Investing in a property you can rent out can be a profitable investment. However, it is not easy as it sounds, and many landlords commit simple mistakes that can affect their opportunity to maximize their profits. Property management needs to be taken seriously if you want to make the most out of your investment to live comfortably and gain financial freedom by maximizing your income.
By learning these, you are one step ahead in improving the cash flow on your investment. So, here are 10 mistakes you should avoid as a landlord:
1. Neglecting Essential Maintenance and Using Band-aid Fixes
One of the biggest mistakes any landlord can make is neglecting essential maintenance or using band-aid fixes on some repairs. Yes, essential maintenance can cost you money upfront, and temporary fixes can be much cheaper. But keep in mind that you are working towards getting the most out of your investment in the long run.
For example, temporary repairs for a leaky roof need a more permanent solution. It will cost a lot more upfront, but it will save you more money in the future and might even add value to your investment, giving you more legroom to increase the rent when it is time to negotiate.
2. Skipping The Screening of a Tenant
Some landlords want to turn over their unit to a tenant quickly to start earning money. However, skipping tenant screening is a mistake that can cost you more in the long run. Screening tenants will help you ensure that the tenants will pay their rent on time, saving you energy, money, and a lot of headaches in the future. However, taking too long to turn over a unit is also one of the mistakes you should avoid.
3. Taking Too Long to Rent Out Your Unit
Taking too long to turn over a unit can be expensive because every month of the mortgage without a tenant will come out of your expense. You want to turn over a unit as quickly as possible to avoid unnecessary spending on utilities and mortgage, but as we mentioned, don’t skip the screening process.
4. Not Calculating The Numbers
You can’t be impulsive if you are just about to buy a location for an investment property. To calculate the profit, you must crunch the numbers, including expenses and income. If you just go ahead and purchase a property and skip this crucial step, you may end up losing more money rather than earning a profit. You need to make sure that rent will cover the mortgage and maintenance and still gain a profit. However, the price also needs to be reasonable for the renters, which brings us to our next item on the list.
5. Choosing a Bad Location
You might be hunting for a cheaper investment property to make the most profit. However, some cheap properties are priced that way for a reason. It must be in a bad location. The location of a property is one of the most important selling points of the property you are planning to rent out. And it is on the top of the list for renters when looking for a home, which significantly influences their decision. So when looking for an area to invest in, make sure it is close to good schools, public transportation, easily accessible, and close to dining and shopping centers. Although the property might be a little bit more expensive than you expect, it will make you more profit.
6. Being Too Kind to Your Tenants
Yes, it is always more beneficial to be kind to your tenants. However, some tenants can abuse your kindness and mistake it for weakness. If you are going to be friendly with your tenants, make sure that you are firm with the rental policies because it has nothing to do with your friendship with the tenant. If you let it slip once, they might try to take advantage of that.
7. Unnecessary Investments
Some landlords like to keep their rental property up to date to get new tenants and to have more reasons to raise their rent prices. However, some landlords make the mistake of investing in upgrades that don’t add value. Improvements to your property must be analyzed carefully.
If you want to add a pool to a single-family unit to raise the prices, it might not break even in the long run due to high maintenance costs and installation costs. However, investments like kitchen upgrades and a laundry room are much better upgrades that add value without spending as much on maintenance.
8. Not Organizing Paperwork
Another common mistake landlords commit is not organizing their paperwork. A paper trail is essential for any type of business and is important when dealing with finances. By documenting every expense, you can pay the right amount of taxes. In addition, you must also include a tenant-owner agreement to protect your best interests.
9. Skipping Move-in and Move-out Inspections
Many tenants tend to skip move-in and move-out inspections because they are too busy or too trusting. However, knowing the condition of your rental property before a client moves in will save you time on complaints that might not have even been your fault in the first place. You must also conduct a move-out inspection to ensure the previous tenant left your property in good condition and know how much of the security deposit you will need to spend to repair the damage.
10. Overlooking The Importance of a Property Management Firm
Now, if you want to avoid making these mistakes and want to make the most profit out of your rental property, hiring a property manager can be your best solution.
Looking for a property manager in Dallas can be quite overwhelming, but it is important to know that you want to choose a firm that has managed the most properties successfully. We at Local Dwelling will take away the burden of managing your rental properties, so you won’t have to learn the hard way and commit any of these mistakes. All you need to do is sit back, relax, and enjoy your investment profits.