Are you a new landlord navigating the challenges of property management? Done right, investing in real estate can help you enjoy a consistent passive income. That said, owning a rental property doesn’t automatically mean you’ll be a successful landlord. Your success will be determined by how well you’re able to manage your rental property or properties.
If you choose to manage your rental property on your own instead of partnering with a property manager, there are certain mistakes you’ll want to avoid.
1. Not Having a Written Lease Agreement.
A lease is a legally binding agreement. It’s a contractual agreement that binds both you and your tenant for a certain duration of time, usually between 6 months and a year.
Without a lease, you won’t be able to let your tenant know what exactly is required of them. In turn, you won’t have any legal ground on which to hold them accountable. If any issues arise, it’ll be your word against theirs.
For a lease agreement to be effective, it needs to contain certain crucial terms. We suggest including a subletting policy, a pet policy, rent-related terms and occupancy limits. The lease also needs to be legally binding for it to serve its purpose. Make sure all essential information is included on the lease and have both parties sign it.
2. Failing to Regularly Inspect the Property.
Even after renting out your property, you need to inspect it from time to time. After all, the property is still your responsibility. It’s your responsibility, for instance, to ensure that the property meets the basic health and safety codes.
Inspecting your property regularly will also help you check whether the tenant is abiding by the lease terms. For instance, you can see if they’re keeping an unauthorized pet or illegally subletting the unit.
3. Not Respecting Your Tenant’s Space.
Tenants have a right to respect, peace and quiet. Even as the landlord, you can’t enter the property without proper notice. Familiarize yourself with local and state laws.
In the state of Alabama, you need to serve your tenant with advance notice of 2 days before entering. The only exception to this is if you need to access the property in the case of an emergency. You can also only enter the property during normal business hours.
4. Filling Vacancies Slowly or Not at All.
Being slow to fill vacancies is a costly mistake when renting out your property. While property vacancies are normal, having them for an extended period of time can prove disastrous to your bottom line.
You’ll want to keep your vacancies as low as possible for maximum profitability. To do this, always make sure to prepare early. Don’t wait until a tenant has moved out to start the marketing process. Start marketing your property the moment your tenant notifies you that they’re going to leave at the end of their lease.
It’s also a good idea to have at least 3 months in savings to cover vacancy costs. Set up a separate account in case of an extended property vacancy.
5. Letting Emotions Cloud Your Judgment.
To be a successful DIY landlord, you’ll need to separate your emotions from the business. While empathizing with tenants isn’t bad, it can become detrimental to your bottom line if you’re not careful.
The lease agreement requires a tenant to abide by certain terms, such as paying rent on time and in full. If a tenant stops paying rent for whatever reason, notify them of the issue right away. Let them know how much they need to pay and within what period of time.
If they don’t comply, you might want to start eviction proceedings against them immediately.
6. Pricing Rent Incorrectly.
Pricing rent incorrectly is another common mistake DIY landlords make. As a new landlord lacking property management experience, you might find yourself either undercharging or overcharging for your rentals.
To determine the right rent amount, conduct a thorough comparative market analysis and interview landlords renting out similar units. You can also factor in any special features your property has.
That said, if you’re just starting out, hiring a reputable property management company can be the best option. A good property management company will have knowledge of the local property market and know how much you can charge for your rental property.
7. Screening Tenants Improperly.
Screening tenants poorly is another common mistake landlords make. The last thing any landlord wants is to rent their property to a problematic tenant.
Conducting a thorough tenant screening process will help you to know whether a tenant is a good fit for your rental home. An effective tenant screening process is one that examines prospective tenants on the basis of their:
- Creditworthiness
- Rental income
- Criminal status
- Eviction history
- Employment history
When screening tenants, make sure to abide by the Fair Housing Act.
8. Failing to Disclose Important Information to Your Tenants.
There are certain disclosures that every landlord needs to make before renting out their property, in order to comply with laws and meet safety standards. For instance, federal law requires landlords to give tenants a lead-based paint disclosure under the Lead-Based Paint Disclosure law.
Various states have also passed laws that compel landlords to make certain important disclosures. For instance, the state of Alabama requires landlords to disclose the names and addresses of all authorized management parties. Familiarize yourself with local and state laws to avoid legal repercussions. We suggest also being with common real estate terms as a self-managing landlord.
Bottom Line: Hire a Property Manager
Being a property owner comes with its challenges, especially if you intend to rent out your home. Self-managing landlords need to make sure they have a good lease, inspect their property regularly, respect their tenant’s space, fill vacancies quickly and act professionally. You also need to price rent accordingly, screen tenants thoroughly and disclose necessary information to your tenants.
Does all of this seem daunting? For expert help in managing your Fairhope rental property, look no further than Level Property Management Group.
With over 15 years in the business, our full suite of property management services can help you handle all aspects of managing your rental property. Dial (251) 210-1664 or email leads@levelpmg.com to get in touch with our property managers and receive a free rental analysis today.
