I often talk a lot about what you should do in Property Management. Another way to look at this is by talking about what you should avoid. I’ve been in this business for a while now, and I’ve seen good owners/ landlords/property managers and I’ve seen bad ones. Even the good ones make mistakes but the key is learning from them. Here’s a list of what I consider the Top Ten Pitfalls Landlords Face:
- Not continuing to become educated
- Not following the proper Landlord Systems
- Not following Fair Housing Laws as it applies to Landlords
- Not understanding how to properly tenant screen
- Not understanding the main components of a well written lease
- Not performing a Rental Market Survey at minimum once every three months
- Not staying on top of Maintenance issues
- Not building the proper Team and Network infrastructure
- Not enforcing your rules and regulations
- Not treating the business of Landlording as a business.
Let’s look at each of these individually.
- Education keeps you out of trouble in many ways; for example when I first started in the property management business I found out quickly that ignorance was costly. When you consider that not understanding how to properly deliver a tenant notice under the local or state laws can cost you when the tenant who you are trying to remove gets to stay an extra couple of days and sometimes weeks this all adds up. Each day the tenant stays without paying rent costs you. Most of the mistakes that I see landlords make over the years can be contributed to them not staying educated in an ever-changing profession.
- Having proper Landlord operating systems, like systems in any other business, is extremely important. They are the backbone of your operation, allowing you to be efficient, productive and consistent. As a landlord you will need these operating systems through every landlording phase from dealing with a prospect tenant to moving out. You run your systems, and your systems will run your business.
- Many landlord lawsuits are a result of a Fair Housing violation by the landlord and the crazy thing is landlords don’t even know they are violating these laws. Fair Housing is a federal law you must comply with and violations can be costly. We will talk more about this subject more in our blogs to make sure you are equipped to comply with the Fair Housing Act
- Tenant screening is one of the most important process in the landlord business and is one of the most overlooked or skipped processes. The most common mistake I see made is to move someone into a rental because you needed to fill a vacancy. You either have to evict the tenant a few months later because you chose to overlook issues on the prospective tenant’s application or deal with other issues. Not properly screening tenants always ends up costing the landlord more money in the long run. When you factor in the eviction fees as well as the fees associated with getting the rental re-rented far out exceed the cost of allowing the unit to stay vacant for an extra month. Trust me, you soon learn that it is far easier to stick to your qualifying criteria and waiting to get a good tenant in the rental versus moving someone in just to fill a vacancy.
- Your lease is the first major line of defense. It pains me to see investors work so hard to purchase their first rental investment run only to then watch the investment’s wheels fall off soon after taking over the property. If you have a very small child who needs to still sit in a car seat, and I told you that the car set that you have was recalled, I know that you would get rid of the seat and get a new one, one that would protect the child. The same thing holds true with an investment property. Why would you trust your most valuable investment to a poorly written lease? Your investment is as useless as a castle with broken down walls. Your lease is the very first line of defense. It is the contract that binds you and the tenant spelling out all the rules and regulations as well as clearly spelling out the terms of that agreement.
- Rental Market Surveys are probably the single most important area an investor needs to have a strong grasp of. This is where a lot of investors make their first costly mistake. If rental income makes up 99% of Net Operating Income that a rental property can produce, which you will learn about in depth in our Property Management Business Development course, then you as an investor must do your homework to make sure you are charging the right rent amount. If you are undercharging, you are just throwing money away. A great analyzation tool I use to keep my rent on target is Property REI. (Get a 10% discount off the software with promo code TLPMA)
- Maintenance issues: When it comes to maintenance the old saying “an ounce of prevention is worth more than a pound of cure” holds true. When it comes to owning investment property it helps to be very proactive with maintenance. Perform routine maintenance checks on your rental units. Most investors/ landlords pay attention to the building only when there is a problem like a leaky faucet or a toilet that is not flushing correctly. Being proactive and addressing these items when they are an acorn and not an oak tree will help maximize income and minimize expense.
- Not building the proper team and network infrastructure: A wise man once told me that “If you’re the smartest person on your team then your team is in trouble.” In real estate we talk a lot about leveraging, and most of us think of leveraging as a financial term but it doesn’t just apply to financing. You have to learn to leverage relationships that you develop. I see so many would be investors and would be entrepreneurs stop short of their goals because of their lack of understanding of how to properly leverage relationships. You will always be just one contact person away from your goals. Understand that someone close to you may be holding the key that will unlock the door to your success! I will stress the importance of team again and again in my posts. Remember, if you want to go fast, go alone. If you want to go far, go with others.
- Enforcing your rules and regulations: As a landlord performing day to day operations this should be your call to arms. Where a lot of landlords make critical mistakes is when they allow the tenants to dictate the business relationship. Remember this is a business; there is no place for weakness. You must be professional and you must also stay in control of the tenant relationship as well as your property. Routinely ask yourself if your are you running the property or is the property running you? Stay in control.
- Not treating the business of landlording as a business: This is a business, more importantly it’s your business and it should be treated like a business. You wouldn’t show up late for work at someone else’s business or miss deadlines. You wouldn’t throw away someone else’s money by not reducing expenses. Why would you do anything less for your own business, the one that can provide you long-term wealth and financial freedom?
I’ve shared with you some of the keys, both to bettering myself and to guiding my business, that guide me in any market and under any conditions. Part of the key to my success is that I’ve always followed these principles no matter how down on my luck I was, or sometimes even more tempting, no matter how much money someone offered me. If a person is not guided by wisdom or principles, then I rather not waste time with them. I know in the long run I will save myself major headaches down the road.