Landlords and investors should never feel like they are immune from mistakes, no matter how experienced they may be. When it comes to investments, everyone in property management is going to make some mistakes.
Here at Specialized Property Management, we have been managing income properties for many years. We have made most of the common mistakes already, and we have learned from them. Those mistakes have helped us to implement policies and systems that can anticipate challenges and ensure properties are managed effectively and efficiently. Our job is to help you avoid the mistakes that are going to cost you money or heartache in the future.
There are a few mistakes that we see landlords make over and over again. We gathered some of the most common mistakes and put them together so you’ll know how to identify and avoid them. Here are a few tips to help you stay clear of the big mistakes.
Mistake No. 1: Incomplete Tenant Screening
If you’re someone who trusts your instincts and believes in gut reactions, you should put those things aside and stick to the data that can be verified when you’re screening tenants. We see a lot of landlords rent their properties to tenants without much of a screening process. Someone may seem very nice and tell you everything you want to hear – but it’s crucial to verify those things with some background checking.
Tenant screening must be thorough and consistent. At the very least, it must include:
- Checking credit. You don’t want to see any previous evictions or outstanding balances due to other landlords or property management companies. Look beyond the credit score. You need to check a full credit history to get an idea of how a potential tenant meets his or her financial obligations.
- Criminal background checks. It’s especially important to look for past criminal history that is violent or potentially damaging to your property. Someone who has been convicted of theft, assault, or arson may not make the best tenant.
- Verify employment and income. You want to be sure this tenant will be able to pay rent on time every month. Check that the employment information you were given is correct, and make sure the tenants earn at least three times the amount of rent each month.
- Talk to current and former landlords. This reference check will give you an excellent idea of how your applicants have performed in the past. Ask landlords if they paid rent on time, took care of the property, and followed the lease terms. Ask if they would rent to this tenant again.
Take your time with the tenant screening and make sure you do a thorough job. Otherwise, you run the risk of placing bad tenants in your home. It’s also important to follow all fair housing laws while you’re screening applications.
Mistake No. 2: Not Documenting Home Condition
Documenting the condition of your home before a tenant moves in is important. You’ll compare the condition of your home before a lease period to the condition of your property after a tenant moves out. This will help you establish whether any damage occurred to the home during the course of the tenancy.
Many landlords will move a tenant in without conducting a complete move-in inspection. This is a mistake. You should always conduct a complete inspection with a detailed checklist that allows you to make notes on how the property looks. You should also have photos and if possible, a video of your property before a tenant moves in.
Document the condition of everything, from the appliances to the floors to the ceilings. Take pictures of windows and faucets. Document the condition of the yard and the counters. Give your tenants the opportunity to add anything to your inspection report. They may notice that something isn’t working after they move in. Leave the inspection report with them for a day or two and then make sure everyone signs off and agrees on the condition of the home.
Make sure you have an inventory check list prior to the tenant’s arrival. This is your only source of proof as to the condition of the home upon arrival. It will help determine security deposit refunds when the lease term is up. Incomplete or missing documentation is a huge mistake that can cost you a lot after your tenants move out.
Mistake No. 3: Lack of Legal Knowledge
Owning rental property comes with a lot of risk and liability. There are state laws, federal laws, and local laws that need to be followed. If you aren’t compliant with something or you make even a small mistake with your lease, you will open yourself up to a lot of potential lawsuits and claims.
Although none of us are attorneys, there are some legal avenues you need to know about. You need to be sure all the codes are taken care of as far as county, city, and state requirements. Not knowing or abiding by this can cost you big money and vacancies.
When you’re brushing up on your legal knowledge, it’s important to focus on a few key areas that are crucial to Orlando property management. These include:
Fair housing laws. You need to understand the seven protected classes in the Fair Housing Act, and it’s important to understand how your marketing, screening, and leasing processes can violate that law without you even realizing it. Keep up with the changes in fair housing laws as well. Disparate impact is a big part of fair housing now, and you need to know how to apply it to your criminal background checks.
Security deposit requirements. Florida law offers specific instructions on how to collect security deposits, where to keep security deposits, and when and how they are meant to be returned to your tenants. A mistake with the security deposit can cost you a lot of time and money.
Americans with Disabilities Act. You need to understand the difference between a pet, a service animal, and an emotional support animal. You cannot deny housing to a tenant who has a service dog, even if you rent out a no-pet property. You need to know when and what you can ask for in terms of documentation that someone needs a service or support animal. You need to understand when you can charge pet deposits and pet rent, and when those things are not allowed.
There are numerous laws that will affect your rental property. Make sure you understand what those are, and stay up to date on all their changes. If you don’t have time to get to know these things, talk to a Professional property manager who has the resources and tools to keep you compliant.
Mistake No. 4: Inconsistent Rent Collection
It’s important to have a consistent rent collection policy in place, and to follow it. This starts with your lease. The rental agreement should explain how much rent is due, when it is due, and how it should be paid. The lease must also address late fees and other consequences that a tenant will face when rent isn’t paid on time.
Many landlords allow their tenants to pay their rent whenever it is convenient for them. This is not a good policy. It can lead to tenants taking advantage of you and not paying on time or at all. Don’t let yourself get emotionally involved with your tenants and their financial situations. You have to do what’s best for your property and your investment goals, and that means collecting rent on time every month as agreed upon in the lease.
Make sure you consistently require the tenant to pay the rent on the due date. Inconsistency will only lead to issues in the future.
Mistake No. 5: Deferring Property Management
A huge mistake we see a lot of rental property owners make is deferred maintenance. Every property is going to have to have maintenance. Even new properties will need repairs from time to time. Whether you hire a professional or handle it yourself, it is important to be on the ball and be available for your tenants. If a tenant notifies you of a maintenance issue, it is your responsibility to address the issue as quickly as possible.
Putting off maintenance is a terrible idea for three reasons:
- It compromises the condition of your home and decreases the value of your asset.
- It only leads to more expensive and time-consuming problems down the road. Maintenance issues never become less expensive with time.
- It makes your tenants feel like you don’t care about their needs. This will not help you with tenant retention, and you’ll likely have a vacancy at the end of the lease period.
These are the most common, and potentially the most expensive, mistakes we see landlords and investors make all the time. If you have any additional questions or concerns, please do not hesitate to contact us at Specialized Property Management in Orlando.