Investing in real estate can be extremely lucrative and make you a lot of money over the years. However, most people who have been landlords before know that managing rental properties isn't always easy.
You can get off to the best possible start as a landlord by avoiding the following six common mistakes:
Neglecting to screen tenants
Many first-time landlords feel timid when contemplating the idea of calling the references of potential tenants. However, this is a very important step in finding tenants that will reliably be able to pay their rent.
You should not only contact the references of potential tenants, but you should also invest in running a credit check. With a credit check, you can quickly and easily get a good idea of the financial situation of tenants you are considering.
Not drawing up contracts
Rather than simply coming to a handshake agreement, you should draw up rental contracts that clearly state the terms of agreements between you and your tenants. This can prevent disputes from coming up at a later date as to what the financial obligations of the tenant are.
Being slow to make repairs
You may be a little slow to get repairs done around your own house because you're busy with your professional and personal life. While you can do your own home repairs whenever you choose, you can't be so lax when it comes to repairs on a rental property.
You could face a lawsuit or have difficulty getting rent money if you procrastinate about making repairs to your tenants' homes. Get repairs taken care of as soon as you find out about them from your tenants to avoid conflict and keep your property in good condition.
Not establishing a relationship with law and tax professionals
Any landlord should have a lawyer and an accountant to turn to for advice and professional services when necessary. As a landlord, you're bound to come across legal and financial questions that you don't know the answer to yourself, so get in contact with informed professionals who will be able to help you out.
Failing to make full disclosures to tenants
You need to communicate very clearly with your tenants on any hazards of drawbacks at the property you're renting. As a landlord, you will be liable for any possible health issues that come up because of environmental hazards at your property. However, if you make full disclosure of any hazards in writing, you should be protected from financial and legal problems.
Not getting the right property insurance policy
Property insurance is a vitally important asset for landlords. You need to protect your investment with enough liability to cover potential damages to your property.
Discuss your situation as a landlord with insurance company representatives to get the best possible policy for your particular situation.