5 Common Landlord Mistakes to Avoid
Increase Your Chances of Success
Being a landlord is a learning experience. Making mistakes is normal and personal experience is often the best teacher. There are some mistakes, however, that can be avoided with a little education. Here are five common landlord mistakes that you can avoid making.
Common Landlord Mistake #1: Skimping on Insurance
The first mistake that a landlord can make can occur before you even place a tenant in the property.
This mistake involves failing to obtain the proper insurance coverage. This could be a twofold issue. You could fail to get the right type of insurance coverage, fail to get the proper amount of coverage, or a combination of both.
Right Types of Insurance:
You need to make sure you have the right types of insurance on your property and on your business. You should have property insurance and liability insurance.
- Property Insurance- This insurance protects you against damage or destruction at your property. This damage or destruction could have been caused by fire, wind, vandalism or similar events. You can add loss of income insurance to protect you in case property damage leads to loss of rental income.
- Liability- Every landlord needs to have liability insurance. This insurance will protect your property and your business in the event of a lawsuit, such as a slip and fall, or other claim of negligence.
Amount of Coverage:
Not only must you get the right types of insurance, but you must also obtain the proper amount of coverage. For example, for liability insurance, you should make sure you are covered for one million dollars per occurrence.
Common Landlord Mistake #2: Becoming Lax With Tenant Screening
A second mistake that landlords make is becoming sloppy when screening prospective tenants.
Landlords usually fall into two categories, landlords who do not thoroughly screen tenants from the very beginning and landlords who had great screening procedures at the beginning and have gotten lazy with it as the years have gone on.
You must have a system in place from day one and must follow the procedures with every prospective tenant, even if you would be renting to your cousin, mother-in-law or dog walker. When you do not properly screen tenants, there is a greater likelihood that you will have to evict a tenant, which will lead to lost rent and vacancy costs.
You should have a set of questions that you ask every prospective tenant, have tenants fill out a rental application, verify the information on the application and run a credit check to help verify that the tenant can afford the apartment. Proper tenant screening can be a burden, but you will thank yourself in the long term when you have great tenants in your rentals.
Common Landlord Mistake #3: Lack of Knowledge of Landlord Tenant Law
Another mistake landlords make is not being familiar with landlord tenant law. You can get yourself into big legal trouble if you do not follow certain procedures or fulfill certain responsibilities.
Each state will have certain rules for how you must collect and store security deposits, the maintenance responsibilities you have at the property, reasons you can enter a tenant’s apartment, and the procedures for evicting tenants. There are also federal laws, and in some cases, separate state laws, about offering fair housing to all prospective tenants regardless of color, disability, national origin, race, religion, or sex.
If you do not follow the proper procedures for collecting and storing a security deposit, you may have to return the entire security deposit to a tenant, even if they have caused damage to your property. If you are accused of violating the Fair Housing Act, you could face large fines as well.
Common Landlord Mistake #4: Putting Off Maintenance Issues
It can be easy to push off maintenance issues to a later date.
However, it is often in your best interest to address these issues quickly because they can become larger issues very quickly.
You may know of a small roof leak at the property. Since the tenant has only complained about it once, you do not think it is vital to fix immediately. However, after a heavy rainstorm, you get the call from the tenant that part of their ceiling has collapsed.
You finally go over to the property, inspect the roof, and realize that the gutters were clogged with leaves. If you had taken the time to inspect the roof earlier, you would have cleaned out the gutters and avoided damage to the interior of the property.
Common Landlord Mistake #5: Trying to Do It All/Not Knowing When to Get Help
The fifth mistake that landlords make is not knowing when to ask for help. Landlords sometimes forget how valuable their time is and try to do everything themselves.
Just because you know how to fix a water heater does not mean it makes sense to drive an hour to your property, spend two hours fixing it, and then drive an hour home. You can call a skilled professional to fix the water heater and spend those four hours analyzing another property investment. Knowing how to delegate responsibility will often help you succeed as a landlord and help you keep your sanity.