Managing a property is an involving process. From staying on top of maintenance issues to regular communication with tenants, it’s a process that requires a lot of commitment and patience.
When done right, owning a property can be a rewarding investment. It can help the property owner build wealth, diversify their income, and generate passive income for generations to come.
However, just like any other industry, it’s easy to make mistakes while being a landlord. And when they do happen, they can be quite costly. This article will cover three property management mistakes to avoid as a landlord.
3 Property Management Mistakes Landlords Should Avoid
1. Choosing the Wrong Tenant
Choosing the wrong tenant can make your job as a landlord very difficult. Common problems associated with renting to wrong tenants include:
- Nonpayment of Rent - This can have a very negative impact on a property owners ROI.
- Breaking of Rules - Tenants may violate the terms of the lease agreement by inviting long-term guests, hosting loud parties, or have an unauthorized pet.
- Property Damage - Difficult tenants have the potential of leaving you with considerably high repair costs by causing property damage that exceeds normal wear and tear.
- Disruption to Neighbors - Disturbances like throwing noisy parties regularly can prevent your tenant’s neighbors from enjoying their homes.
Of course, one way of dealing with such kinds of tenants is to evict them. However, evictions tend to be costly and can take a lot of time away from your other responsibilities. That’s why eviction should always be a last resort.
Therefore, the best way to avoid renting to a difficult Florida tenant is to have a meticulous tenant screening process. Don’t just check the prospective tenant’s credit.
An effective tenant screening process is one that checks a prospective tenant’s:
- Criminal History - This can pull up information regarding drug convictions, lawsuits, pending charges, and crimes involving theft, weapons and/or assault.
- Eviction History - Check for things such as missed or late rent payments, unlawful detainers, or unpaid utility bills.
- Employment History - A tenant who isn’t able to hold a job can mean issues with rent payments down the line.
- Landlord References - Checking references from previous landlords can provide important information about a prospective tenant.
2. Setting the Wrong Rental Rate
Making the mistake of overcharging or undercharging your tenants can cause trouble for you as a property manager.
Overcharging tenants can result in prolonged vacancy rates or higher tenant turnover rates because people won't be willing and/ or able to spend more. What’s more, with other options to consider, they won’t need to.
Undercharging tenants can also be a problem. Good tenants may become suspicious of the reasons for the low prices and avoid renting the unit. Undercharging also means you’re leaving money on the table.
Most landlords invest in rental property in the hopes of making a decent return on their investment however, undercharging your tenants can prove to be counterproductive.
Now, when setting the monthly rent, it’s important that it remains competitive with similar properties in the neighborhood. Get the average market rate and then make the appropriate adjustments for any unique features the property has.
3. Failure to Understand the Rental Laws
Once the lease is signed, both parties get certain rights and responsibilities. A tenant gains rights to:
- Live in a habitable rental property.This is a property that meets all the basic health, safety and building codes.
- Live in quiet and peaceful enjoyment of their rented premises.
- Be notified when the landlord makes changes to the terms of their lease agreement.
- Be notified when the landlord is looking to enter their rented premises.
- Form or join a tenant’s union to advocate for their rights.
- Be treated with respect, fairness and equity.
Performing such responsibilities requires that a landlord understands their state’s landlord-tenant laws. The following are a handful of laws Florida landlords must abide by:
- Security Deposit Laws - Landlords in Florida have a responsibility to store their tenant’s security deposits either in a a normal account, an interest-bearing account, or to post it as a surety bond. Landlords must also notify their tenants in writing within 30 days of receiving their tenant’s deposit.
- Landlord Entry Laws - Under Florida law, landlords must give their tenants a notice of at least 12 hours prior to entering their homes. The entry must also be within “reasonable” hours.
- Warranty of Habitability - This is an unstated guarantee that a rental property meets basic living and safety standards. Landlords have a responsibility to ensure they remain that way for the entire lease term. A tenant may have several legal options to pursue include withholding further rent payments if a landlord fails to meet these standards.
- The Fair Housing Act - Floridians are entitled by law to rent a home without being discriminated against based on their protected classes considered. Protected classes include race, color, disability, national origin, familial status, and religion.
Other Mistakes to Avoid when Managing a Rental
Besides the 3 mistakes mentioned above, there are also others that a DIY landlord should be wary of. They include:
- Failing to keep up with maintenance tasks.
- Failing to build a positive relationship with their tenants.
- Having imprecise accounting practices.
- Failing to properly prepare a vacant unit.
- Scaling without having systems in place.
Owning a rental investment is only half the equation. The other half involves the rental’s management. If you choose to become a DIY landlord, make sure to avoid the aforementioned mistakes.
If you find this daunting, Suncastle Property Management can help! Get in touch with us today to learn more.