It's easy to see why rental property ownership holds so much appeal. After all, from a renter's perspective, all most landlords do is sit back and let the rental cash roll in. While it's true that being a landlord can be a great source of passive income, there's a lot more work involved with this role than my first-time property owners realize. Needless to say, becoming a landlord without realizing what the job entails can be a costly blunder. To help ensure that your first foray into rental property ownership pays off, take care to avoid the following mistakes.
Purchasing Properties in Low-Demand Areas
When it comes to property investment, location is crucially important. In fact, the location of a property is oftentimes regarded as being more important than the property itself. For instance, a property that's lacking in the space department or missing certain modern-day amenities is liable to attract a fair amount of interest if it's located in an in-demand area. Conversely, an amenity-laden, well-maintained property is unlikely to command your desired rental rate if it's found in a low-demand area. So, no matter how new or flawlessly maintained a property is, abstain from making a decision until thoroughly researching the area in which it's based. Aspiring landlords in the Lone Star State should scope out high-quality homes for rent in Galveston, TX.
Buying the Wrong Type of Insurance
Some first-time landlords think that a good homeowners insurance policy is all they need to protect a rental property. However, it's important for them to understand that if the owner doesn't reside in the property, a homeowners policy will not protect it. As such, you'll need to purchase a dependable landlords insurance policy, which should cover you in the event of lost rental income, property damage or tenant injury. For added protection, make sure to encourage each of your tenants to buy their own individual renter policies.
Failing to Properly Address Maintenance Issues
Regardless of how new a property is, maintenance issues are bound to spring up on a fairly consistent basis. In some cases, these issues arise as a result of negligence on the part of tenants, poor building maintenance or the advanced age of a property. Other times, there's no discernable underlying cause for maintenance problems. However, regardless of why a maintenance issue occurs, the responsibility of fixing it falls to you.
If you're not particularly well-versed in building maintenance, you'll need to hire a dependable maintenance person - or a whole maintenance staff, depending on the size of the property. Failing to address maintenance issues in a timely and professional manner can cause serious damage to your professional reputation and possibly even land you in legal hot water. So, no matter how annoying you find dealing with maintenance problems, you'll need to make tackling them in earnest one of your foremost priorities.
Botching the Tenant-Screening Process
Many first-time landlords find the tenant-screening process time-consuming and cumbersome. As a result, they opt to go with their guts instead of properly screening rental applicants. For example, if a tenant does a solid job of presenting themselves in person or over the phone, some landlords will engage in little to no actual screening.
While this approach may strike you as a convenient timesaver, it stands to facilitate serious financial repercussions. As most experienced property owners will tell you, talking a big game doesn't necessarily mean that someone will be a good tenant. So, to minimize your chances of winding up with undesirable renters, make a point of going over every application with a fine-toothed comb. In addition to confirming that applicants have favorable credit histories and consistent income, take care to contact every reference they provide - especially if any of them are former landlords. Although this will ultimately mean devoting more time to the screening process, your diligence will certainly pay off in the long run.
If you've owned a rental property, there's a good chance you view being a landlord as a role that's primarily passive. Although you may think that owning rental properties entails nothing more than sitting back and waiting for rent checks to come in, this role entails a lot more responsibility than you realize. Unsurprisingly, if you invest in a rental property with such unrealistic expectations, you're liable to find yourself in for a rude - and costly - awakening.
