5 Warnings and One Suggestion for New Landlords
You hear much about tips for new landlords, but very few people warn landlords-to-be of the pitfalls they will encounter when managing their properties. So I compiled a quick list of warnings and a single suggestion that will help you avoid some problems while managing your property.
It’s a business, not a hobby
Property management is not something you take on your spare time and hope for the best. Nobody I know likes dealing with other people’s problems, doing tons of paperwork, and being responsible for vendors finishing their jobs on time just for the fun of it. But, let’s be honest; you are here for the money. Treating your landlord’s duties like a hobby has real consequences. Losing money, exposing yourself to a whole range of lawsuits, and making the life of your tenants (and your own) miserable are just a few of the possible outcomes.
Rules are not suggestions
As a landlord, you are creating a small community where people expect to feel safe and comfortable. Consistency and predictability help generate much of those feelings, and rules are the elements that make consistency and predictability possible. Therefore, if you have a rule, you must enforce it to get back the expected results. If the rule is no longer necessary, take it out. There is nothing worse than having tenants guessing which rules must be followed and which ones must not.
If you have any doubts about what will happen by not enforcing the rules, watch this clip from the original Ghostbusters movie.
Insurance is not optional
What is insurance? At its basic, it is a way to manage risk. For example, renting a property and having strangers live on it involves certain amounts of risk. A way to lower the chances of dealing with large amounts of unexpected liabilities is through insurance. Is homeowners insurance enough? Or, should I have landlord insurance? These are questions you have to discuss with an insurance agent before signing a rental agreement.
Expect the unexpected
Water leaks, HVAC failure, pests, toilet backing up, and electrical issues are some problems that will eventually appear at the most inconvenient times. Have an emergency plan and be prepared to execute it. The right place to start is a list of trusted vendors (with backups) that won’t charge an arm and a leg to finish the repairs expediently and professionally.
Don’t skip on the paperwork
The dreaded paperwork, you won’t miss it until you need it. Payments, maintenance requests, agreements, and other details must be documented and properly archived. For example, if an HVAC unit stops working during the middle of the summer, you want evidence of your efforts to get that unit up and running as soon as possible. Accurate records are the key to a profitable and happy relationship between tenants and landlords.
Learn from an experienced Property Manager
After all the previous warnings, here is my suggestion for the inexperienced landlord-to-be. Property management is an industry that depends on the knowledge and services of many other sectors. In addition, it is a profession that takes years to learn and even more to perform well. So even if you are thinking of eventually managing an entire empire of rental units, you might do yourself a favor by hiring a Property Manager for the first year. You can learn what they do through all the different stages of the rental process without the risks. This way, you’ll better understand the whole endeavor. Think of their fees as the cost of schooling. In the end, you might decide the added peace of mind is well worth the price of keeping their services.
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