For some people, becoming a landlord is a carefully planned career transition or investment. Other times, it’s something that just happens—you inherit a property or perhaps you move and decide to rent your old home rather than selling it. Whatever the reason you have a rental property, there’s one thing that’s certain: you want to make a profit. Here are some common mistakes landlords make that reduce their profitability.
1. Not Getting Landlord Insurance
First-time landlords often make the mistake of believing that if they require their renters to have insurance, that’s sufficient protection for their property. People who have become landlords by renting a property they used to live in may be under the impression that their homeowners insurance will still offer coverage. Both of these assumptions are wrong.
Rental insurance will cover your tenants’ property and damages to their units in very specific circumstances, while homeowners insurance only applies to a property that the policy owner is living in. One of the reasons you need landlord insurance is that it’s the only insurance option that offers you comprehensive coverage from losses, whether it’s due to damage caused by a tenant or by a fire. It also covers you in case a tenant or guest is injured and provides assistance with legal expenses.
2. Not Screening Tenants
Having tenant issues can be the bane of your existence as a landlord, so to save yourself the stress and hassle, do a thorough vetting of every potential tenant before giving them a lease to sign. One of the most common landlord mistakes is simply trusting that anyone who is willing to share their references on an application likely has nothing to hide.
If you don’t have the time to verify employment, rental history, and references yourself, you can get your property manager to screen tenants, or use a tenant screening service like SmartMove to do the work for you. Have your potential tenants pay the screening fee and using the service is essentially free to you. No matter how personable and pleasant a potential tenant seems to be, it’s always worth putting in that time upfront to do a screening because it’s easier than having to evict a nightmare tenant a few months down the road!
3. Not Inspecting Units Thoroughly
You probably do a move-in and move-out inspection of each of your units, but how thorough are they? Do you have someone else do them for you or allow tenants to self-report when they move into a unit? These inspections are something you should do personally as a landlord to protect yourself and your tenants.
During an inspection, take copious notes and photos as well. While notes can be disputed, photos cannot.
4. Not Keeping Your Property Maintained and Updated
Just like your car, your personal home, and anything else of value that you own, your rental property needs regular maintenance. Get out of the habit of maintaining your rental units and soon things will spiral out of control—a leaky faucet can end up as a costly black mold problem and outdated wiring can lead to a fire. By demonstrating to your tenants that you care about your property and do what you need to improve it, it makes them more likely to leave their unit in good condition when they move out.
Speaking of improvements, to maximize your profits as a landlord, you should make thoughtful updates to your property between tenants to add value and command higher rent. Simple upgrades like replacing white appliances with stainless steel or carpet with luxury vinyl planks will pay for themselves in a short amount of time and make your property more attractive to potential renters, reducing turnaround time.