As is the case when stepping into any new role, you’re liable to face a host of challenges as a fledgling landlord. While there’s little wonder as to why so many people find rental property ownership so enticing, the day-to-day job of a landlord is far more complicated than others tend to realize. Fortunately, if you have the right pointers at your disposal, you can effectively avoid some of the most common perils new landlords contend with. First-time landlords looking to avoid rookie mistakes would do well to read up on some of the blunders made by their fellow property owners.
Purchasing Rentals in Low-Demand Areas
A rental located in an area with minimal demand for housing is an investment that may fail to generate the desired returns. Unsurprisingly, the more in-demand an area is, the more landlords who make investments in that area are likely to rake in. Even if a property is fairly new, well-maintained and packed with amenities, a bad location can severely limit its profitability.
So, before committing to purchase your first rental, make sure to do a deep dive into its location. While this may strike you as cumbersome, a little bit of location can prevent you from making an extremely costly mistake. You should start by researching local property values and rent prices, as this will provide you with a good understanding of how much landlords typically make in an area. To help determine an area’s long-term profitability (or lack thereof), have a look at its population size, rate of growth, local economy, median income and crime rates. Good location research can prove particularly helpful to Golden State-based investors who have an interest in investing in real estate in Los Angeles.
Forgoing Property Inspections
You should never forgo a pre-purchase inspection when investing in a rental property. Given how much you’ll be spending, it’s only sensible that you’d want to know exactly what you’ll be getting before moving forward with a sale. So, no matter how well-maintained a property appears to be on the surface or how new it is, a professional inspection should be a prerequisite for your willingness to purchase it.
A certified inspector will be able to bring a host of property issues to light – some of which the seller may even be unaware of – and provide you with the information you need to make an informed purchasing decision. Additionally, depending on the results of the inspection, you may ultimately deem a property unworthy of your time and resources and decide to seek out other rentals.
Poorly Communicating with Tenants
Effective communication is vitally important to your success as a landlord. If tenants view you as unapproachable or you make yourself virtually impossible to reach, you may find yourself on the receiving end of an assortment of undesirable consequences – including low renter retention, negative feedback online and a damaged professional reputation.
To nip communication issues in the bud, make sure that every tenant has a phone number and email at which you can be reached during normal business hours. Tenants should also be provided with a number to call in response to after-hours maintenance emergencies. In addition, take care to respond to communiques from tenants in a timely and courteous manner. The longer one of your renters is kept waiting for a response, the less important they’re likely to feel.
Failing to Screen Rental Applicants
Every person who submits a rental application should be thoroughly screened, regardless of how positively they present themselves in-person, via email or over the phone. Among other things, a good screening process entails having a look at an applicant’s income situation, criminal background and credit score, as well as reaching out to any references they provide. Landlords who don’t have time to screen rental applicants on their own are advised to reach out to a dedicated screening service.
It’s not hard to see why so many first-time rental property owners believe that being a landlord will be easy. After all, if you’ve never managed a rental in the past, it stands to reason that you’re unfamiliar with the various responsibilities that are synonymous with this role. And as you’ll quickly find, there’s a lot more to being a landlord than collecting rent checks every month. Fledgling landlords looking to ensure long-term success should make an effort to avoid the missteps discussed above.