When you’re a landlord, there are two categories of mistakes you risk making.
The first are small and not very costly. These consist largely of learning experiences that don’t have any significant impact on your cash flow or stability.
The second category can be deadly, though. These are the mistakes that will land you in financial or legal hot water. If you’re making these errors, you need help … and you need it quickly!
Don’t make the biggest rookie mistake of all: improper screening of tenants. It’s lucrative to fill your units as quickly as possible and get the rent checks rolling in; but it’s not worth it if you get tenants with a history of failing to pay the rent.
You won’t know about that history if you didn’t check up front. If you don’t properly screen your tenants before handing them the contract, you’re likely to find yourself in a messy situation.
An inconsistent screening process can also get you into legal trouble, especially if there’s a possibility of discrimination. Inconsistent screening can land you with a fine, and increase your chances of leasing a unit to an irresponsible renter.
If you follow Fair Housing Laws, they can be your friend; if not, they’re a lethal enemy. Landlords cannot discriminate based on race, color, religion, sex, national origin, handicap, or familial status.
Any who do will be smacked with a hefty fine. When we say hefty, think millions.
3. Using Outdated or Generic Leases
As you know, your renters have to sign a lease agreement before they move in. However, it shouldn’t be just any “standard” lease agreement that you can download from the Internet.
Your lease agreement should be extremely specific, and detail your precise stipulations for living in the space as well as expectations about the future. In addition, it should adhere to all current laws that describe both tenant and owner rights.
Dedicated landlords will ask an attorney to read over the document to eliminate any loopholes. Failure to present a proper lease can lead to fines, untimely lease breakage, and even lawsuits.
4. Ignoring Dangerous Conditions
If you expect tenants to hold up their half of the lease agreement, you must also hold up yours. It’s not a suggestion; it’s the law.
If you know about a dangerous condition on the property and fail to do anything about it, you’re going directly against your half of the legal agreement and can be subject to lost revenue, lawsuits, fines, and lost licensing, depending on the severity of the issue.
Landlords have a right to evict tenants who don’t meet the contractual agreement, but it must be done properly. To begin with, delaying an eviction won’t do you any good; if your tenant is breaking the contract, set an example by applying the penalty delineated in the lease.
Also be sure to follow correct procedure when you evict the tenants. Avoid what some like to call “constructive eviction” by turning off the utilities.
This may work effectively to get a tenant out of the unit, but it will also lead to more of a mess when you find yourself in legal trouble for mistreating your tenant.
6. Underestimating Costs
Landlords and property owners often find themselves in hot water when they underestimate the costs associated with running the property. Most landlords budget for insurances, taxes, and mortgages, but they might neglect to include the utilities, garbage, landscaping, maintenance repairs, and lost revenue from unfilled units.
Savvy landlords will develop a more realistic estimate of these costs and create a healthy amount of savings in case they can’t fill every unit. Annual maintenance and living costs can run anywhere from 30 to 50 percent of yearly rental income, so you should have that amount stowed away for unforeseen annual costs.
8. Neglecting the Property
In a perfect world, each renter would tell you everything that’s wrong with the property and you’d be able to fix it before it became a major problem. Most of the time, it doesn’t work like that.
Many renters won’t recognize the genesis of a major issues, and others won’t want to bother you. Still others just won’t care.
To avoid losing thousands a year, be sure to visit the property regularly and watch for common issues that could cost you a lot, such as clogged or broken rain gutters, damaged roofing, and mold.
9. Breaking Laws
This may sound strange, but too many landlords break the law simply because they don’t know what the laws are. In fact, the major real-estate company Zillow quizzed landlords on basic rental law to see just how many didn’t know what they were doing.
The results indicated that 50 percent didn’t have an adequate understanding of rental law. The law doesn’t care whether you know about a law when you break it or not.
If you want to avoid legal penalties, lawsuits, and potential jail time, you’ll be well versed in the laws and avoid skirting them.
10. Trying to Handle Taxes and Legal Issues on Your Own
Tax time can be a trying period for anyone, but especially for landlords who have such complicated paperwork. Many different deductions and stipulations are available for doing taxes as a landlord, and the IRS watches these issues closely.
It’s best to get help from a professional when you do your taxes to avoid being audited by the IRS. Likewise, don’t try to handle legal problems by yourself.
Even landlords who do everything by the book may find themselves the victim of a lawsuit at some point. Without the right legal representation, they’ll suffer. Get the help you need to keep ahead of legal issues.
Hire Green Residential as Your Property Management Company
It’s all too easy to stumble into situations that could leave you penniless. If you’re struggling to stay afloat, it’s past time to enlist a property management company that can handle the typical challenges and more for you.
We at Green Residential are happy to take care of each of these issues for you. Our team of experts is trained and certified to handle everything from proper grounds maintenance to legal work and taxes.
We are the solution you need to run a successful and hassle-free rental property. Contact us today!