Rental property owners have many responsibilities when it comes to managing their property.
Without the right experience or preparation, they risk losing money, and even their property, while trying to figure things out on their own.
In this post, we’ll cover 10 of the most common mistakes that first-time investors make so you can avoid them.
1. Foregoing background checks
An important step before renting to a tenant is the screening process.
The rental application form is important for you to get all the prospective tenant’s information. Get a credit report and do a comprehensive background check to verify the applicant’s information.
Important details such as employment and renting history as well as any criminal background should be confirmed before considering the applicant.
2. Failing to treat it like a business
A requirement to running a successful rental business is having an understanding of the laws that are relevant to it.
Keep separate accounts and bookkeeping for your rental property. Accounting and expenses need to be tracked as well.
Make sure that you have all the needed paperwork that’s required by Washington laws or you may find yourself losing money from the fines received for noncompliance.
3. Charging the wrong rent price
If you notice that you don’t have long-term tenants or have high turnover or vacancy rates, chances are your rent price is wrong.
Experienced property managers know how to determine the correct rental price. They do this by studying the market and doing comparative analysis on the property.
4. Not meeting state and local housing codes
It’s your responsibility as a landlord to give your tenants a safe and habitable place to live in.
You are required to make sure the property meets health and safety standards. Your tenants may have legal grounds to break the lease and possibly sue you if these standards are not met.
Regularly check in with your tenants and the property. Keep in mind to stay within the housing guidelines regarding tenant privacy and always make your visits announced.
You can conduct drivebys to assess the general condition of the property as well.
5. Getting the wrong insurance
Your best defense against financial losses is by having an insurance cover. Most inexperienced property investors overlook its importance.
Insurance is necessary and a single calamity can end up destroying your investment.
Examples of these calamities are storms, floods, and fires. Rental property insurance is more complex than your ordinary insurance and it’s important to understand what types you should get.
Discuss with a licensed insurance professional to determine your real estate insurance needs.
6. Asking illegal interview questions
During tenant screening, you run the risk of asking discriminatory questions that may not adhere to the Fair Housing Act.
This Act states that you can’t deny a tenant’s application based on race, color, religion, national origin, sex, marital status, handicap, or family status.
Understanding the basics of the Fair Housing Act is very important to avoid problems with the law. An experienced landlord will know the right questions to ask as well as how to advertise their property while staying within these guidelines.
7. Failing to set clear and specific tenant rules
Owning a rental property doesn’t just mean collecting rent. Managing tenants is an important responsibility and is a skill that landlords need to master. Not setting clear and specific tenant rules can lead to costly consequences.
Protect yourself and your property by setting straight forward rules in your lease or rental agreement. Cover details such as rent amount and due date, penalties and fees, and payment methods.
Be clear about the rules on returning the security deposit by coming to an agreement with your tenant as what constitutes as “normal wear and tear” and what damage is.
8. Underestimating the cost of repairs or ongoing property maintenance
This is another mistake new landlords often make. They don’t realize the importance of hiring professionals to repair and maintain the property.
It’s easy to make this mistake when the goal is to minimize expenses and maximize returns.
What you may not realize is that these small repair and maintenance issues, if not handled properly, will become bigger problems.
This, in turn, will lead to higher costs than what it would have cost you to hire an expert in the first place.
9. Being too friendly with your tenants and prolonging disputes
A good landlord-tenant relationship is great but it should also be professional. Landlords who become friends with their tenants often leads to preferential treatment.
Payments and lease terms may soon become overlooked and you may be faced with an eviction. Evictions are messy and costly. Delaying it will only make the process more expensive. You could also face other lawsuits if your other tenants find that you are not treating them equally.
It is always best to settle any disputes with tenants as soon as possible and keep your relationship with your tenants professional.
10. Doing everything on your own
To run a successful rental property, you need knowledge, skills, and experience.
Understanding the landlord-tenant laws, as well as other property manager responsibilities, will help you resolve any complex issues that may arise.
Owning a rental property signifies that you take responsibility for everything that comes along with it. These are 10 of the most common mistakes that beginning property owners should avoid.
Regardless if you own one property or a hundred, remember that you own a business and that you should treat it like one.
If this all seems like more work than what you thought you signed up for, hiring a reputable and experienced property management company will help you grow your Washington investment while you sit back and enjoy your passive income.