There are a number of dangers and pitfalls that can come from self-managing an investment property. I can spend a lot of time on this, but I’m going to cover my top 10 dangers, and we’ll talk about other potential problems in future blogs.
1. Poor Screening
Poor screening can lead to so many areas and problems. At one time, we would just meet with people, and agree to a tenancy with a handshake. That doesn’t work anymore. You need to thoroughly screen potential tenants because with all the credit and criminal issues that may come up, you must protect yourself against potential problems.
2. Lease Preparation
Lots of owners don’t know how to do a proper lease and use the right language. Without the right lease, your tenant can break the lease and violate it without any recourse. Use the right documents.
3. Rent Collection
We hear about owners who allow tenants to pay rent directly into the owner’s bank account. This is never a good idea, because it presents complications if they underpay or pay partially.
4. Laws and Regulations
There are many legal issues and regulatory requirements that people don’t understand. You need to research and know the laws and regulations pertaining to your rental property. Tenants are savvy. They have a different level of knowledge and if you don’t know the laws, you can find yourself in a minefield.
5. Poor Response to Service Requests
If there’s a repair needed and you don’t respond, that inaction can lead to problems. Tenants are at your mercy when things break, and you have to be able to repair what’s needed. Sometimes owners will go on vacation or neglect to return phone calls. Meanwhile, the tenants are facing a water leak that’s causing damage to the property.
6. Not Providing Good Customer Service
Be available and have vendors who provide good service. Your tenant is your customer, so respond in a timely manner and make sure the tenant’s needs are met.
7. Not Paying Taxes
There is rental tax to pay. The taxing entity can go back months and years to audit your files, and if you haven’t been paying your rental tax, you will be subject to penalties and interest.
8. Not Waiting for Funds to Clear
If you deposit a tenant’s check and it bounces, you can find yourself in financial trouble. You also have to spend time and effort collecting from the tenant. Don’t spend any money in your bank account until it has cleared.
9. Not Conducting Detailed Move in and Move out Inspections
Inspections prior to move in and after move out are critical. Do them well, and be thorough. Don’t just walk through the property. Document everything and take pictures.
10. Not Keeping a Professional Landlord/Tenant Relationship
If this is a property you’re personally connected to, it can be hard to distance yourself. You must remain objective and keep some professional distance. Don’t get more involved with your tenant than you need to.
These are some of the things to watch out for as a self-managing landlord. If you have any questions, please contact us at World Class Properties.