As professional property managers, we know that many landlords and investors manage properties on their own with varying levels of success and failure. Often, many investors will call property managers after experiencing certain pain points like a backed up septic system or undesirable tenants. Unfortunately, it is easy for these kinds of pain points to cost landlords a lot more that it would to hire a manager. However, it is not only these kind of pain points that motivate investors to hire managers. Properties run professionally tend to make more money for their investors in the long term. In this blog we have put together 13 of the most common mistakes that landlords make with their rental properties.
Mistake #1: Not letting go.
Landlords and property owners should treat their investment properties a lot like a business, and a lot less like a casual undertaking. Let us be forthright in saying that we completely understand and empathize with homeowners who have important historical and family connections to their property. We sympathize with owners because there are so many circumstances that lead to needing someone else to temporarily manage an important property. We consider ourselves to be experts at striking these important balances between an owner’s love for their property and their need to make practical decisions. We support our owner-clients is every way that we know how, based on decades of experience, lots of patience and professional know-how.
It is common for certain owners to be emotionally invested in their properties, for various reasons. This can impact their decision-making ability when it comes to appealing to quality tenants and keeping them for a long period of time.
Emotional investments happen for all kinds of reasons. Often someone inherits a home from a family member, and as a result this home has special memories attached to it. Sometimes people move out of the first home they owned, or the house where they raised their children.
There are a lot of important decisions that need to be made about any property, including what kind of maintenance and repairs need to be made and when. Other decisions like how to screen tenants, how to write proper leases, how much to charge for fees, how often to do inspections, and how to engage with tenants when issues present themselves – are all decisions that can be easily mismanaged by an overly emotive homeowner. A quality property manager also understands how to be empathetic and patient when it comes to any complex issues that come up. It is important to strike the right balance between listening and advising when tough decisions must be made.
Remember the staircase banister you slid down as a kid? How about those marks on the wall to measure the children’s growth spurts? These are a few examples of special memories in a home. These memories are important, and they need to be cherished and respected. At the same time, it is crucial when managing properties as investments, to create some reasonable boundaries between the emotions involved and decisions that need to be made.
Property owners and landlords often report feeling anxious and worried about the property on several levels. This can be more difficult when the investor lives far away from the home.
One thing landlords worry about a lot is whether tenants are taking care of the property. Emotionally attached landlords often deal with this anxiety the wrong way, by imposing unusual or strange rules upon their tenant. This can lead to a lot of unwanted issues, and this is one of the reasons landlords hire good property management companies. Generally speaking, it is a good idea to have a set of standard, uniform rules for the tenants. There are exceptions that exist, and a good property management company has a lot of experience to draw on when deciding when to impose any special regulations.
Another common issue regarding a landlord’s special memories of a home can come up when tenants make repair requests. Hiring a good property management company can help since repair requests will go through the company, and landlords can avoid having hurt feelings.
There is one last thing to remember when deciding to hire a professional instead of managing properties on your own. One of the reasons people hire a property manager is so they can act as a buffer. In other words, the information can be presented to you in an objective way and therefore good decisions can be made. Property managers recommend that their clients try not to micro-manage the job of management. Specifically, it can be tempting to drive by the property, and it is only human nature to hear a story from a neighbor and forget that there are two sides to every story.
If as a landlord you have already hired a property manager, and you still feel the need to check on your home and tenants, it is possible you have hired the wrong one. Whether you have hired a manager you don’t trust, or whether you are looking to hire your first one, please reach out to us at Honest Property Management (HPM) for a consultation and price quote. When you receive your monthly payout conveniently, but never have to worry about your property, that is when you will be happy you called HPM (207) 500-7027.
Mistake #2. Not considering Financial Implications.
Property Managers can assist you with several financial matters that will ensure you are making the right investment, setting your rent rate properly, and projecting profit accurately.
Buying the Wrong Property
Investing in the right property is critical. There is a lot involved in the decision to purchase an investment, and property managers have years of experience to draw from. Generally speaking, make an analysis utilizing principal, interest, taxes, insurance, repairs, and vacancies. Your property manager can assist you to make sure these numbers are making sense for your personal financial situation.
Underestimating Costs
Without a good property manager, it is easy to forget or neglect the costs that are involved in managing a home or building. Repairs and maintenance are facts of life. Roofs, heating systems, plumbing issues are just a few examples of expenses. These expenses will be a lot more manageable if repairs are handled as soon as they arise, as opposed to month or years after the fact. Reporting systems are another advantage to hiring a management company because things do not get lost in the shuffle. It is recommended that property investors set aside approximately 10 – 15% of the annual rents and put it into a savings account or rainy-day fund, for when you need it.
Making the right choices
There are so many ways to upgrade a property, and a lot of places to spend money. It is important to remember that rent rates are generally controlled by market conditions, location, and square footage. A perfect lawn or modern fixtures are certainly nice additions but will not necessarily get landlords more rent each month. It is recommended that property owners focus on codes, safety, and some curb appeal.
Setting the right rent rate
One of the biggest mistakes a landlord can make is setting the rent too high, because if it does not rent, lost income will be the result. A good property manager wants their landlord clients to make as much profit as they can, but also know the consequences of allowing the unit to stay empty. A good market analysis is always the right way to go so that the correct rent rate is chosen to attract the right kind of tenants at a fair and competitive rate.
When it comes to these important financial implications, Honest Property Management has the experience you want to maximize your investment and minimize your headaches.
Mistake #3: Neglecting to Stay within Legal Compliance
It would be easy to write a ten-page blog just on legal issues alone. For the purpose of this blog however, we will make mention of 4 common examples of legal issues that landlords would be smart to hire a property management company to handle for them. First, it is important not to ask any illegal or discriminatory questions to prospective tenants. It is easy to make this mistake, and there are awfully specific federal guidelines in place regarding discrimination. Second, each state has their own laws regarding disclosures that needs to be made to each tenant. In Maine, landlords must disclose radon levels for example and tenants must sign that they have read all the risks involved. A third example has to do with safety. For those first-time landlords without the necessary experience, neglecting safety can open them up to liability issues. Lastly, tenants also have privacy rights. As a lease nears its expiration and new tenants are setting up showings, the current tenants must be given at least 24 hours’ notice before the showing can take place. To make sure your property is always in compliance, call Honest Property Management for a no cost consultation today.
Mistake #4: Neglect Documentation or Record Keeping
Documentation and record keeping can be time consuming, but it is an essential part of property management. Many investors may neglect these important details, but a property management company will not. For example, it is important to take photos before a new tenant moves in. Take as many photos as necessary, store them safely and label them accurately. Do the same thing when the tenant moves out. This will ensure that any damages will be handled professionally. It is not uncommon for tenants to argue about damage because they want their full security deposit back. This process is a good example of a time-consuming task that is routine for property managers but is probably not instinctual for most landlords. For a low-cost answer to your record-keeping needs, consider Honest Property Management.
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Mistake #5: Insufficient Insurance Policies
There are so many reasons to make sure the insurance policy on a rented building is thorough. The list of possible mishaps is too long for this blog. A good property management company will make sure that the right kind of insurance policies are in place. Usually, the normal homeowner’s insurance is not sufficient to protect an investor against the unpredictable. For example, it is a good idea to invest in a rental dwelling policy to protect from liability. Honest Property Management has a lot of experience with insurance, and access to great rates as well. Give HPM a call today for a no-cost proposal on your property or properties.
Mistake #6: Inferior Marketing and Slow Response to Inquiries
One of the most time-consuming parts of managing homes and buildings is when a tenant plans to move out. When this happens, the units must be advertised with quality photos and a professionally written listing. When prospective tenants respond to the advertisement, a timely response is important otherwise tenants will just go right to the next listing. Once a prospective tenant has found a desirable home to move into, there will not be any reason to wait until someone has responded to the initial request for a showing. Therefore, it is recommended that busy investors or landlords hire a property management company to respond in a timely way to each and every showing request or inquiry. There is nothing more important than finding a quality tenant, but if showing requests are not responded to, there is a good chance these quality tenants will find another place to live. Honest Property Management has marketing experts to make sure your property is advertised professionally.
Mistake #7: Inadequate Tenant Screening
The absolute last thing any property investor wants is to move tenants into their building on a standard one-year lease who are irresponsible, inconsiderate, or unable to pay rent. Thorough, professional tenant screening is critically important, and it is the best way to avoid these kinds of tenants. It is recommended to do several things as part of the screening process: credit check, criminal background check, proof of income, and references. When it comes to reference checks, it is better to have a conversation with previous landlords about what it was like to rent to the prospective tenant, as opposed to sending a form to fill out. Lastly, experienced property managers will have a published set of guidelines they follow for each tenant, so that the standard is not different from one tenant to the next. Honest Property Management screens tenants more carefully and thoroughly than most companies out there and we take pride in the process that we use.
Mistake #8: Deficient Lease Agreements
One of the easiest mistakes to avoid is making sure the tenants sign lease agreements. The importance of writing a professional, thorough lease cannot be overestimated. To put it simply – do not rent to a tenant without writing a lease and getting it signed. Without one in place, tenants can leave anytime, and this does not give landlords any protection. The terms and fine print in a lease are important to consider. These terms should be thought out and selected by the landlord so that they are advantageous. Smoking and pet policies for example are important to impose as part of the residential lease. A lease also ensures that tenants will stay for one or two years, however the length of the lease. This will give managers the time they need to advertise the fill the unit if it is vacated at the end of the term. Honest Property Management reads each lease word for word, making sure all the details are reviewed by our experts.
Mistake #9: Too much Deferred Maintenance
Having a good property manager is valuable when it comes to having the knowledge and experience regarding maintenance issues. Deferred maintenance is a part of every property, but landlords often put off projects too long. Deferring important maintenance projects too long can end up damaging the home. Whether it related to rotting trim boards, an old heating system, broken gutters, or an old roof – waiting too long can have expensive consequences. This is where an experienced property management company can save investors a lot of money. Managers know what maintenance projects should be done and when. Honest Property Management staff have decades of experience knowing what to defer and what not to defer. We hope you call HPM today to have a no-pressure discussion about your needs.
Mistake #10: Lack of Preparation
It is common for landlords and investors to wait until the last minute before they engage with a property management company. While this might be better than not calling one at all, it is certainly not ideal. Ideally, it is a good idea to plan ahead by calling a property management company at least 2 – 3 months before putting it on the market. This allows time to lay the groundwork for a solid analysis and marketing plan. The best chance for maximizing profit and getting quality tenants, rests with planning ahead. If property owners wait until the last minute to start these relationships, it could easily result in a lost week or month in rent. If you call us at Honest Property Management for a free consultation, we can assure a thorough and smooth onboarding process, resulting in maximum profit and less stress for our owner-clients. Honest Property Management staff are always prepared, and chances are we have experienced most any problem in the past, so we can draw from our experience to solve your property management pain points.
Mistake #11: Choosing a property management company based on price only
Any investor looking to hire a property management company is going to compare the options based on a variety of factors that include price, quality, and reputation. Price is an important consideration, as there is no reason to over-pay. However, it is important to remember that property investment is not the type industry in which a bargain-hunting is appropriate. The costs of neglect or mistakes in these areas are just too high to take risks when it comes to who you hire. The recommendation to property owners would be to hire a property management company that is properly staffed so that each unit in your portfolio is attended to. You do not want to hire a company that stretches its employees too thin. It is also important that your property management company has good reviews, otherwise tenants may be unlikely to apply. Lastly, make sure the company you hire to manage your property has the experience and expertise necessary to navigate tricky issues like eviction, home maintenance, and tenant screening. If you make a careful choice based on all these factors, instead of price alone, you will be much happier in the long term, and your investment will be protected. Honest Property Management gives a lot of thought to our fair and competitive pricing. Please call HPM today for a consultation.
Mistake #12: Not Checking in on Tenants
Do you have tenants who pay their rent on time every month, and who you have not heard from in a long time? This is actually pretty common. It is also common for landlords not to want to bother tenants for fear that they will ask for repairs. Do not fall into this trap. Hire a property management company that makes a habit out of being proactive instead of reactive. It is a good idea to check in with tenants on a regular basis and perform inspections once or twice per year. This kind of responsible management company will save you a lot of trouble and money in the long term. Honest Property Management performs annual inspections of every unit we manage, provided our owner-client wants them to take place.
Mistake #13: No Enforcement of rules and regulations
Not enforcing timely rent payment schedules
This one is pretty simple and straight-forward. Many landlords make the mistake of being easy-going about rent being paid a few days or weeks late. Tenants will take advantage of this if they are allowed to, and it is easy for them to get into bad habits. A good property management company provides a professional buffer between property owner and tenant, so that things do not get awkward. They will also make sure that the lease is clear about grace periods and late fees, and that they get signed before anyone moves in.
Evicting Too Late
Eviction is perhaps one of the least desirable parts of managing a property. Many landlords are not truly knowledgeable about the legal aspects of eviction, but a good property management company will be. It is usually a good idea to serve an eviction notice when tenants are late because it lets them know that business is business. Too many landlords or investors handle late payments casually.
Once your tenant is late on rent, serve your eviction notice at once. They need to know that you are serious about the rules. Too many landlords try to be empathetic but, in our experience, this almost always leads to tenants taking advantage by paying later and later each month. The expression “No favor goes unpunished,” might apply here. By serving the eviction notice immediately, tenants will either pay as they should, or will be removed because they do not. Treating your company like a business is something that a good property management company will do for you, so you do not have to worry about enforcing the rules on your own. Honest Property Management would be pleased to have you as a client, so please email or call us today for a no-cost consultation with our experts in the field.
