07 May The Top 3 Ways You Can Fail as a Landlord
Buying an investment property to rent is a tricky process in itself, but becoming a landlord is a whole different challenge.
Finding the right tenants to live in the property, remaining responsible for the building’s maintenance and repairs (no matter how costly they get), and abiding by every fair housing regulation under the sun are just a few of the good times that await you.
But while there’s a litany of things that can go wrong which will make any residential owner question their investment—and existence on this planet—we are here today to discuss only the top 3 ways to fail as a landlord…
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Not Setting the Right Rental Price
This can go one of two ways. Either you set a price that’s too high, and the rental sits unoccupied for weeks on end. Or, you offer it too low and lose out on potentially thousands of dollars over the ensuing months.
Do your market research.
Go online and study the median rent values in your area.
Even if you just purchased your first rental property and are anxious to get it rented, take a little time to learn about other prices in your area. This wisdom will help when it comes time to negotiate pricing with prospective tenants.
You also have to factor in your property’s particulars as well as the parameters of your proposed lease. Account for factors like, how big are your residencies? Will you be allowing pets or other animals? What types of local amenities or conveniences are available?
Every landlord’s goal is to maximize their monthly cash flow, but it has to be tempered by a sense of realism as well.
Not Hiring Help
If you own a small portfolio with just a few units and you have the stomach for being a landlord, you might be okay managing everything on your own. Otherwise, don’t hesitate to hire a competent property manager.
Hiring a management company is a great way to relieve the burden of ownership and helps show your tenants that you’re treating this like a real business.
Most companies will charge a percentage of the monthly rent as a management fee plus other fees associated with other events in the management process.
A big mistake first-time landlords make is thinking they can handle everything by themselves. By hiring property manager, you’ll alleviate tons of headaches along the way. Plus, you’ll be providing a much better living experience for your tenants which has proven increase renewal rates.
As a residential landlord, you need to keep your tenants at a distance. It’s easy for them to get chummy with you and treat you more like a friend than a land baron. When this happens, they may start thinking they can get away with certain actions and behaviors that go beyond the rental agreement.
Don’t let them make you spend all of their security deposit because they were acting careless. Sometimes, the best way of maintaining a level of respect in a residential landlord and tenant relationship is to hire help.
When they need assistance at one o’clock in the morning, you’ll be glad you hired a property manager. That’s guaranteed.
Read this article on 7 Questions to Ask Before Hiring a Property Management Company.
Not Treating The Property Like a Business
“It’s a real estate investment. It’s a source of rental income. I’m just going to sit back and rake in the dough, aren’t I?”
Think again.
In order to become a successful landlord, you must treat your property like a business. It doesn’t matter what type of property it is, it won’t run efficiently or give you the kind of income you crave unless you treat it like a fluid machine.
This means having the right systems in place to facilitate every aspect of investment property management. You need to have paperwork for every occasion, whether it be a move-out checklist or protocols for tenants moving in.
Like with any business, lawsuits can happen. If you study the landlord and tenant act and include the right provisions in your lease agreement, you will help prevent potential conflicts with tenants down the road.
Bonus Tip: Be Good With Tools
When things go wrong, you want to be standing by with a wrench in hand to fix them. Whether something goes loose inside the toilet, the sliding door breaks, or a lug nut comes off somewhere else, it’s helpful if you know how to remedy these situations on your own.
Of course, this isn’t to say you shouldn’t call for professional help. But knowing these basics can help you put a bandaid on the problem until help arrives.
Resources for Landlords
Every landlord/real estate investor should stock up on books to help them become better at their job. Here are some of the top resources to get your hands on today…
Rich Dad, Poor Dad – Robert Kiyosaki
A perennial favorite for entrepreneurs and investors alike, Rich Dad, Poor Dad delivers brilliant advice how you to save money and invest it the right way.
While this may not help you much when it comes to landlording, it still offers valuable lessons about financial planning.
Landlording – Leigh Robinson
First published in 1975, this book chronicles the many necessities for succeeding as a landlord in any era.
It’s full of best practices and includes a fair amount of legal advice to help you avoid getting taken to the woodshed in a court situation.
The Total Money Makeover: A Proven Plan for Financial Success – Dave Ramsey
Any book written by financial guru Dave Ramsey is a must-read for investors, but this one is among our favorites. It’s all-encompassing approach to becoming financially successful is hard to beat, and can be useful for any real estate investor.
