Contrary to belief, there’s more to a landlord’s remit than just purchasing a property, renting it out for more than their monthly mortgage repayments and maintaining it every now and then.
A landlord has many responsibilities and duties which, if not fulfilled, could land them in some serious hot water.
As a landlord with several significant expenses, it can be tempting to try and cut costs where possible. But this mentality may end up costing you more in the long run.
Below, we round up 7 common pitfalls for landlords and offer suggestions for how to avoid them.
Mistake #1 – Insufficient Coverage
Many first-time landlords will try to minimise costs by reducing their home insurance coverage, only to end up with insufficient coverage that costs them more out of pocket in the long term!
Other landlords might even have the wrong type of insurance for their property, or forget to account for factors that are likely to affect them.
To avoid being underinsured and undergoing unnecessary financial strain, ensure your home insurance provides you with comprehensive protection from things like natural disasters – particularly if you’re in an area prone to them.
Check that you are covered for tenant-related incidents that are out of your control, as these can threaten your financial well-being. At the end of the day, it pays to be clued in on what home insurance policies cover.
Finally, stay up to date with laws and regulations so that you’re not caught unaware of changes. A good example of this is recent legislation that allows renters more rights, including the ability to keep pets in their rental homes. In light of this, you might want to adjust your insurance coverage accordingly. Keeping up with relevant legislation will give you peace of mind that you’ve pre-empted worst-case scenarios and are covered for them.
Related: ‘What you need to know about landlord insurance cover’
Mistake #2 – Lack of Screening Processes
As a landlord, your tenants are one of the most important parts of the equation. Having reliable, trustworthy renters can be the difference between a smooth sailing experience and a legal nightmare!
While you might feel pressured to get tenants in to inhabit your property quickly, take the time to develop proper vetting processes so that you can avoid inconsistent tenants.
As a first port of call, make sure that you’ve screened them for a history of late payments, any regularity in breaking lease agreements, their credit scores, incomes and reference checks. This could save you in the long run.
Mistake #3 – Account for Inconsistent Incomes
Many landlords assume that their rental income will be steady over time, and therefore, tie their earnings to it.
However, even one month with reduced rent can be a drastic hit to your earnings. It’s important to conduct an accurate cash flow assessment regularly and conservatively put away resources for those rainy days. You can’t predict the behaviour of tenants, but you can safeguard yourself against volatility.
Mistake #4 – Not Knowing the Tenant’s Rights
As a landlord, you need to be educated on the tenant’s rights.
To begin with, you must comply with the Fair Housing Act, which prohibits any discrimination on the basis of age, gender, sexuality, race, religion or disability.
Then, once you’ve got tenants in, you’ll need to ensure that you are adhering to certain protocols and procedures. Know when you’re allowed to visit the rental, the notice you must give prior to an inspection, and the legal process for eviction as a starting point.
Failure to stay up to date with evolving laws and regulations could end in a legal dispute.
Mistake #5 – Ignoring Tenant’s Requests
Part of accommodating tenants is also fulfilling your responsibility to act on your tenant’s requests for repairs or replacements promptly. Failure to address these erodes the relationship and could impact your ability to get good tenants in the future.
Mistake #6 – Waiting Too Long to Evict
When it comes to eviction, most landlords find this – understandably – uncomfortable. Hence, they delay the process as long as possible. However, this prolonged decision means they are sacrificing the time they need to search for a responsible tenant. Plus, it may be harder to evict tenants the longer you leave it.
To combat this, initiate the eviction process as early as legally possible and make sure you’ve got everything in writing as documentation.
Mistake 7: Underestimating Maintenance Costs
Maintenance costs are an ongoing expense for a landlord. When you’re responsible for electricity, gas, paint, and the interiors, these costs can quickly blow out.
To avoid putting yourself in a financially precarious situation, ensure you’re charging enough rent to cover these basic fees. Create a maintenance account for home repair that you contribute to regularly so that these don’t build up over time.
With these tips and tricks under your belt, you can avoid the 7 common mistakes landlords make.
