New Landlords Take Note: 5 Common Mistakes That Can Cost You
One reason why you want to become a landlord is that it can be a good source of income. Having a rental property can help you to live off the income from your investment.
However, there are several landlord mistakes that you might make when you’re first starting. But don’t worry, we’ve got you covered!
Read on to learn where new landlords go wrong when it comes to property management. Let’s get into it!
1. Neglecting to Perform Tenant Screening
Conducting a background check on prospective tenants is one of the most important responsibilities of a landlord. This process is something that should not be taken lightly.
Not performing tenant screenings can cost landlords time and money in the long run. Additionally, those who are not screened can cause problems such as:
- being behind in rental payments
- damaging the rental property
- causing disturbances to others
In addition, it can result in a landlord taking on a tenant that will be difficult to evict if tenant laws are not followed properly. This is the reason why it must be done thoroughly and should include:
- background checks
- credit checks
- criminal history checks
- employment verifications
Any landlord should take the time to properly assess their tenants before signing a lease agreement to avoid costly mistakes in the future.
2. Establishing a Rental Amount That Is Too Low
New landlords often make the mistake of setting a rental amount that is too low, leading to a loss in revenue. This happens when they are trying to attract renters by undercutting other landlords in the area.
It’s important to realize that each rental property is unique and requires different rental amounts to cover the potential expenses. For example, a two-bedroom apartment in a luxury building may cost a higher rental amount than a one-bedroom apartment in a basic building.
Moreover, setting a rate that is too low can greatly affect your income. It may also lead to other issues like attracting undesirable tenants.
To avoid this, it is best to research the area for rental averages to ensure you’re setting a competitive rate to attract and maintain quality occupants. It can even result in higher tenant turnover, increased repair costs, and the need for higher rental rates in the long run.
3. Skimping on Property Maintenance and Improvements
Overlooking property maintenance and improvements is one of the biggest rookie mistakes. As a landlord, you must inspect the property regularly and invest in necessary repairs and upgrades.
In the event of wear and tear, it is crucial to do minor upgrades such as:
- regularly painting walls
- applying a fresh coat of sealer to cabinets
- replacing socket and switch covers
This can go a long way in protecting the value of your rental property. Additionally, landlords may experience higher insurance costs if they neglect to maintain their property.
Also, if a landlord fails to keep up with general upkeep, tenants are less likely to be satisfied and may leave or withhold rent payments. So, instead of trying to save a few dollars in the short term, landlords should prioritize conducting regular maintenance.
Finally, this will not only create a better rental experience for renters but also ensure higher long-term returns for the landlord.
4. Not Understanding the Local Rental Laws
When entering the rental market, understanding the local rental laws can be one of the most common mistakes that can cost you. To start, make sure that you are familiar with all the legal requirements relating to the rental of a property which include:
- fair housing laws
- health and safety standards
- the tenant’s right to privacy
In addition, it is equally important to clearly outline all the terms of the tenancy. Make sure that there is a signed lease agreement that includes:
- the payment of the rent
- the tenants right to sublet
- the terms and conditions of occupancy
- stipulations concerning damages
Lastly, it is always beneficial to understand local tax laws about your property. Not being aware of legal requirements can lead to fines and even criminal action.
Thus, new landlords should ensure that they are familiar with all rental and tax laws in their jurisdiction when taking up the role of a landlord.
5. Incorrectly Classifying Taxable Income and Expenses
New landlords need to pay close attention to correctly defining income and expenses. Inaccurately designating rental income as non-taxable can result in penalties from the IRS.
Additionally, incorrectly deducting expenses can significantly reduce gross rental income and can incur additional taxes. Extra care should also be taken to track any income used for personal purposes.
Ultimately, landowners should maintain a detailed accounts ledger outlining all rental income and expenses. This should be updated as new income and expenses are incurred. When in doubt, consulting an accountant can prevent costly mistakes.
Importance of Hiring a Property Manager
Hiring a property manager to oversee your rental investments is a must if you want to run a successful and profitable operation. They bring expertise, experience, and systems to ensure the property is correctly maintained and managed.
They can also provide preventative maintenance to avoid costly emergency repairs. Additionally, they can help screen potential tenants and deal with payment issues such as timely eviction.
Finally, an experienced property manager can also help minimize taxes and maximize the return on your rental investment. All in all, hiring a property manager can be well worth the cost.
If you’re living anywhere in Utah, you’re lucky! The professionals at Kasteel Property can do more than just watch your rental property. They can even protect it, cultivate it, and help your investment grow.
Where New Landlords Go Wrong?
New landlords need to take note of common mistakes to avoid costs that can be easily prevented. Knowing the right questions to ask, the laws that apply, and solidifying rental agreements are key tactics that owners must understand for successful letting.
Understanding where new landlords go wrong could save you money and time in the long run. Get the advice of a professional today to ensure you make the best decisions and avoid high-cost pitfalls.
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