So you’ve decided to become a landlord! Congratulations! Renting out a property is one of the best ways to make passive income. Just because it’s passive income, however, doesn’t mean that there isn’t a bit of work involved. Thinking that property rental is a “set-it-and-forget-it” endeavor is one of the most common mistakes that first-time landlords make. In fact, in this article, let’s discuss a few of the mistakes people often make when renting out their properties, as well as how you can avoid them.
Mistake #1: Not Having Someone to Manage the Property
Hopefully, the tenant you’ll find for your property will be a dream tenant who will take responsible care of everything and leave things better than they found them. Even if this is the case, however, you’ll need someone nearby to manage things. This could include taking care of landscaping (little items like mowing the grass, as well as big things like supervising the removal of a dead or damaged tree), as well as letting repairmen into the property if something breaks. If you don’t live close enough to do this yourself, consider hiring a property management company to take care of it for you.
Mistake #2: Not Securing the Right Insurance
A lot of people wrongfully assume that their normal homeowner’s insurance will cover their property once it’s turned into a rental. Unless you’ve actually talked to them and confirmed this, it might not be the case. This is why many landlords secure coverage through companies like Homelet. Are you covered if a renter damages your rental? How about if someone is injured while on your property and files a lawsuit against you? This is why securing landlord insurance is essential before officially putting your home on the rental market.
Mistake #3: Not Enforcing Due Dates
It’s good to have an excellent relationship with your tenants, but at the end of the day, it’s important to remember that you’re their landlord and not their friend. This means that if the rent is due on the first, it’s due on the first. This is the case no matter what sort of personal issues may be going on. If you start letting due dates pass by without payment or penalty, you’ll find that you still have your mortgage and property expenses rolling in…without any rental income to cover them. Make sure the rent gets paid on time, every time – and if it’s not, it’s time to start looking for a new tenant.
Mistake #4: Not Screening Tenants
Some of the biggest landlord headaches can be avoided by simply screening your tenants. For starters, this means conducting a criminal background check, as well as a credit check. This will give you an idea of whether you’re getting into trouble by inviting a certain tenant in – either by raising the likelihood that illicit activity will take place on your property or that your rent checks will be late (if they’re ever seen at all). Once a potential tenant has passed these checks, follow them up with an in-person interview and check out their references before having them sign a rental agreement.
Mistake #5: Not Being a Good Landlord
As we mentioned at the start, being a landlord isn’t a “set-it-and-forget-it” operation. You (or your property management company) has to be involved to make sure everything runs smoothly. This includes making sure the property is in good shape and rental-ready before your tenants arrive. You’ll want to install new carpet (or clean the current carpet if it’s in good shape), make sure all appliances are in working order, and make any necessary repairs. This should continue after the tenants move in: you need to be available to respond to any questions, concerns, or repair requests that your tenants have. Having happy tenants means having long-term tenants – and no vacancy means that you’ll have steady rental checks rolling in!
Being a landlord isn’t hard; it just requires a bit of preparation and a lot of organization. Once you get your rental up and running, you’ll have a guaranteed way to generate passive income for years to come.