10 Common Reasons Landlords Fail
More and more people every day are buying up property and becoming landlords. However being a landlord can be a very tough job, and it can be easy to fail.
Many landlords we spoke to actually admitted their first few properties that they rented out were a disaster. Thankfully they stuck around to reap the full benefits that being a landlord can bring. We wanted to cover 10 common reasons that cause new landlords to fail.
#10: Lack of Business Management Knowledge
Being a landlord isn’t just a case of owning a property, and renting it out. When you decide to become a landlord, you are effectively starting your own business. Your tenants will become your clients. You need to understand how to run a business to really succeed in the landlord market.
#9: Lack of Research
What do you know about the property that you are renting? What do you know about the neighbourhood? Many people like to purchase a “fixer-upper” place where the buy cheap, renovate then rent high. However even if you turn a pit into a mansion, the crack den that is your neighbour isn’t going to magically disappear! Research the area first!
#8: Lack of Knowledge
Thankfully, by reading this site you understand that you need to educate yourself on being a landlord. There is a lot to learn when it relates to becoming a landlord, and you need to understand everything. This includes how to deal with certain tenants to all the potential legal mistakes you can make.
Speaking of that…
#7: Legal Mistakes
It’s very easy to make legal mistakes as a landlord. Every State has many different laws in regard to landlord agreements, and you need to make sure you are aware of all of them. One of the most common issues is over eviction notices, and covering everything in regard to that. It’s common for mistakes to be made when it comes to how to handle the tenants that you are evicting, and missing legal steps along the way.
#6: Rental Agreement Mistakes
This is a big one – making mistakes in your rental agreement. When you make a rental agreement, you need to make sure you cover everything. If you forget to mention that the tenant can’t have animals, then you’re going to have a problem when Rex covers the place with hair! Rest assured, our rental agreement template covers everything you could think of to make sure you don’t have any problems here.
#5: Not Respecting a Tenants Privacy
No matter who your tenant is, they still have a right to privacy. Many states have different rules on this, but the iron-clad rule is that if a landlord wants to enter a rental unit they need to provide 24 hour written or verbal notice. Just because you’re renting to your nephew, does not give you the right to walk in whenever you want!
#4: No Business Plan
Renting a property is not just a case of buying a property, then renting it – and we’re not just talking about contracts, security deposits etc. We’re talking about you creating a plan to make sure it’s profitable. The worst thing a landlord can do is say “Well I’ll make $xxx a month as long as there’s no repairs needed”. Repairs are needed, and things always go wrong! Be sure to factor these in when setting a price to rent your property.
#3: Going Overboard
This one goes hand in hand with the business plan. When you buy a property with the intentions to rent it out, it’s so tempting to go overboard and make it such a nice place. Yet in reality, it really doesn’t matter. The worst thing you can do is work on a property to the point that you won’t get a positive ROI(return of investment) for many years. Sit down, plan it out, figure out at what point you want to profit, and then aim towards that.
#2: Plan for the Worst
One of the biggest mistakes you can make as a landlord is thinking it’s easy. It’s not easy; it’s very difficult! One of the toughest problems can be when it comes eviction time, as it can be a long drawn-out process – especially if you haven’t covered your butt legally! Don’t assume everything will go swimmingly, and plan accordingly.
#1: Rental Agreement Mistakes
This was #6 on our list, but we have to repeat it for emphasis. Your rental agreement is your contract between you and the tenant. It needs to cover everything for you to have a legal leg to stand on! Make sure you cover absolutely everything in this, because rest assured many tenants will take advantage.