Are you seriously considering investing in real estate? Do you plan to make your money as a landlord? There are definitely some good reasons to do so because property can be a very stable investment, and a high yielding one if you can buy cheap. However, you shouldn’t be fooled into thinking that becoming a landlord is easy – it certainly isn’t, and it’s not for everyone – because if you get it wrong, you could end up in a bit of a financial pickle!
To ensure that you make the right decisions and make your money work for you, check out these rookie landlord mistakes and do your best to avoid them:
Underestimating Your Costs
The biggest mistake that any potential landlord can make is not taking into account things like mortgage payments, home insurance, and taxes when they buy a property with a view to renting it out. Those are the main expenses, but there are also maintenance costs and repairs to think about too! On average, the running costs of being a landlord are likely to be between 35-45 percent of rental income generated. As long as you know that, you should be fine.
Not Hiring a Property Management Company
If you take a look at this roofstock review, you will see just how much a property management company does for the average landlord. If you’re in close proximity to the property you’re letting, and you have the tie and inclination to do it and do it right, then fine, but if you’re not, then don’t think that you can simply cut corners. This is a rookie mistake that can lead to your tenants deserting you and you getting a bad reputation as a rogue landlord. Don’t try to save a little extra by cutting out the property managers unless you’re willing to dedicate your time to your properties. It is a false economy.
Breaking the Law
A lot of landlords wittingly or unwittingly break the law, and although many of them do unfortunately get away with it, many don’t and none of them should. If you don’t want to end up getting a fine or worse, then make sure that you understand the laws for landlords in your state and your city (they can differ vastly fro place to place) and ensure that you adhere to the letter to them.
Not Getting Tenant Thoroughly
So many landlords have been hit in the wallet by tenants who’ve refused to pay, trashed their properties and generally caused them a nuisance. Almost all of them have put themselves in that position by not thoroughly vetting their tenants. You might think you have pretty good instincts, but everyone can be fooled, so do those background checks.
Not Taking Out a Renters Insurance Policy
Renters insurance policies are often overlooked by landlords who think that as long as they’ve covered their property, appliances, and liability for any injuries or damage, they are good to go, but that isn’t always the case. If possible you should require your tenant’s take out a renters policy, which will cover you should your tenant’s own stuff get damaged and this can be very useful because many tenants get really mad when their stuff is damaged and end up trying to sue the landlord!