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Even experienced landlords and investors make mistakes when they’re renting out a property. It’s easy to misunderstand the requirements and expectations of a rental property owner, especially if you don’t know the laws or aren’t aware of the best practices.
As professional Whittier property managers, we often see landlords make the same mistakes. Sometimes, they’re costly errors that reduce your rental income and eat into your ROI. Today, we’re sharing some of the most common mistakes we see, and offering some ideas on how to prevent them.
Improper Rental Property Pricing
Many times, a landlord will have a set idea about how much rent should be collected. Instead of analyzing the market or looking at competing rental properties, an owner will calculate how much he or she needs to earn in order to make the mortgage payment and meet other financial obligations like taxes and insurance costs. However, the market drives the rental price every time. It doesn’t matter how much you need or want to earn and it doesn’t matter how much you think your property is worth. If you price your home too high, it will be vacant for longer, and that will cost you a lot more money than a monthly rental rate that’s a few dollars lower than what you want.
Price your home competitively. Gather reliable data about what similar homes are renting for, and make sure you’re in the same range. Then, follow the market so you know if and when it’s appropriate to raise your rent.
Inadequate Applicant Screening
Applicants need to be screened thoroughly and consistently, and we’re always surprised when landlords place unqualified applicants. If you don’t do a complete and rigorous screening, you could end up with a resident who violates the lease agreement, pays rent late or not at all, or damages the property beyond the amount of your security deposit. This is an expensive mistake because you lose money continuously on a bad resident. Make sure you collect an application from every adult who will live in the home. At the very minimum, check for:
Prior evictions or landlord judgments
Credit that reflects a lot of unpaid bills and debt
Income that’s at least three times the monthly rent
Landlord references
Deferred Rental Property Maintenance
Another major mistake that landlords make is not responding to maintenance and repair issues right away. When a resident lets you know that something is broken or wrong, respond right away, even if it seems like a minor problem. Minor problems never go away and they never become less expensive. If you leave that running toilet for a month, you could end up with a leak, which may lead to a rotting floor, which may lead to mold. Take care of your property. Protect its condition and its value; otherwise you will lose a lot of money.
Responding to maintenance issues right away also helps you retain good residents. They’ll be happy that you care about their comfort and their needs, and they’ll appreciate that you care enough about your property to take care of it.
Not Understanding Landlord Tenant Laws
California is known for its long list of laws and regulations that apply to landlords and tenants. While it may seem overwhelming to get to know these laws, you have to at least understand the basics. There are specific things that your lease agreement must include, for example. You need to pay attention to federal laws like the Fair Housing Act and the Americans with Disabilities Act. If you don’t understand the difference between a pet and service animal, you could be in trouble. If you don’t know what you’re allowed to charge from the security deposit after a resident moves out and how quickly you need to give that money back, you could face expensive fines.
Get to know the laws.
One of the best ways to avoid these mistakes and other common landlord errors is by working with a professional property management company. If you’d like to hear more about that option, pleases contact us at LS Property Management.