Becoming a landlord may seem like a simple process — and a great way to earn a living (or even some extra income). But if you want to be successful, you really need to think like a businessperson. New landlords often make simple mistakes that result in losing good tenants. Here are six mistakes to avoid as a beginner landlord.
1. Not Running Background Checks
You may want to rent out your unit as soon as possible so you can start making money on your property investment. But it’s unwise to take on a new tenant without checking their background. Draw up a rental application with blank spaces for the tenant to provide background information. Check the prospective tenant’s credit report for late payments and delinquent accounts and call their previous and current employers to verify their employment status. You may even want to contact previous landlords to find out if the tenant paid rent late, disturbed their neighbors, or damaged property.
Even if a tenant is anxious to sign the lease and able to cover the deposit right away, check their background before you agree to anything. You don’t want to be pressured into renting your property only to end up with an irresponsible tenant who damages the rental, keeps other tenants up at night, gets involved in illegal activities, or skips town after failing to pay rent for a month or more.
2. Underestimating Maintenance and Repair Costs
It may be tempting to put off dealing with property maintenance, but you’re better off fixing any problems before they become worse. Some maintenance problems are potentially urgent. Take asbestos abatement, for example, which is the process by which fiber release from asbestos is controlled. If a property contains asbestos, that fact has to be declared, but the asbestos does not have to be removed unless it’s at risk of becoming airborne. If it becomes airborne or you feel disclosing this risk will keep a unit vacant, you’ll want to take care of this problem as soon as possible.
Other maintenance tasks may not be as serious, but they still need to be attended to on a regular basis for the safety and comfort of tenants, as well as to protect your property. You’ll have to keep current with maintenance if you want to attract better tenants. Be certain that the amount you’re charging for rent will help pay for at least some of the costs of regular maintenance, such as professional cleaning and painting services between tenants. Expect to take money from the business or your personal funds on occasions when you don’t have enough rental income at your disposal to cover significant one-time repairs, including fixing damage to the property’s structure and replacing worn-out appliances.
3. Using Discriminatory Screening Practices
According to the Fair Housing Act (which is part of the Civil Rights Act of 1968), you do not have the right to reject tenants on the basis of race, religion, color, national origin, marital status, sex, handicap, or plans to start a family. Laws were put into place to specifically protect families from housing discrimination more than two decades ago, yet some landlords still violate these laws. You can’t legally refuse to rent to a family because you think kids create greater wear and tear or because you want to maintain a “mature” or “quiet” property. You can specify the maximum number of tenants in a unit (usually two tenants for every bedroom), but you can’t alter that standard for families.
If you ask illegal screening questions that discriminate against any of the above groups, you can be hit with a fair housing complaint. Not only will you need to pay your lawyer to handle it, but you might end up missing out on a great tenant due to preconceived notions. Make sure that any interview questions you ask are legal and that each prospective tenant is asked for the same information across the board.
4. Failing to Meet Health and Safety Housing Codes
You must be aware of your state and local housing codes, which require that rental properties satisfy health and safety standards. This includes, among other things, providing adequate heat. Hypothermia happens when the body’s internal temperature falls below 95 degrees, so a lack of heat is a serious health risk. Landlords must observe all laws concerning heat and get necessary repairs done promptly. There are some variations in the law from state to state, but all states require landlords to provide heating.
Of course, there are other regulations you’re legally required to follow to protect your property and your tenants. If you neglect health and safety codes, tenants may have legal grounds to break the lease, file a lawsuit against you, and seek financial compensation if they have been injured or their possessions damaged as a result of your neglect.
5. Invading Tenant Privacy or Having Poor Communication
You are responsible for the properties you’re renting out. You must communicate with your tenants on a regular basis to make sure they are happy with the property and respond promptly to their requests — especially if those requests involve repairs or appliance breakdowns. You must also inspect the condition of the unit regularly. But this doesn’t mean you can make surprise inspections if the laws in your state prohibit you from doing so on the basis of protecting tenants’ privacy. If you show up unannounced, your tenants may have grounds to sue or to break the lease.
6. Ignoring Pest Control Problems
According to the implied warranty of habitability, landlords must ensure that conditions in a rental unit are livable. A pest infestation makes conditions uninhabitable, so it’s typically the landlord’s responsibility to make an appointment with a pest control company and pay for their services. If the infestation is the result of natural circumstances, eradicating the pests is the landlord’s job. For example, if the property sits near a grassy field and mice invade the unit, the landlord contacts and pays for extermination. Other pests that could result from natural circumstances include spiders, rats, termites, ants, wasps, bedbugs, and cockroaches.
In the United States, 68% of all income from pest control services resulted from work done in residences, so a pest problem isn’t uncommon. Typically, experienced landlords provide pest control prevention and maintenance on a seasonal basis, since it’s cheaper to address a pest issue early on before it gets out of control. Failure to take care of an existing pest problem can easily result in tenants breaking their lease.
Being a responsible landlord is a major undertaking. With these tips in mind, you can build your reputation and ensure you’re able to get — and keep — the best tenants.