Do you have what it takes to be a successful landlord?
Think landlording is simple? Think again!
It’s not for the fainthearted, and it’s certainly not for those who aren’t prepared!
This isn’t to say that it’s not worth it. It can be. Rental properties are in demand—something that’s only expected to grow over the next 15 years. Renters are on track to outpace homeowners, and it’s estimated that 59 percent of new households that will form between 2010 and 2030 will rent.
Naturally, rental rates are rising as well. It’s a great time to own a rental property, and if you own property already, you’re in a great position financially.
But this doesn’t mean that landlording is effortless, or something that can be automated. Nothing good can come from renting out your property sight unseen to the first potential tenant who comes knocking. And, as we’ll see, letting your property to anyone who has cash isn’t a good idea either. Your best option is to ensure that you get a decent tenant (and this means having a diligent tenant-screening process) and conducting regular on-site inspections. In many cases, it also means enlisting the services of a good property management company that can be on call in the event something goes wrong.
For those who are interested in rental property, let’s see how you can protect yourself from some of the common issues that can arise.
Failing to Run a Background Check
One of the most important things that will make or break you as a landlord is the type of tenants you get in your rental.
Ensuring that your tenants are everything you’ve hoped means running thorough background, reference and credit checks on them. Never base everything on gut feelings or first impressions alone. And no matter what you do, don’t skip the interview process altogether.
“One time I had this genius idea that I was going to do everything virtual,” says landlord Jimmy Moncrief. “I wasn’t ever going to meet the tenant in person. Instead, I’d just do everything on my timetable and on the computer.”
Moncrief had just finished putting in new carpet and fixing up the rental unit. Then he posted some photos and a video walkthrough on Craigslist, where he found an applicant who was ready and waiting to move in. She paid, and Moncrief put the keys in a lockbox so she could let herself in—all without ever having met the applicant in person.
Things went well for five months, until the tenant suddenly stopped paying rent. Moncrief asked her in an email if something was wrong and received a response—three weeks later: “Oh yeah, I moved out a month ago. I left the place clean but accidentally left my cat.”
Needless to say, the unit—and the new carpet—was nothing short of a disaster.
Protect yourself from unscrupulous tenants by making sure you meet them in person, before handing over the keys!
Failing to Perform Regular Maintenance
Maintenance is one of the most important jobs that comes with being a landlord. If you’re not planning to do maintenance, that’s fine, but make sure you have a property manager or a contractor on hand to do repairs for you. Don’t leave it to the tenant—or worse, to chance.
Moncrief discovered the challenge of rental maintenance and repairs when a “small leak” at one of his rentals turned into a much bigger issue.
When his tenant informed him there was a leak, Moncrief went over to solve the problem. But by the time he arrived at the rental, the rain had stopped, so he couldn’t find the source of the drip.
“The next day I return to put some tarps up with my kids, just to buy some more time to call a few contractors and figure it out,” Moncrief writes.
Unfortunately, though, things didn’t go as planned. “It took two additional weeks for two contractors to finally go over there just to assess what was going on and give me an estimate. Meanwhile, the tarps didn’t work, and my house continued to flood every time it rained. And as Murphy’s Law would have it, it rained pretty much every day.”
“Why multiple contractors couldn’t figure out what was going on is beyond me,” he writes. “One of them wanted me to rebuild the whole back wall at a measly price of $12,000! Another said he could rebuild part of the back wall for only $2,000. I chose the latter.”
Meanwhile, the poor tenants had to deal with the leak for two months.
Conducting regular maintenance allows you to spot small problems sooner, preventing them from turning into bigger issues every time it rains.
Not Doing Regular Inspections
As any experienced landlord will tell you, regular inspections are important. This is true no matter how confident you are that the tenant is doing a good job of keeping up your property for you.
Portland landlord Braheem Hazeem learned this the hard way, when a tenant moved out—leaving him to pick up the pieces, quite literally.
It turns out the tenant was something of a hoarder, and Hazeem was left to clean up 50,000 pounds of trash when the tenant abandoned the property!
The house was basically full of garbage, Hazeem says. “Full of old furniture, mattresses stacked up … four or five mattresses.” After two months of work, Hazeem and his friends were still attempting to clean up the mess.
As disastrous as these problems are, the good news is that they can largely be mitigated by having proper screening procedures in place and protecting yourself with a security deposit and an airtight lease.
And of course, don’t underestimate the value of a good property manager. As we’ve seen, managing property isn’t for the faint of heart. It’s not something that can be automated—but it can be outsourced. Having someone who can handle tenant sourcing, screening and rent collection, along with regular inspections, repairs and maintenance, is invaluable and will save you tremendously in terms of wasted time, damaged property and unnecessary stress.