10 Mistakes to Avoid for New Landlords
You probably clicked on this article because in recent years you absolutely scored a low interest rate and while you’re ready to move, you don’t want to sell your house. That leaves you with the option to rent it out or sell it and lose the interest rate.
Maybe you went back and forth on the decision for a while;
Do I want to be a landlord and make rental income off of this property or do I want to take my money and run?
However long it took you to negotiate with yourself, you’ve made the decision (or if you haven’t, read this article to see if you’re sure you want to proceed) to try your hand at property management - congratulations! Feeling a little uncertain is normal because you’ll never know what it’s really like until you try it.
To set you on the fast track and ease your nerves, I’ll share with you the ten biggest mistakes I’ve made as a landlord so you can avoid them. As someone who has been self managing multiple properties for three years now, let’s just say I’ve made a lot of landlord mistakes so this isn’t the entire list but it’s enough to get you going. After reading this, I have no doubt you’ll save countless hours and reduce unnecessary expenses. As a result, I hope you’ll get in the rhythm with your new business and take advantage of the opportunity to earn rental income.
Landlord Mistakes I’ve Made So You Don’t Have To;
Trying to be friends with your tenants
Have you heard the adage ‘friends and business don’t mix’? Well it’s true - it’s really hard to see through a business lens when emotions are involved. And this is no different when it comes to renting a home.
Just as you would with any other business, make sure the your formal agreement takes centerstage. If you realize along the way that your tenants are really cool people, great. Be friendly and stay in contact so you can get to know them better once they move out. Chances are, they might feel obligated to return the niceties since they’re living in your home. So wait until the formal arrangement has ended before you try to get to know each other on a more personal level. Boundaries will benefit both parties in this situation.
Cheaping out on expenses you don’t want to pay
I received a maintenance request to have air ducts cleaned on one of my homes. It’s about an $800 charge to have a professional bring an oversized vacuum into your home and take some photos of how much debris is stuck in them. Spoiler, there’s no discount when the vents are almost completely clean prior to the service.
While this example was an unexpected expense I didn’t want to pay, it’s critical to consider a tenant’s health and wellbeing at your property. If this makes a difference for their allergies, they’re going to feel cared for. If you treat your tenants well and address their maintenance requests or other reasonable inquiries, you’ll demonstrate that you are invested in their wellbeing and their experience at property. Whatever the outcome, it goes a long way towards building trust and establishing respect with the people living at your house.
Delaying repairs to save money
Conducting regular maintenance rather than waiting for items to break is the way to go on any home. If you know something is slowly deteriorating, take care of it before it completely wears out to avoid expenses associated with rushed repairs. A perfect example of this is paying a few hundred dollars to service the furnace each year plus supply the home with replacement filters rather than wait for it to stop working during a snow storm.
Don’t let repairs get away from you and try to make some updates regularly so that as time goes on, you gradually keep up with the age of the home and won’t need to do a single cash injection after your tenants move out. Budgeting a few thousand each year will improve your property, save you time in the future, and create a tax write off too!
Forgetting to track your expenses
I’ll say it again, this is a business! Maybe it’s been a really laid back experience but you didn’t become a landlord just for funzies. You intended to make money and to know how much money you’re making, you have to track income and expenses.
As a general rule, I recommend that a property owner track everything. This includes start up costs (like marketing), gas to and from the house, repair costs, hours logged working on the house, labor and materials for bigger fixes and of course, rental income. All of this can be logged in a spreadsheet or accounting software along with the receipts but make sure it’s in one place.
You will really kick yourself at tax time when you have to go back through the year and try to remember when you went to the house or what repairs you made.
Ignoring curb appeal throughout the year
Want to know a great way to piss off your neighbors and set the tone with tenants that you don’t care how the house is treated? Allow the yard to become a gangly overgrown mess.
What landlords sometimes don’t consider is that the front of the house is also important to tenants. They want to be proud of where they live too. Provide them with the tools or equipment to maintain the lawn and the yards and they’ll more than likely chip in. I give my tenants creative freedom with the backyard as long as it’s maintained. They have a lawn mower, clippers, garden beds, a patio space and I’ll even haul away old branches. Similarly to interior maintenance, regular exterior yard maintenance can keep bigger expenses at bay.
Failing to build systems into your property management
Standard operating procedures are unenjoyable (in my opinion) to implement but are absolutely worth while.
I’ve forgotten to send water bills, provide enough notice to increase rent, and leaned on free software trials to avoid monthly fees. In avoiding formal systems, routines, and processes, I’ve cost myself a lot of money.Invest in tools that can help you streamline signing leases, track rent payments or notify you of late charges. Use calendar invites to remind you when repairs are needed or when to send a holiday gift. The more you can systemize your management, the more you can optimize the performance of the rental.
Attempting all maintenance yourself
I previously did not know how to repair drywall but now I do. The downside? It took me two full days to replace something that could’ve been completed in an hour. In trying to save a few bucks, I spent precious time doing work to build a skill that I’d probably hire out again in the future.
Call in the professionals, they’ll do it faster, better and you can write it off on your taxes. It saves you a trip to the house and will be worth the time back in the future. Sometimes it does makes sense to do repairs on your own but do a cost analysis to determine if your time is better spent elsewhere.
Feeling uncomfortable raising rent
I’m not of the mindset that you should raise rent every year; however, I do think you should raise it in congruence with your expenses. Schedule time about sixty days before your lease is set to expire to research your costs for the coming year. Are you expecting negligible increase? Then offer a lease renewal at the same rate. Are your expenses increasing dramatically? Then explain your increasing costs to your tenant and offer a lease renewal at a new, reasonable rate. Transparency goes a long way here. This is not about maximizing every dollar of profit; it’s about responsibly considering your costs and what income is needed for a viable business.
It can be nerve-racking to notify a tenant of a rate increase because you can’t predict their reaction. Even if you hope they renew, they won’t be obligated to or they may want to negotiate. Anticipate various responses so you can be prepared to discuss a route forward and find what works for both you and your tenant. Additionally, consider that you might have to put the property back on the market if the increase isn’t feasible for your tenant.
Checking on the property every few months
Take the time to visit your property a few times a year, always sending 24 hours of notice to the tenants first. This will help you update your logs of items that need repairs, check in with your tenants, and catch issues that you might not have otherwise seen. It demonstrates to your tenants that you’re engaged and interested in maintaining the home.
It might be easier to ask your tenants for an update but this is a task that shouldn’t be outsourced if you’re self managing.
Expecting to make zero mistakes along the way
Plan for the first year to be a learning experience. Anticipate challenge. You’re not always going to know what you’re doing. It’s OK - remember, this article was not titled ‘How to Be a Landlord for One Year Only’. You’re more than likely in it for the long run so if you really want to grow as an real estate investor, accept that you’ll make landlord mistakes in the first year and do a little better the next. Over time, you’ll have your systems in place and the little hangups won’t feel so uncomfortable.
Your Next Steps
Embarking on your journey as a landlord will undoubtedly come with its share of challenges, but with preparation and the right mindset, it can be a fulfilling and profitable endeavor. Each mistake you avoid can save you time, money, and stress, bringing you closer to running a successful rental business.
Don’t be afraid to seek advice from experienced landlords, join property management forums, or consult with professionals to fill in any knowledge gaps. The more you learn and implement best practices, the more streamlined and effective your property management process will become.
Are you ready to put these tips into action? Start planning for your first year as a landlord! Share your experiences and any additional tips in the comments below—your insights could help fellow landlords avoid common pitfalls and achieve greater success.
