After a long search, you finally bought the perfect property. You like the location. It’s all fixed up the way you want it. You’re excited to find tenants. You’re ready to start making money.
Before you dive into the deep end, though, there are some things you might want to know.
Every landlord makes mistakes. Inevitably, you will as well.
However, minimizing most of those errors could be the difference between turning a profit and falling into the red.
In this article, we’re going to look at 5 common mistakes landlords make that kill profit:
- Not turning units over quickly
- Poor tenant screening
- Mishandling maintenance issues
- Being too lenient
- Ignorance of laws and regulations
Avoiding these mistakes will help you turn a profit and grow a fruitful business.
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MISTAKE 1: NOT TURNING UNITS OVER QUICKLY
The cost of vacant unit can add up quickly and the longer it’s empty, the more expenses climb. Avoiding extended vacancy periods is critical as a landlord if you want to make a profit.
A key part of turning units over is marketing and advertising. Make sure you’re on as many listing sites as possible and carefully construct engaging copy to describe your property. This article goes into detail about creating the ideal property listing.
In addition to marketing, ensure your property is well-maintained. You want to show people something that catches their eye and has features they’re looking for.
MISTAKE 2: POOR TENANT SCREENING
Even though turning units over quickly is important, that doesn’t mean you should go light on tenant screening. Skipping or glossing over tenant screening is a huge mistake. And it’s one that could cost you money for a long time.
Great tenants are one of the best ways to keep your profits healthy. You don’t want to deal with damaged property, noise complaints, and poor communication. It’s frustrating and hurts your bottom line.
So, thorough tenant screening is a must. Have criteria and stick to them. Be sure to pull criminal reports, eviction reports, and run credit checks. You want to get a full picture of someone before you loan them your most valuable asset. And, most importantly, you want someone who is going to pay rent in full on time.
Tenant screening is a long-term investment. It helps prevent evictions, which are a nightmare. It also helps you find tenants who may become reliable customers in the long run. These are relationships you want.
MISTAKE 3: MISHANDLING MAINTENANCE ISSUES
A small, patched leak in the roof can allow for major damage. A broken dishwasher can lead to flooding. A hole in the ceiling can cause a slew of problems.
Many landlords make the mistake of putting band-aids on maintenance issues that need full repairs. Or they don’t stay organized enough to take care of maintenance issues as they become issues. You need to avoid these mistakes. Maintenance issues can compound in the blink of an eye.
Staying organized, communicating promptly, and managing issues is critical when it comes to maintenance.
MISTAKE 4: BEING TOO LENIENT
Always remember you’re running a business. It’s great to build solid relationships with tenants. It’s great to communicate proactively with tenants. It’s great to understand who they are and where they’re coming from. But not at the expense of your business.
You’re trying to turn a profit and it’s not your job to be your tenants’ friend. So, one thing you need to avoid is accepting unreasonable partial payments. We’re living in difficult times, so some understanding goes a long way. That being said, tenants need to pay rent.
It’s not easy tracking everything and hunting down late payments. Thankfully, property management software can help with this by assessing automatic late fees, sending out automated reminders, and tracking payment dates. It may be a good option for you to consider for your business as a whole.
At the end of the day, you want to build relationships with tenants, but it doesn’t behoove you to make things too personal.
MISTAKE 5: IGNORANCE OF LAWS AND REGULATIONS
Educating yourself about laws and regulations is a necessity. You need to understand what you can and cannot do. You also need to understand how to run your business within the applicable rules. Research your specific state laws. Understand regulations and how they impact your business. Talk to a lawyer if you need to.
Not understanding the “rules of the game” will destroy your profits. Imagine trying to play a sport without first understanding the rules. It would lead to disaster. It’s the same with your rental business. You need to know how to navigate the landscape and avoid land mines.
As a landlord, it’s always better to be proactive rather than reactive. But no matter how proactive you are, you will make some mistakes.
However, minimizing your mistakes and avoiding the five pitfalls we’ve discussed will help you turn a profit.
So, go do some research, educate yourself, and take action!
About the Author
Innago is a free, easy-to-use property management software solution, designed to save you time & money. Innago allows you to easily: collect rent, screen tenants, list properties, manage work orders, create applications, sign leases, organize financials, communicate with tenants, & much more! Learn more here