Investing in rental accommodation can be one of the most reliable ways to build a retirement, grow another revenue stream, or diversify your investments.
However, it’s not entirely without risk. Most of the risk comes from inexperienced landlords making big mistakes. Here, we’re going to look at some examples of those mistakes that can turn your big opportunity into a money and time sinkhole that could even end up getting you into debt.
Thankfully, we’re also going to look at how you can avoid that.
#1 Skimping on Repairs
The costs of maintaining and repairing the property are going to be a constant item on the budget and that’s a reality you need to get used to.
You have a responsibility to ensure that the entrances are secure, and the heating, electrics, and plumbing of the home all work as they should. But you should make whatever repairs could prove a potential risk in the future.
Not only can you save money on repairs by making them when they’re smaller, as opposed to making major fixes in the future.
If you leave the home in an unsafe condition and a tenant ends up getting sick or injured because of it, then you could have some hefty legal costs on your hands.
#2 Not Knowing Who You’re Renting To
You have the right to access certain information about your tenant, both through database checks and the interview process. The most crucial information you need is any criminal record and credit issues.
A tenant credit check can help you avoid those who are likely to have problems paying the rent reliably. Besides having to deal with the costs of upkeep without the income to help, it can strain the relationship, which often leads to spiteful acts against the property you have to end up repairing.
Don’t be afraid to ask about their previous rental history, either, by getting references from past landlords. If they don’t have good relationships with any of the landlords they have lived with before, it’s a warning sign worth heeding.
#3 Not Treating It Like a Business
You are providing a tenant (or tenants) with a place to live, but don’t let your friendly relationship with them jeopardize your business. A rental property is a business and should be treated as such.
For instance, if they’re late on rent, apply the fees you have set in the contract. Being fair is always recommended, but if you’re too kind, then tenants may take advantage of that and you could see a lot more late rent payments in future.
Similarly, don’t be afraid of jeopardizing your relationship by raising the rent when you need to. Keep the costs and benefits of the investment in mind above everything else.
If you’re not an experienced landlord, make sure you do plenty of research and consider partnering up with an agent if you’re not ready to be hands-on with the responsibility of managing your own property. Sacrificing a cut of the profits is worth it if you’re uncertain you can do it right.
Have you made any of these mistakes as a landlord?