In the landlording business, we make lots of mistakes. Indeed, there would be no successes if we did not encounter some mistakes along the way. It is these mistakes that cultivate our systems for success.

The idea, of course, is to run a profitable, stress-free business. We take what works and duplicate it; each mistake along the way gets discarded. What is left is a finely oiled machine that delivers success with great ROI to you, the investor. To your tenants, it delivers a great rental unit that they are proud to live in. That leads to your tenants telling their friends how happy they are with their home and their landlord.

The quicker you can get past the mistakes, the quicker, stronger and more successful your landlording business will be. The great part is that you do not necessarily have to make these mistakes yourself. How cool is it that you can learn from other people’s mistakes so you can fast-track to success?

Here are seven landlording mistakes I have made or seen others make that that have reshaped how I manage my business.

1. Being Too Quick to Fill a Vacancy

I often see new investors fall prey to this one. I, too, many years ago made these bad judgment calls—but never again. It is easy to drop your standards when a unit is about to become vacant. Emotions take over, and then some prospective tenants appear, waving cash at you. Sure, they do not represent the perfect tenants and their income is lower than I require but they are nice people and they have the cash for the deposit and first month’s rent. Besides, I will start negative cash flow next week if I do not rent to them. Three months later, I struggle to collect rent, and month after month is a fight to get paid. I tell myself, “I wish I had held out for better tenants.” Like so many others, I have learned it is far better to have a few weeks of vacancy while finding the best tenant than to hurry and rent to a bad apple.

2. Failing to Clearly Define Rules and Boundaries

I have learned that during the first week or two of tenancy, boundaries automatically are set. The big question is, “Who is setting the boundaries?”

My experience tells me that when you give them a chance, many tenants will immediately push the boundaries to see what they can get away with. So either you are setting precedents to the rules, or they are.

I now create a list of expectations that is given to them at move-in during the walk-through inspection. This list outlines the parts from the lease on policy and procedures which includes what they do as tenants and what you do as a landlord.

3. Treating Tenants as an Income Source Instead of Valued Customers

Having my first tenant at the age of 18 was exciting and nerve-racking at the same time. I just took on an extra mortgage, so job number one was getting rents paid so I could make the mortgage. To me, the tenants were my income source. I have since learned the valuable lesson that they are an integral part of the business and need to be treated as valued customers and not just a revenue stream.  I actually identified this by watching other landlords treat their tenants as income and realized, “Wow, I do that too,” and it did not feel right. Tenants needs to be nurtured so they feel like valued customers so they will want to renew their lease at year’s end.

4. Trying to Become Friends with Your Tenants

I do see a lot of landlords try to be friends with their tenants. You want to like and trust each other, but you are in a business relationship, and it should stay that way. Developing a close relationship makes it difficult to manage from a logical business person’s perspective. Emotion-based decisions have very little place in running an effective business.

5. Failing to Keep Property Maintained

Looking at hundreds of properties each year, I continue to see a large number in disrepair. When talking with sellers the common theme is they want to increase cash flow and do so by ignoring repairs or simply doing inexpensive “bandages” on a property. In reality, that creates unhappy tenants who move frequently, which actually results in lower cash flow. The repairs themselves that get ignored devalue the property. My experience tells me that to maintain maximum cash flow, you want to maintain a property in great condition.

6. Missing Opportunities on Multiple-Year Leases

As investors, you all know that tenant turnover is the single largest expense we encounter. You do not have to continue to carry that burden. This is an expense you want to address and fix—not just accept. I have found great success in offering two- and three-year leases. It immediately goes to identify tenants who want to stay long-term. I discovered this when some new tenants moved in and wanted a two- to three-year lease. They wanted to be sure I would not be asking them to move out next year, as for them the moving process is also expensive. They were even content with an “escalator clause” of a 5 percent increase in rental rates each year. Both ways, your cash flow will be more consistent and your tenants who desire to stay will know what the future has in store for them, as opposed to wondering what is going to happen on their move-in anniversary. You also want to treat these tenants well so they continue to renew leases.

7. Being a Landlord Instead of Being an Investor

This one may be subjective, but it comes from my experiences working with hundreds of investors. I find a common denominator that separates the most successful investors from the ones who struggle to advance. The most successful investors spend their time investing instead of being landlords. As a licensed real estate broker, I am constantly asked if I will manage my client’s property. I always state that managing property is a full-time position. To be effective at it, you need to devote full-time attention to it. Perhaps one of the biggest mistakes is trying to be effective as a part-time landlord.

One of my favorite quotes comes from John Maxwell in his book “Failing Forward:” “To achieve your dreams you must embrace adversity and make failure a regular part of your life. If you are not failing, you probably are not really moving forward.”

I also invite you to share some mistakes you have made or have seen others make. Together we can all do as the book states: we can “fail forward.”

Visit Larry’s website here.

Categories | Article | Operations
  • Larry Arth

    Larry Arth is the founder and CEO of Equity Builders Group, a Florida-based real estate investment group. A 36-year veteran of real estate investing, Arth also is an international consultant and speaker who each year assists hundreds of investors, both foreign and domestic, in realizing their investment potential. He analyzes locations for economic strength and for the largest and most sustainable returns and, most importantly, sustainable turnkey investment. His focus is offering turnkey investments to the passive investor. Visit his website at

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