Unlike owning a mutual fund, bonds, or private notes, having rental properties isn’t totally passive. Rental income does require both work and skill, and there are many that make the same mistakes again and again, so here are five unreasonable things that you should avoid, and various ways to make it easier.
The first is to not pocket all of the cash flow. Everyone should have a cash reserve such as for personal expenses and even an emergency fund. As a landlord, you should make sure that you have this because there are expensive bursts that happen. You should set aside income every month into an account that’s separate to cover these larger expenses. If you fail to do so, you’re going to end up with a crisis on your hands.
Next is putting off repairs. The longer you let these slide, the more expensive they become, and the more pissed off your tenets will be. Physical problems with the property tend to get worse over time, and if you’re not relatively urgent with these it can affect the tenant’s ability to renew their lease, and you don’t want to create a turnover that can be avoided with a minor cosmetic or even just a repair that will make it better. When you do inspections, you should always ask for any repairs that need to be done.
You also should make sure to inspect the property at least once a year, if not more. Minimally, you should do this once. This will prevent repairs from getting worse, and you should make sure that you hold the tenants accountable too. Sometimes, if you do have someone living with them, you’ll be able to either raise the rent, or evict them, and from there, you can also check for other leasing violations. It also will be a good deterrent for violating the lease as well. It will let tenants know that since you do inspect, it will prevent extra people from living in units.
It also shows that you’re not an absentee landlord, and it also shows that you care about the property, which will send a good message to those who stay here.
Then, there is the mistake of deducting the cost of normal wear and tear from the deposit. While that is fine and dandy, it does leave room for interpretation, which in turn can lead to a blurry line. If you see a small hole, usually that’s wear and tear, but bigger moves, it can be considered damage. But, if a tenant moves out after a long time, that scuffing is wear and tear, versus maybe being there for a first year and having scuffs all over the walls. You should definitely delineate whether or not that it’s wear and tear, or if it’s not.
Finally, it’s not allowing pets. Pets do cause a lot of wear and tear on properties, and it can be a liability, but here’s the thing if you don’t allow pets, you’re turning away a lot of people, about 68% of potential renters, without even looking at other credentials. You may want to put down a non-refundable pet fee or a pet deposit, and you should charge about 15 dollars a month or something small on the pet rent if you really need that. You can also make sure that if you’re really worried, you don’t allow specific breeds, or have a breed-specific liability and it will require those that do have that breed to get renters insurance of that. It also will prevent pets from sneaking in. You should regulate the pets, charge this in a fashion that works, and then benefit from the higher deposits, rents, and also it will make the applicant pool larger.
These five ways are where landlords fail, and if you’re smart about this, you’ll be able to create the best sort of way for you to truly master the art of leasing your places out. By being smart, and making the right decisions, you’ll be able to prevent various aspects from getting worse, and you can get better tenants that will stick around for a long time for you too.