Five No-Nos for Landlords

Posted by Teresa on February 11, 2010 under Landlord and Tenant FAQs, Landlord Tips | icon: commentBe the First to Comment

iStock_000009436769XSmall-300x200If you’re a seasoned landlord, you probably have done each of these no-nos at least once in your career. If you’re a newbie, consider yourself warned: these five errors are easy to make, and can cost you plenty.

1. Making decisions with your heart instead of your head. Yes, owning rental property is a people business—and when people are involved, some concern for their welfare is normal. Treating your tenants with respect is necessary—but allowing emotions to cloud good decisions is a mistake. Example: Christine’s new tenant had $1200 of the $1400 needed to move into her apartment. She told Christine she would pay her the rest as soon as she moved in, which Christine allowed her to do. Months later, Christine still hasn’t collected that $200, and has had difficulty collecting subsequent rents, too.

2. Allowing desperation, the economy, the rental market, and even the weather prevent you from following your established procedures. There is no doubt that unemployment remains high and most parts of the U.S. are experiencing renters’ markets. In certain areas, it’s cold and snowing—and a bad time to be attempting to fill vacancies. Experienced landlords will tell you to stick it out. This business is cyclical, and now is no time to shed proven procedures like screening tenants and calling previous landlords before signing a lease with a new tenant. Desperation is not a position of strength.

3. Confusing appearance with tenant credit worthiness. A nice car, good clothes and expensive-looking jewelry have fooled many landlords into assuming a tenant applicant has solid credit and a great job. Conversely, a carless, sloppy dresser on a bike could be the best tenant you’ve ever had. The old adage applies: Do not judge a book by its cover.

4. Failing to review the lease thoroughly. It may seem like overkill, but taking the time to review every lease with every tenant—line by line—and obtaining initials on each page is just a smart way to do business. Example: Barry hands his lease to his tenants, asks them to review it and bring it back signed and dated. He often finds himself reiterating his rules and expectations over and over, and wonders why his tenants don’t get it.

5. Not charging enough rent. There is a fine line between what the market will bear and what you need to bring in to make a profit. Before you purchase rental property is the time to figure out the numbers, taking into consideration the principle, interest, taxes, insurance, and expenses from landscape service to lawyers’ fees you’ll be paying out. What is the range of rent that will support the expenses, P&I and allow for a profit? Is the range within the market rent for the property? If you start low and the rental market falls, you could be in a losing situation. Renting property is a business and no one can go in the hole month after month.