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Four mistakes to avoid when starting a rental business

Maybe you’ve recently come up with some money, or you’ve been saving for a while and accumulated enough money to do something significant… but you’re not sure what to do. You want to start a business and after a little online research and maybe some advice from a friend or two you decide to start a rental property business.

It seems easy enough, doesn’t it? You buy a property, let others know it’s available, they move in, and you get a check in the mail every month. Sounds pretty great!

Like everything in life, it’s never quite that simple. Owning a rental business requires planning, responsibility, attention to your tenants and attention to detail. It takes energy and hard work, but if you’re determined to do things right and avoid the common pitfalls many landlords face, you’ll be in great shape.

Here are four of the most common mistakes landlords make when owning a rental business.

Rental of real estate

Mistake 1: Write the rental agreement yourself instead of getting legal help

Good fences make good neighbors goes an old adage, even in business, written agreements that are legally binding give structure, security and peace of mind to everyone involved and are crucial when it comes to finding new tenants for your property.

You might be tempted to think that a lease is simply a statement stating how long someone can reside in your property and how much they must pay each month for the privilege of doing so. But that couldn’t be further from the truth. Many legal disputes have arisen due to poor or unclear lease agreements between landlords and tenants. You might be tempted to save time and money by trying to write your own lease from scratch or copying someone else’s from somewhere you don’t know. Still, it’s crucial to use a carefully drafted lease agreement by an expert before you or your renter sign on the dotted line.

At www.ezlandlordforms.com, you can get a state-specific, attorney-written lease form for next to nothing!

Rental of real estate

Rental of real estate

Mistake 2: Neglecting property management

If you are a landlord it is your responsibility to ensure that your property is in good, habitable condition. Your tenant might be responsible for lawn maintenance, paying the utility bills, keeping the property clean, and the like. But when it comes to the heart and soul of your home, it’s your duty to make sure everything runs smoothly.

Many landlords forget that the safety and habitability of their property is their responsibility, and often get a rude awakening when they receive midnight calls about a pipe bursting on the property 60 miles away. Driving to your rental in the middle of the night to do some plumbing work or call an emergency plumber isn’t exactly a fun way to spend the early hours.

Because of this, it’s important to remember that property management is your top priority as a landlord. Do you have the knowledge and tools to care for and maintain your property? Have you hired a property manager or property management company to take care of these issues if and when they arise?

Many landlords forget the property management aspect of being a rental property owner and are often grossly educated on how important it is. Create a property management plan before you start renting your property. This gives you and your tenant peace of mind.

Rental of real estate

Rental of real estate

Mistake 3: Underestimate costs

You probably know this, but you’d be surprised how many people forget this, only for it to come back later and bite them in the bank.

Renting an apartment is expensive! There’s the basic mortgage payment and then property taxes, personal mortgage insurance, the cost of repairs, the cost of a property manager if you use one, the cost of renters insurance unless your renter pays that, and the cost of new appliances , regular maintenance, and the list goes on.

Understanding your overall cost of your property is vital as it will help you know if you will be earning a legitimate interest rate return based on your rental costs. For example, if your mortgage is $2000 a month but everything else adds an additional $700 a month, it wouldn’t be a good idea to charge $2800 a month for rent; You would only make $100 in realized returns each month. There are better ways to make $100 in profit every month, that’s for sure!

Take a precise inventory of your actual monthly expenses and only then set a sensible rental price.

Rental of real estate

Rental of real estate

Mistake 4: Not making a plan for the unexpected

Many landlords struggle because they just don’t plan ahead for all possible outcomes.

What happens if your tenant has to terminate his rental agreement early? What happens if your property is vacant for a long time? What if something catastrophic happens to one of your devices and you have to shell out two or $3000 out of nowhere? What happens if your tenant gets into legal trouble and can’t pay their rent?

There are many more questions like these that every landlord should prepare for in the back of their minds. These don’t always happen, but they can. And it’s important for landlords to have a plan. If you don’t plan, you plan to fail.

However, avoid these common pitfalls and you’ll be in fantastic shape when you start your rental business!

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