Whether you choose to buy and flip or buy and rent out, real estate can be a great investment. Unfortunately, without proper understanding, real estate can be a physical, emotional, and financial mistake. If you are new to the world of being a landlord, for instance, you may be surprised by the amount of work that is required to rent out properties. With this guide, you will learn a few common mistakes first-time landlords make with their rental properties.
Underestimating Maintenance Costs
Again, most first-time real estate investors underestimate just how much time it takes to rent out their properties. In addition, many new landlords underestimate the cost of maintaining their rentals.
Unless you plan to spend the time and energy conducting the maintenance tasks yourself, you will need to hire professionals, which can be costly. Not only will you need to maintain the main systems of the home, such as the heating/cooling, electrical, plumbing, and septic/well systems, but you will also need to ensure the yard is clean and landscaped properly.
Unfortunately, regular maintenance is not the only cost you may need to consider. It is important that new landlords set aside a fund that can be used to make repairs or replacements on their properties since these updates will be the owner's, not the renter's, responsibility.
Forgetting It's a Business
Many real estate investors buy and rent out properties as a passion project. While it is fine to be passionate about your real estate investments, you need to remember that it is a business first and foremost.
Avoid giving certain tenants special treatment — do not lower your rent because you feel sorry for a friend or family member. Remember that your rent needs to be enough to cover your mortgage cost (if you have a mortgage) and maintenance/repairs.
Also, it is fine to admit that a property was a bad investment. Therefore, if a rental is not bringing in the rental income you want and need, consider selling it in hopes of making a profit in that manner.
Not Screening Tenants Properly
Not everyone would be considered a good tenant, especially if you want your rent paid in the most efficient manner possible. Unfortunately, many new landlords learn the importance of proper screening techniques the hard way.
Make sure your tenants complete an application to get started. This application will help you see their current and past employment and where they lived previously. The application should provide you with references and who you should contact to determine their rent history.
Running a credit check is also important. Credit checks will show how well a potential tenant has paid not only their rent but also their other bills. A history of late payments or excessive debt could indicate the applicant has financial issues, meaning they are not the most ideal candidate to bring into your own rental property.
Doing It All Yourself
Finally, you may think you can handle all aspects of having rental properties. You may conduct all maintenance on your own, market your properties, screen potential renters, and even show up to collect rent payments. Attempting to do it all yourself will most likely lead to mistakes and large amounts of stress and anxiety.
While there may be a fee, hiring a property management company is a worthwhile investment, especially if you own and rent out multiple properties. The management company will not only manage your properties, ensuring they are maintained, safe, and secure, but they will also help find and deal with tenants who are responsible renters.
Owning rental properties can be great investment, but proper understanding is key. This guide will ensure you avoid a few common mistakes to improve the success of your real estate investments.
For more information, contact a company like MacPherson's Property Management.