Last Updated Mar 15, 2017 · Written by Rob Schneider
Investing in property can create extra income or you can choose to live in your investment property after you retire. Property investment is the first step in the process. After you have purchased your property, you want to attract long term tenants who are happy to pay their rent. This is where many new landlords fail and why they lose money when tenants move out frequently or fail to pay their rent.
What are the top mistakes landlords make? Here are six mistakes that can turn a good investment into a bad one.
Landlords can tend to want to save money by skimping on repairs. They may take a DIY approach or hire unlicensed "trades" to do jobs that should be done by licensed tradespersons. While this approach can save money, it can be disastrous if the repairs are not adequate.
Eventually, tenants will move out and you will have to find new tenants. In order to save money, some landlords go into the home or apartment and clean up themselves. Better tenants want to move into a property that looks and smells fresh. They don't want to see signs of previous tenants or smell lingering odours. Hire a house cleaning service and don't overlook anything. The house should be spotless and odour-free; the windows should be clean; the outdoor pavers free of dirt and grime; and the kitchen and bathroom sparkling.
Hiring house cleaners, window washers and/or a pressure cleaning service will cost more than taking a DIY approach, but you will attract better tenants and get higher rent for a house or apartment that is clean and in good repair.
Tenants expect occasional inspections, but you don't want to go overboard. Property managers usually make an annual inspection and do periodic drive-by inspections. Driving past a property can tell you a lot about how well a tenant is taking care of your property. If the yard is maintained and the tenant keeps the driveway swept and tidy, they are probably taking good care of the interior, too. If the yard is overgrown and you see trash on the driveway, it may be time to check the home interior, too.
Never enter the property without giving the tenant warning. You should get written approval to inspect the property and give sufficient notice. Written approval will be the proof you need if you have to take further steps and evict the tenant.
Rents tend to rise, but sometimes they fall. Some landlords automatically raise the rent annually or even semi-annually. Before you raise the rent, find out what similar homes or apartments are renting for in your area. If they haven't gone up, don't raise your rent. If you have good, long term tenants, you don't want to drive them away with a rental increase. It's worth keeping good tenants even if you get slightly less rent than you may be able to make if you raise the rent annually.
Tenants have rights, just as landlords do. Many landlords don't understand or respect their tenant's rights. Making unannounced inspections is one example, but tenants have other rights as well.
If you have a tenant who is not paying the rent on time or is damaging your property, you have the right to evict them, but you have to go through the proper channels. Evictions are regulated differently in different states. In some cases, you may have to issue a notice to pay the rent. If rents are far overdue, you can issue an eviction notice. Contact your local council to find out what you can legally do. If worse comes to worst, you may have to go before a tribunal. If you follow the law, the tribunal will look more favourably on your case.
There are a number of mistakes landlords make when dealing with vacancies. Usually a tenant will give advance notice. That is the time to start advertising the property. If you wait until they move out, you will have to wait at least a month or even months before you start collecting rent again.
Your tenants have rights before they vacate the property. If you want prospective tenants to view the property, you need to give them advance notice. Try to limit the number of inspections. You may want to hold an open inspection. One should be enough. Tenants will resent having to vacate the premises every Sunday. They will also resent having to open their doors to prospective tenants every evening at an inconvenient time. Work with your tenants and they will be more inclined to work with you.
Taking a DIY approach to being a landlord can be a mistake. Property managers know the laws and have experience dealing with tenants. They charge a small commission and some fees, but they can make the difference between a property investment that goes smoothly and a disaster.
If you live in the area and have a network of licensed trades you can call on, you may be able to manage your own property. If you live outside of the area, you can't keep tabs on your property. A local property manager can do everything for you, including doing background checks on prospective tenants; collecting rent; and taking care of repairs.
If you're working, you may not be able to handle an emergency repair. A property manager is there to handle any emergency that arises. They know how to deal with tenants who are in arrears or don't look after a property. Property managers also know the best ways to handle vacancies. They will be tactful with your tenants and find new tenants quickly.