It takes several years to become a smart, vetted landlord. Chances are, you will make a few mistakes with your first property. Here are some rookie mistakes most first-time landlords make and what you can do to avoid them.
1. Screen Applicants Prior to Showing
When listing a property for rent, often landlords get excited with the number of responses they get in the first few days and go crazy booking appointments for viewings. This may not seem like a problem, but in the long run this can waste a LOT of time - both for the landlord and for the potential renters. A simple phone conversation, email exchange, or application submission can save you a lot of trouble. You can confirm their interest in the unit and your interest in them as a tenant. Maybe they have a dog and you aren’t allowing pets on the property, or maybe the apartment has wall-to-wall carpeting and the applicant is looking for hardwood floors. Maybe the potential tenant is out of work and you are concerned he/she will not be able to afford rent or make payments on time. Whatever the situation may be, you can weed out applicants based on this pre-screening process instead of scheduling time-consuming showings with people who aren’t really interested or who are not qualified. Describe the property in detail, and ask as many questions as necessary before making any in-person appointments.
2. Properly Screen Tenants
We recommend to do this before showing the property, but whenever you screen your potential tenants, be sure to check all of these things:
Income to rent ratio - Tenant’s monthly income should be at least three times the rent
Criminal background check - Do any of the applicants have a criminal history? Are the on the registered sex offender list?
Credit Score - This is not always the best indicator of a tenant’s ability to pay rent in a timely manner, but some landlords use it as a qualifying factor.
Previous Landlords - Calling references and previous landlords can be a great way to find out if this applicant is a good fit for your property. Did he/she pay rent on time? Was there any damage done to the place? Problems or complaints?
3. Treat Your Rental as a Business
It is important to develop a personal, trusting relationship with your tenants, but do not forget that you are running a business. Keep things professional and do not let your emotions get in the way of your work. You want to have long-term, happy, cooperative tenants, but you also want to make a profit, receive timely payments, be respected, and have your rules and standards remain in tact.
4. Know the Law
What can and can’t you do? What can and can’t your tenants do? These are things you need to educate yourself on before signing a contract with a tenant or getting into trouble with the law. For example, many first-time landlords don’t know that there are strict laws prohibiting discrimination against tenants or potential tenants. Study up before you get yourself caught in a lawsuit.
Following these tips can help you avoid making mistakes that countless first-time landlords have made in the past. When dealing with your first investment property, or even your hundredth, you need to find a healthy balance of caution and risk-taking to succeed. Be cautious where it matters, protect your assets, but being too cautious won’t push your business above and beyond the competition.