The Ultimate Landlord Survival Guide: Avoid These Mistakes
Investing in your first rental property can do wonders for your financial situation. Well-maintained property in a high-demand location can generate a sizable amount of passive income every month.
However, not all prospective property investments represent a wise use of your time or resources.
Furthermore, even if you manage to find a suitable property, you risk harming your investment by making several blunders. As such, all first-time rental property owners will need to be extra mindful of the following behaviors.
Common Mistakes Of First-Time Rental Property Owners
Here are the common mistakes that a rental property owner must avoid. Read on…
Failing To Factor In Repair And Renovation Costs
Nearly every rental property you find will require some degree of repair and/or renovation.
Depending on the type of work that needs to be done and how much it’s projected to cost, you may be better served by walking away from a deal and turning your attention to other rental properties.
So, before committing to purchase your first rental property, thoroughly inspect it and obtain an estimate for repair and/or renovation costs.
If the property in question doesn’t turn enough profit to justify said costs, your money may be better spent elsewhere.
Additionally, if you’re still interested in purchasing a property that requires repairs and/or renovations, request that the seller consider the estimated costs when determining the final price.
Failing To Take Upkeep And Maintenance Costs Into Account
Unsurprisingly, some rental properties require more maintenance than others. For example, a single-family property is unlikely to need the same level of upkeep as an apartment building or complex.
So, if you’re interested in purchasing a multi-family property, you may need to hire full-time maintenance personnel. Since this will require a fair amount of money, make sure to know the cost of operating expenses and how much money you stand to make from rental income each month.
Knowing how much upkeep a property will require – and how much said upkeep will cost – before finalizing a deal can save you a considerable amount of stress.
Hiring Unlicensed Contractors
There are several reasons you should avoid working with unlicensed contractors.
For starters, operating as a contractor without a license is illegal. You’re likely to face a much greater degree of liability if an unlicensed contractor becomes injured while working for you.
Secondly, an unlicensed contractor is more likely to leave you high and dry before the work they were hired to do has been completed.
Lastly, an unlicensed contractor may not be keen on obtaining the proper permits for specific jobs or be well-versed in planning and zoning software.
So, the comparatively low prices many unlicensed contractors offer may be tempting. However, you’d do well to stick with fully licensed and bonded professionals.
Of course, this isn’t to say that every licensed contractor rental property owner comes across will be equally reliable. To help ensure that you don’t get stuck with a lemon, make a point of seeking out reviews from previous clients.
Thanks to the web’s abundance of consumer feedback tools, you should have no problem finding reviews for most of the contractors in your area.
Regarding Applicant Screening As Optional
If your tenants cannot keep up with rent, you will have difficulty profiting from your first rental property. You can get a jump on this problem by screening every prospective renter instead of relying on your gut.
So, no matter how much someone’s application impresses you or how they present themselves in person, don’t neglect to run a credit check, confirm their income level, and contact references.
In the interest of safety, rental property owners should also encourage all new tenants to invest in renters insurance. Furthermore, since homeowners insurance can’t be used for rental properties, one of the first things you should do upon finalizing the sale is seek out a good landlord insurance policy.
Stop Regretting Your First Rental Property Investment
Regret is the last thing you want to feel regarding your first rental property investment. While the right rental property can be a reliably consistent source of passive income, the wrong one can be a money pit that costs you a lot more than it ever stood to make you.
Additionally, even after purchasing a desirable property, you can’t just sit back and expect money to come rolling in. In the interest of maximizing your success with your first rental property, take care to avoid the missteps discussed above.
Failing To Build An Emergency Fund
A rental property owner never knows when those unexpected expenses might arise. Thus, it is crucial to have an emergency fund that can easily cover all the unforeseen costs strongly related to your rental property.
You must also consider all the future expenses. This can include renovations, replacements, and other expenses. These costs can also have a significant impact on overall profitability.
Ignoring All The Local Regulations
Always try to stay informed about the local landlord or tenant laws and regulations. This can help you to avoid the legal issues.
Moreover, understanding such laws and regulations can help you with all your rights as a landlord or tenant.
Neglecting A Proper Tenant Communication
Effective communication is crucial between a landlord and a tenant. This encourages a great tenant-landlord relationship. So, you must respond to the tenant’s inquiries and concerns properly while addressing all the issues.
In Conclusion,
Investing in your first rental property can be a rewarding experience. However, it’s essential to approach it with careful planning and consideration.
By avoiding common mistakes, you can increase your chances of success and maximize your investment returns. Always remember a well-managed rental property can be an asset that provides a rental property owner with long-term financial benefit.
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