While managing your properties yourself can work out well if you have the skill and experience, it’s essential to avoid the six mistakes below.
If you own Houston residential investment properties, you can either hire an experienced property management company like Green Residential, or try to handle them on your own.
Delaying Routine Maintenance
Everyone wants to save money on their investment properties. But one way to never do it is to neglect routine maintenance.
No matter how good your property is, things will wear out eventually. You need to perform monthly or quarterly maintenance from toilets to shower faucets to AC units to avoid huge repair bills.
For example, if you don’t have your AC system checked and cleaned every year, eventually, the added strain of years of dirt and grime can make the compressor fail prematurely. And make sure you change all AC filters every month. Just doing that will extend the life of your unit.
Not Inspecting Your Properties
Property inspections are essential to ensure that the unit is in good condition and not abused by the tenant. Checking in every quarter is a great way to catch minor problems before they transform into disasters.
Also, even if you have a great tenant, they may not notice some minor maintenance issues that you do. As you walk your property, look for any moisture where it shouldn’t be, as well as mold or termites.
Another reason to do inspections: If you don’t, it could invalidate your insurance coverage.
Not Running The Numbers
Many new investment property buyers are excited to get their first home or building and may rush into the transaction.
It’s critical to crunch the numbers accurately to ensure you will be making money. You should add up all rental property expenses, including maintenance and vacancies, so you can set a rental price that is profitable.
Many rental experts say that you should try to set the rent at about 2% of the purchase price. But your local market determines what rent you can charge, so make sure that the area in which you want to buy will allow you to set a profitable rent.
Hiring The Wrong Help
The quality of the contractors you hire to repair your properties is vital. We understand your brother-in-law is looking for work, but he shouldn’t be maintaining your units if he’s not highly skilled and experienced with HVAC systems.
Hiring licensed, bonded, and experienced contractors will cost more, but it almost always will save you money over time.
And don’t let your tenants do repairs in lieu of rent! This usually results in poor quality work that will cost you more later.
Loose Screening Of Tenants
As that apartment sits vacant, it can be tempting to lower your credit score or income requirements to get a renter in it. But this often comes back to bite you.
Lowering your standards is admitting a person that could cause trouble. Whether it’s paying rent late or damaging the property, you’re better off if you maintain your standards and let the vacancy sit until you find the right tenant.
Not Increasing Rent
So, you have a good tenant in your rental property who pays on time and keeps the place in order. And you don’t want to make them want to leave by increasing the rent. This is a mistake that many landlords make that costs them thousands of dollars.
Inflation occurs annually, and it has been rising more in recent years. If you don’t increase rents to at least keep pace with inflation, you are losing money. As most of us know, you have to pay more to have your property maintained and repaired over time, so you are spending more money.
You should consider adjusting the rent for inflation at a minimum every year. Also, do a rent survey for similar apartments or homes in your area at the end of every fiscal year. If you see that rents have increased, you should increase yours to match the market.
By monitoring inflation and the rental market, you can ensure that you are getting as much money as possible for your units. Be especially watchful for increases in housing demand in your city because that is usually a good time to increase monthly rents.
Allowing Late Rent Without Penalties
If you have done your homework, you have laid out the rules in writing for paying rent on time, as well as the consequences for paying late. Whether the late fee is $30 or $50 or something else, it’s essential to have the same rules for everyone. In addition, it’s necessary to enforce the terms of your lease.
When landlords don’t enforce timely rent payments, you beg people to pay you late every month. However, the late fee is a stiff penalty for many tenants, so when you enforce it, it’s less likely they’ll be late again.
Not Keeping Records
When you visit your units or houses to inspect them, it’s essential to document everything checked or discussed with the tenant. This helps to ensure that no maintenance issues are forgotten that will cause worse problems later; it also maintains a good relationship with the tenant as you follow up on needed repairs.
Also, if you ever need to take a tenant to court, it will be helpful to have a thorough written record of your interactions.
Keeping Rents Low To Attract Renters
Some landlords worry about keeping their units full so they keep their rents below market. Experts generally see this perspective as shortsighted and you will lower your ROI.
You also may think that keeping a low rent can attract better tenants. But you shouldn’t be relying on rental prices to screen tenants. It’s vital to screen tenants by checking their background, credit, and income.
When you set your rent at a competitive price compared to the market, you will attract the most qualified candidates.
Being a landlord or property manager isn’t for all of us, but if you avoid the problems above, you should run a profitable business.