Like any other type of business, rental property management can be pretty confusing to navigate on the first try. It often takes some time before you finally get the hang of things, but even so, expect that you’re inevitably going to make mistakes during this period.
When done right, property management can help you grow capital while leveraging your investment at the same time – it’s a wise financial investment for many. Yet, despite this, most still fail to realize the different complexities of managing their assets properly.
Fortunately, you don’t have to endure such difficulties and commit many mistakes to get things right. But, as many investors have already gone through this same dilemma before, you won’t be going to venture into this world empty-handed.
Because of this, we’ve curated a list of the top five most common mistakes that people make when managing their rental properties:
- Underestimating the Management Process
It’s true that before anything else, an excellent property and finding tenants for it is crucial when starting your business. However, these are only the first pieces of the whole puzzle. After moving in, you’d then have to handle a whole lot of other tasks. This goes from collecting rent, reporting it to the bureaus to maintain the property, routine repairs, and more. Not only that, but you’d also have subtasks that you have to manage and pay for weekly as well.
The most mistake property owners commit when it comes to these is when they do these loads of tasks alone. This is very common, especially for new investors, since they often manage their properties by themselves. What they don’t know is that it usually ends up in having more expenses to cover. For instance, you may not be able to understand or fully comprehend fine prints that are located in purchase contracts. However, with the help of a professional, you may be able to go through such a task while still having time on your hands to fulfill your obligations.
- Setting Wrong Rent Prices
When you’re involved in property management, on-point pricing is essential. If you set your price too high, chances are your property remains unoccupied for months. On the other hand, when placed too low, you lose significant profits and may even attract unfavorable tenants.
To avoid this, the best that you can do is to consult an expert neighborhood real estate agent so that you’ll be able to compare properties, thereby aligning your price with the local trends. If you’ve found the right price but your property still goes unrented for two months or so, don’t bother lowering your rent price. You can decrease your rent by up to $25 since it typically costs even less compared to a month or two of vacancy in a market.
- Friendships with Residents
When it comes to tenants, it’s a must that you screen them thoroughly since you’re essentially entrusting your property and income to them. Also, a property owner needs to be courteous with residents as much as possible. Stay in touch with them, and make them feel that you genuinely want them to have an excellent rental experience. This promotes mutual respect, which enables you to keep great tenants around for a long time.
While this is true, it is implied that you don’t maintain friendships with them. This is because landlords who often become friends with their tenants tend to give them preferential or special treatment. Consequently, late rent payments, notices, or unfilled evictions can get overlooked. In the worst-case scenario, you may be subjected to a lawsuit if your other residents discover that there isn’t an equal treatment for all of them.
- Failing to keep records
As much as property management is passive income, you should be able to treat it as a business by first keeping track of your accounting practices. This means that you have to constantly keep records of your expenses, repairs, maintenance, and rental payments. It’s a must to keep your receipts, too, as well as copies of communication that you have with your residents like emails, texts, and important documents. This is to help you prepare should a legal issue arise that requires these items.
- DIY or Hiring Unprofessional Contractors to Cut Down on Costs
Maintenance is among your responsibilities as a property owner, and often, you might have to hire a team of professionals for this. Make sure that you respond quickly to a tenant’s maintenance needs. Don’t even try doing it yourself or resorting to hiring unprofessional contractors all so you could save money. Doing such can lead to a bad reputation.
The above mentioned are just a few of the many tips that can be useful to starting property owners. By knowing the common mistakes that people often make when it comes to property management, you’ll have a greater chance of foresight to pre-empt such problems from occurring in the future.