re working maintenance into your budget as well. That is, you need to charge enough rent to afford smaller fixes to appliances so you aren’t spending out of your own pocket. The time for that will come in the event of a major repair, like fixing structural damage, so you need to avoid small costs wherever possible.
Bad tenants are one of the most common landlord nightmares, and failing to be thorough during your screening process is the easiest way to get them. There are plenty of options out there for a landlord background check
, so make sure you’re taking advantage of them. It’s understandable to want to fill vacancies as fast as possible, but replacing one problem with another is not a solution.
You’ll obviously want to do a credit check and look for any criminal record during the background check. Bad signs here are the most obvious warnings of a potentially bad tenant. Getting an employer reference is always a good idea as well, since you want tenants who are financially sound. You can also ask for references from previous landlords, and this will give you a much better idea of what to expect.
Being too lax with tenants
It’s certainly possible to develop a good rapport with tenants, but it’s imperative that you treat rent collecting as your top priority. It’s important to remember that these aren’t just your friends — they are your means of livelihood. Crossing the professional line can be a huge mistake if it leads to tenants trying to take advantage of your good nature.
Late charges should be pursued aggressively, and if necessary, you should be notifying tenants about the possibility of eviction as soon as possible. The eviction process is often a long one
, and waiting on this can put you many months behind on collecting.
There will always be challenges when it comes to leasing properties, but knowing how to avoid these common mistakes will make things go significantly smoother.