Avoid These Rookie Landlord Mistakes

Are you seriously considering investing in real estate? Do you plan to make your money as a landlord? There are some good reasons to do so because property can be a very stable investment, and a high yielding one if you can buy below market value. However, you shouldn’t be fooled into thinking that becoming a landlord is easy – it certainly isn’t, and it’s not for everyone. Being a landlord is a big responsibility that has both legal and financial implications that if you get either wrong could threaten the viability of your investment.

To ensure that you make the right landlord decisions, including making 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 the ongoing monthly payments including mortgage repayments, home insurance, and taxes when they buy a property intending to rent it out. These are the main fixed expenses, but there are also variable outgoings too, like property maintenance costs for repairs and replacements.

On average, the operating costs of being a landlord with an investment property are likely to be between 45-55 per cent of rental income generated. However, the outgoings could be a lot higher. As much as 80 per cent so as long as you know that and have a contingency fund should it be needed to cover expenses, your investment property should remain viable and return you a profit.

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. It’s no small task or responsibility even if your rental property is near where you live, managing it may still not be the right decision. A rookie landlord is better off engaging the experts to achieve tenants and the legislation. It’s not until something goes amiss that property managers knowledge and experience comes into its own.

What you want to avoid is this rookie mistake of managing the property and if things go bad you ending up with 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 learning about the tenancy rules and regulations and have the time to manage your properties efficiently. Yes, there is a fee to engage a property manager however it is a false economy, doing it yourself. When you work out what your hourly rate is and the hours required to manage your rental versus the management fee, outsourcing the management is cheaper every time.

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 from 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 stuff get damaged and this can be very useful because many tenants get mad when their stuff is damaged and end up trying to sue the landlord!

When you buy well i.e. below the market value for the property and make sure the numbers work i.e. rental income allows for all outgoings and some profit, investing in property is worthwhile as your money is working for you. If by chance you do end up with a lemon deal you can always consider selling the property to cut your losses. Good luck!