Five No-Nos for Landlords
If you’re a seasoned landlord, you probably have done all of these no-nos at least once in your career. If you’re a newbie, consider yourself warned: these five errors are simple to make, and can cost you plenty.
1. Making decisions with your sensitivity instead of your head. Yes, owning rental material goods is a people business—and when people are involved, some concern for their welfare is normal. Treating your tenants with respect is necessary—but allowing emotions to cloud excellent decisions is a mistake. Example: Christine’s new tenant had $1200 of the $1400 needed to go into her apartment. She told Christine she would pay her the rest as soon as she went in, which Christine allowable her to do. Months later, Christine still hasn’t collected that $200, and has had problem collecting subsequent rents, too.
2. Allowing desperation, the economy, the rental market, and even the weather prevent you from following your established procedures. There is no skepticism that unemployment remains high and most parts of the U.S. are experiencing renters’ markets. In certain areas, it’s cold and snowing—and a terrible time to be attempting to fill vacancies. Experienced landlords will tell you to stick it out. This business is cyclical, and now is no time to shed proven procedures like screening tenants and calling previous landlords before signing a lease with a new tenant. Desperation is not a position of strength.
3. Confusing appearance with tenant credit worthiness. A nice car, excellent clothes and expensive-looking jewelry have fooled many landlords into assuming a tenant applicant has solid credit and a fantastic job. Conversely, a carless, sloppy cupboard on a bike could be the best tenant you’ve always had. The ancient adage applies: Do not judge a book by its cover.
4. Failing to review the lease thoroughly. It may seem like overkill, but taking the time to review every lease with every tenant—line by line—and obtaining initials on all page is just a smart way to do business. Example: Barry hands his lease to his tenants, questions them to review it and bring it back signed and dated. He regularly finds himself reiterating his rules and expectations over and over, and wonders why his tenants don’t get it.
5. Not charging enough rent. There is a fine line linking what the market will bear and what you need to bring in to make a profit. Before you hold rental material goods is the time to figure out the numbers, taking into consideration the principle, interest, taxes, insurance, and expenses from landscape service to lawyers’ fees you’ll be paying out. What is the range of rent that will support the expenses, P&I and allow for a profit? Is the range within the market rent for the material goods? If you start low and the rental market falls, you could be in a losing situation. Renting material goods is a business and no one can go in the hole month after month.