The 9 Costliest Landlord Mistakes

Classic business philosophy teaches that a great part of survival and subsequent success lies in an operation's ability to reduce mistakes. The cost or repairing the mistakes is inversely proportional to the amount of profit potential of the operation. In other words..."Mistakes Kill the Profit Margin!!!!!"

As landlord's, we don't want to do damage to the precious profit margin we fought so hard to nurture. A landlord's profit margin struggles every day to survive, grow and flourish in a sea of predators, competitors and government regulators. Below are the top 10 threats to you thriving profit margin.

1-Poor Screening

The costliest mistake is accepting a new tenant without properly screening. An undesirable tenant will often have a poor rental and financial histories. Landlords should review previous landlord relations, credit reports, courthouse records and income. It is probable that if they have not met their obligations with previous landlords, then chances are that they will repeat their behavior with new landlords. Many landlords have faced horrific situations where tenants have stopped paying rent while employing legal maneuvering to avoid eviction. Others have faced tenants who moved in and initiated criminal activity, which adversely affected other tenants and neighbors. Either of these scenarios translates into expensive ordeals where the measures of rectifying the situation can threaten the financial stability of the landlord.

A thorough screening also involves verifying that the person who is applying is the same person that submits credit/criminal info for screening. A picture I.D. should be cross-referenced with the application. Landlords must make sure that there are no omissions, inaccuracies or inconsistency in the actual application. Due diligence will certainly save landlords much money and stress.

2-Lease Preparation

Having a poorly prepared lease is very costly because it is the document that legally binds the landlord to the tenant. It is the rules of the relationship that dictate conflict resolution, financial responsibility and terms of execution. With out a professionally prepared lease the landlord stands to forfeit many of the rights afforded to the owners of the property. Landlords need to employ leases that are designed to protect them and their property and not the other way around. Many generic leases do not take into account the values of the landlord. Therefore, a custom lease would assure the landlord that their interests are protected.

Many times landlords receive requests for agreements after the lease has been signed. Landlords will use their best judgment when deciding to agree to a proposal but must never neglect to put the agreement on paper. A verbal agreement is always vulnerable to a false interpretation by the tenant.

3-Rent Collections

Landlords must always enforce the terms of rent payment as it is written in the lease including late payments and fees. If not enforced, the landlord runs the risk of creating a dangerous precedent that will certainly cost the landlord dearly. If a tenant fails to pay rent for two weeks, then legal notices and actions must be initiated as soon as the law allows.

If a tenant has had a poor history of paying rent on time, a landlord should consider not renewing the lease. Being late consistently is a sign of financial trouble and future uncertainty for the landlord. Poor payment habits can be a precursor to bankruptcy or evictions.

4-Law and Regulation Ignorance

Many landlords get into rental business with out learning the rules of the game. To get a perspective of the folly of not knowing the rule, Imagine trying to play basketball with out knowledge of the rules. You would become paralyzed from the constant rule infractions. It would be impossible to win. Translated to the rental business: Knowledge of the Laws and regulations can make the difference between a profitable venture and a loser.

Landlords must familiarize themselves with the states' Landlord/Tenant Act. Every state has different laws, therefore due diligence must be taken by landlords to educate themselves. Landlords must also take the initiative to draw upon with the experiences of other landlords. Many landlord advocacy groups exist in most communities and the Internet.

Finally, it encouraged for landlords to employ the services of a good Property Management company.

5-Poor Response to Service Requests-

The number one reason that tenants do not renew their leases is poor response and execution for service requests from the landlord. Tenants expect a constant inspection, repair, and preservation of the general conditions of their rental home. This also includes a timely repair or replacement of parts for appliances. Everything has to be in working order and problems must be addressed quickly and courteously. Everything has to be in working order and problems must be addressed quickly and courteously. To facilitate an efficient delivery of maintenance requests, the property manager's best method of receiving these requests is actually answering the telephone. Maintenance requests should be supported by a shared calendar that documents the request cycle: creation, delivery, execution, completion and follow-up. Maintenance requests, if implemented properly, should be a team effort that will lessen and distribute workload through the property staff.

6-Not paying taxes

Many landlords do not have their rental income as their primary source of income and neglect to report their income to the government. Others fail to pay property taxes because they don't reside in the property. Failing to declare income and ignoring property taxes can cause very expensive recovery efforts. The government will assess taxes, add fees, add penalties and assign interest. Other costs will come from attorney fees, added accountant charges and personal time. In extreme cases, landlords may get their property confiscated.

7-Not waiting for the funds to clear

In a rush to fill the occupancy, many landlords make the mistake of allowing the tenants to move in before the funds are cleared. The scenario of tenants moving into a property too soon has caused numerous headaches for landlords having to initiate eviction procedures without ever collecting any rent or deposit. Always ask for money orders and certified checks or simply wait for the funds to clear the bank.

8-Not conducting a detailed premove-in inspection

Neglecting to have the tenants complete a premove-in inspection can result in damages to a property that cannot be documented by the landlord. Payment for rent must not be accepted until this inspection is completed.

9- Not Employing the services of a skilled Property Management company One of the costliest mistakes landlords often make is not employing the services of a skilled property management firm. This oversight can lead to a multitude of issues that can significantly impact the profitability and sustainability of their rental business.

Firstly, tenant selection is a critical process that requires expertise and experience. A property management firm has the necessary tools and knowledge to conduct thorough tenant screenings, ensuring that only reliable and responsible individuals occupy the property. Without this, landlords risk frequent vacancies, property damage, and potential legal issues.

Secondly, property maintenance can be a daunting task for landlords. A property management firm can handle routine maintenance, emergency repairs, and tenant complaints efficiently, ensuring the property remains in optimal condition and tenants are satisfied.

Thirdly, legal compliance is a complex area where many landlords falter. Property management firms are well-versed in housing laws and regulations, helping landlords avoid costly lawsuits and penalties.

Lastly, rent collection and financial management can be time-consuming and stressful. A property management firm can streamline these processes, ensuring timely rent collection and accurate financial reporting.

In conclusion, while hiring a property management firm may seem like an added expense, the long-term benefits it provides in terms of tenant retention, property maintenance, legal compliance, and financial management can significantly outweigh the costs, making it a worthwhile investment for landlords.

When it comes to Property Management, Babajide Okusaga & Co is your best choice. Contact us today and let's relieve you of the stress of Managing Tenants!