Positive cash flow means that you have money left over after you've collected the rent, paid the mortgage, taxes and utility bills right? That's the common misconception for first-time real estate investors. The reason it's a misconception is because the true cost of owning a rental property includes many additional expenses that are often overlooked.
If you're a first time landlord renting a property then it's incredibly important to make sure that you invest a little time and money into making it look as attractive as possible and that you use the best techniques when it is time for designing the layout and making your home look comfortable and new attractive. When it is time for making the most from this investment property, the single most important measure is to make sure that you don't end up going months without having anyone in your property.
As a real estate investor or first time landlord you may have taken the time to learn your numbers in terms of profit margins, expenses and tax deductions but have you taken the time to learn the legal side of being a first time landlord? A thorough understanding of this business is the only way to ensure success without opening yourself up to a world of risk and liability. One small slip up is all it takes sometimes to find yourself in a legal mess because some tenants are simply out there waiting for you to make a mistake for them to capitalize on. First time landlords make mistakes in the entire process that people often have the knowledge to call them on it. That is why it is important to avoid making the following mistakes when you want to invest your money into such a thing as rental marketing. Some of the different common mistakes of first time landlords when they want to rent a property are
1. Not paying attention to the Lease
You wouldn't know it but first time landlords often neglect to read their own lease that they give. This will hurt you in the end if you have destructive tenants and you neglect the 30-day time period from eviction to vacancy.
2. Collection Proceeding Knowledge
When a tenant leaves suddenly, a first time landlord often neglects to get a little bit of knowledge of the collection process and fail to do the right things to get the money for the month that the deserters left with.
3. Ignoring the Tenant's money issues
When tenants have money issues, the first time landlord often ignores it for the fact that everyone has issues. When they fail to realize that there are more issues later and even worse, it is too late.
4. Not having an attorney
Another mistake that the first time landlords make is they do not appoint a personal attorney for themselves. One of the common reasons why they do so is they believe that their tenants will not create any problem and they will not even need a lawyer in the future. They neglect the fact that in the future if the tenants create any issues then they will find themselves nowhere.
5. Denying the Tenants to break the lease
This is something that first time landlords don't always allow. Be sure that you make sure that the tenants know of the penalties of breaking the lease, but you need to be open to people breaking the lease.
6. Failing to evict all who live in the area
Sometimes first time landlord forget that there are more than one person living in the area and only evict one. Or in cases when the others are not on the lease, they forget to put "and all those who occupy".
7. Editing the lease
Sometimes first time landlords can make mistakes in the lease that can come back later and hurt them if it is a serious mistake. Some editing of the lease before signing will eliminate any chance of having all the letters in the right place and all the areas clear.
8. Failure to be prompt on repairs
Nobody likes it when a first time landlord doesn't get the repairs done when they happen. Some first time landlords neglect repairs until it is too late and there becomes a bigger problem.
9. Not having a bank account
Commonly, first time landlords have the neglect of owning a bank account. In a lot of cases it is about cash in hand. This is a mistake a lot of first time landlords make when they first start out.
10. Not screening for the right tenants
It is really important to check the background of your tenants and to ask previous landlords what they were like. It is exciting to get an answer on your rental ad, but not every tenant is a good tenant. The most important characteristic of a good tenant is the ability to pay. Check out where they work, get income verification, and references. Nightmare tenants that bother the neighbors and are slow to pay or don't pay you are not worth it.
Not all tenants will be good tenants. All too often landlords can be too eager to fill their homes. It is important that you do a little investigation on your potential tenants. Whether you are managing your property yourself, or using an agency, careful screening will save you a lot of money and stress. There are problem tenants out there, but there are many ways to prevent them living in your property. Things you can do to make be sure one have the right tenants:
- Talk to previous landlords
- Talk to the Tenant
- Credit check
If you are letting an agency handle your affairs, make sure they know that you want a good tenant. Unfortunately, agencies do not always have your interests at heart. Their job is to rent out property and sometimes they forget that they have a responsibility to the landlord to find good tenants, not just any. The key here is to be on top of things. No one will care about your home or income as much as you. When screening your tenants, you should be aware of the Fair Housing Act.
11. Failure to repair things
This is another mistake that you will find most of the first time landlords frequently make. No tenant prefers a first time landlord who does not do the repairing works at the right time. There are many land owners who keep on neglecting the repair works till it becomes too late and the issue goes out of control.
12. Charging below the worth
Is a mistake that the first time landlords make while renting their house. It is found that first time landlords undersell the area and charge under the cost that it needs to be actually.
First time landlords have found themselves in trouble when it is time for charging their tenants late fees. There is absolutely nothing wrong with charging late fees trying to enforce your tenant to pay their rent on time. The problem comes in when first time landlords charge extreme fees well above what the government has regulated as acceptable and this is when your tenant will take you to court.
The more time you invest into getting your property ready and selecting just the right tenant, the better chance you will have at being a success with your own rental property. There are plenty of people in that need a place to rent. Your goal is to make sure that you are selecting only the best so that you maximize your investment and protect your assets.
As long as you avoid these common mistakes, you should be able to get started, and be in profit, far more easily than you probably think is possible. There is nothing better than knowing that in a short time, you could own your own profitable rental properties. It's very rewarding, and can certainly change your life for the better.
Rent marketing is regarded as a simple business. If one has the idea of the right tools that are needed to operate it then they can earn huge profits from this business. As a first time landlord, you might make mistakes but there are many ways by which you can avoid them. Avoiding the mistakes will keep the tenants happy and stay in your house for a much longer period. It is not uncommon for the leases and commercial agreements to have an excess of fifty pages of explained conditions that will affect you financially.
They are a few of the most common legal mistakes first time landlords make today. Although they may seem small and insignificant they can create major problems within your business.