A great way to help generate new and consistent income is to invest in rental properties. However mistakes are made and some can end up costing you a decent amount of money. While you can have what you think is a rather strict and secure screening process, there’s still no guaranteed way to ensure you weed out bad tenants. But you can help safeguard yourself from similar situations in the future by making sure to avoid these all-too-common mistakes that owners can make.
Neglecting to Purchase Correct Insurance
Allowing people into your home opens you up for a greater risk of accidents. Some homeowners insurance companies don’t always offer full coverage if you rent your home out full time. The best way to protect yourself from having damages and a heavier financial burden is to obtain landlord insurance coverage. To even further protect your home and investments you can require potential tenants to purchase renters insurance to protect their own belongings.
Failure to Maintain Proper Documentation
One of the best things you can do when renting your property is to have a defined and specific lease agreement. Even though some states allow for a verbal agreement, having it on paper and signed by both parties is the safest route. Specific things such as late fees, rent due dates, pet policies, and property management information should all be addressed in the agreement to keep everyone on the same page. This will especially come in handy if you have to deal with a broken lease or a troublesome tenant. Additionally, failing to organize said documentation is almost as bad as not keeping it at all: your old school file drawer is not cutting it.
Failure to Disclose of Important Information
Failing to inform your tenants of things such as possible mold, asbestos, or lead paint on the property can turn into a huge legal matter. It is against the law to withhold life threatening information. Be sure to always inform your tenants and stay within the legal guidelines.
Discriminating Against Tenants
Another way to protect yourself from legal troubles is to be aware of fair housing laws. You must make sure that your property doesn’t exclude or targeting specific groups of people. Certain questions you ask may suggest there is a discriminatory reason for not being approved. Questions about disability or social security benefits, religious background, or marital status may appear that way. Always use a credit or background check to support your decisions to decline a tenant.
Lax Screening Process
Being thorough about your screening process will help you find more compliant tenants who are responsible and respectable. Going through their references and conducting background and credit checks is a great way to ensure you weed out bad tenants.
So, for our seasoned property management teams out there- what mistakes did you make early on? What mistakes do you see others making?