by Ben Luxon May 25, 2019 4 min read

Avoid the Pitfalls of Landlording

 

1. Investing in the Wrong Property

Finding and purchasing the right property is the very first step. Where many new landlords fall down is they purchase a property they like, rather than one that fits their business model and ideals.

A great property isn’t necessarily a great rental investment and just because you’ve fallen in love with it doesn’t mean it’ll earn enough rent to cover your costs. Before you buy, check on property websites to find the asking rents for similar properties of similar size no more than a quarter of a mile away.

Think about how much money you’ll have to spend on it and consider how the market in the area is going to act in the future

2. Poor Tenant Screening

A little extra time when screening your tenant could save you from a whole world of grief down the line.

Bad tenants can cause expensive damage to your property, they could refuse to leave at the end of their tenancy, or always pay rent late.

Proper screening can help you avoid ‘nightmare tenants’.

Having a good tenant is a two way street though. Being a good landlord and maintaining a good relationship with your tenants will help ensure the profitability of your property.

So, how do you screen for good tenants? How to Screen Tenants like a Boss 

Related Articles: The Best Ways to Greet New Tenants

costly landlord mistakes

3. Selecting the Wrong Finishes

This is something that a lot of new landlords simply don’t consider. But when you are choosing the finishes for your property, you want to be smart about it. You want designs that are fairly neutral, that look good, won’t date poorly and most importantly you need them to last.

Carpet for example, whilst it can be fairly cheap, it is really easy to ruin. Stains rips, snags mean that they need to be replaced - sometimes between every tenant. This cost very quickly begins to add up.

For a little extra money you could purchase vinyl plank flooring. This not only looks better, but it’s easier to clean, more durable and longer lasting. It’s worth some serious thinking about, and a little extra money could save you a lot in the long run.

Related: Budget Remodels: The most Important Renovation in the House

4. Poorly Written Leases

Your lease outlines exactly what you expect from your tenant and what steps you can take if they fail to live up to your agreement. At a minimum a lease should include:

  • The names of all tenants
  • The terms and nature of the rental
  • The amount of rent and when it’s due
  • Any penalties for not paying rent on time
  • Maintenance and repairs responsibilities
  • What activities are not allowed
  • When you, as the landlord, can access the property

Another thing worth considering is building in something like a break clause, preferably after the six months. Whilst it may be tempting to lock them in for the full year, if they turn out to be tenants from hell you may want to get rid of them sooner.

Even worse than a badly written lease is a verbal lease. This is normally only done if renting to friends or friends of friends, but a verbal lease is near impossible to enforce legally and you could find yourself in some serious trouble down the line if relationships between you and your tenant break down.

5. Allowing Tenants to Renovate

Property Management - renovate

Allowing tenants to make the space more their own isn’t necessarily a bad thing, and in some scenarios could work out well for both parties. However, this needs to be managed. Your tenant needs to first get your permission. The scope of the work needs to be addressed very carefully and, importantly, you have to ensure that any work that gets done is of a good quality.

They should use a contractor that you trust and know will do good work, and you should maintain control of the work at all times.

6. Unrealistic Ideals

Too often, people investing in property get lazy. No source of income though is truly passive. The same is true for investments in property. It’s not just a case of purchasing a property and renting it out.

You need to find the ‘right’ property, you need to get a good deal on it, you need to organise any renovations before renting it. Then you need to advertise and find tenants. The tenants you then need to screenand make sure they aren’t going to cause you problems. Finally, you need to get Landlord insurance, run property inspections, gas and electrical safety checks, schedule maintenance and repairs, and file your taxes at the end of the year.

However, managed properly these tasks shouldn’t take a huge amount of time and the rewards more than justify the time spent. Understanding what you are getting into from the outset and being prepared to put in the work is vital if you want to succeed.

7. Not getting Insurance

We mentioned getting insurance in the last point. There are various insurance providers for Landlord insurance. You will have to do some research to figure out how to get the best cost cost efficient insurance for you and your property. Without a good insurance policy, if your tenants damage the property - or even hurt themselves on your property, you could be liable to a hefty lawsuit.

On top of this we suggest that you ensure your tenants get renters insurance too. Your landlord insurance does not protect their belongings.

Related: Everything you need to know about Landlord Insurance

8. Not Using Property Management Software

Property Management Software

There is a new wave of real estate investors and landlords. The smart savvy ones who are taking back control of their properties to management companies.

By doing this they can maximize profits - and streamline their business. It allows them greater insight into the marketplace, reduces their risks, and saves them money.

Try Landlord Studio for Free now and unleash your investment potential! Property Management done right.

Ben Luxon

"Ben is an author and real estate enthusiast. His interest in all things entrepreneurial has led him to work with real estate professionals all over the world, distilling their knowledge into articles and Ebooks. His love of travelling has taken him to over 10 countries in the last year, where he has sampled the craft beer of them all."


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