There are many different reasons why someone may get into the rental business. You may have inherited a property or decided to rent out an old home. Or perhaps you simply decided to buy a few properties as a source of income. Whatever the case may be, being a landlord can either be profitable, or very costly. Everyone makes mistakes, but it’s always nice when you can see an outcome coming and take action to prevent it. Here are a few mistakes to avoid in order to keep your rentals as profitable as possible.
Not Understanding the Local Market
Before you start renting your property, it’s very important to do some research and find out what your property can actually be rented out for. Make sure your rental is in a desirable location that will attract potential tenants. Get to know the neighborhood, including access to transportation, grocery stores, area features, and businesses. Learn the dynamics of the local market including what is charged for taxes and therefore what you can charge for rent.
Not Treating it Like a Business
Your rental property is an income source, and it should be treated this way. Consider using accounting software or a spreadsheet to keep track of all income and expenses. Document all of your procedures and communications with applicants and tenants and be sure to stick to rules set out in your lease. You may even want to set up an LLC (Limited Liability Company) for ownership and to protect you from legal actions or claims.
Underestimating Maintenance Expenses
Maintenance expenses can make a property that seems like the ultimate home run into a huge drain in your bank account. These expenses can also sneak up on you, such as water damage which can cause you to have to replace roofs, exterior walls, flooring, baseboards, and much more. To prevent this from breaking your investments, be sure to set aside part of your earnings each month.
Not Knowing Your Landlord Responsibilities
Getting a tenant is a huge milestone for your first rental, however, this doesn’t mean that you can leave them be and expect the property to take care of itself. It’s your job to meet the requirements of your lease agreement. This means checking in on your tenants, keeping tabs on the condition of the property, completing regular preventative and seasonal maintenance, and responding quickly to requests. This will insure that your property is a healthy and safe place to live. Neglecting your property and your tenants could result in higher turnover, more vacancies, less rental income, and even lawsuits.