As with any business venture, getting into the rental property game has a learning curve. It takes a while to get your footing, and you’re certainly going to make some mistakes at first — a lot of them, actually.
Fortunately, thousands of investors have gone before you, and you don’t enter this world blindly.
Want to make sure you don’t fall into the same traps as other first-time landlords? Here are the six biggest mistakes to avoid:
1. Underestimating the management side of things.
Buying a great property and finding a tenant are only the first few pieces of the puzzle. After move-in, there’s a whole slew of ongoing tasks you need to handle. From collecting rent and reporting it to credit bureaus to maintaining the property and making repairs, there’s any number of to-dos you’ll need to manage week-to-week (not to mention pay for).
It’s critical you allot enough resources — both time- and money-wise — to cover these tasks and then some. And if you can’t? Hire a property manager who can. Your rental business depends on it.
2. Pricing your rent wrong.
On-point pricing is vital as a rental property investor. Price too high, and your property sits vacant for months on end. Price too low, and you lose out on precious profits and attract the wrong type of tenants.
Your best bet is to use comparable properties, as well as the expertise of a neighborhood real estate agent, to align your rents with local trends. And if your property goes unrented for a month or two at that price point? Don’t dawdle in dropping your asking rent. Decreasing your rent by just $25 usually costs less than a month of vacancy in a solid market.
3. Not screening your tenants properly.
You’re entrusting your property (and your income) to your tenants, so make sure you vet them thoroughly. Sure, you want to reduce vacancies as much as possible, but don’t rush through the screening process just to avoid another vacant week.
Have a comprehensive process in place for checking your tenants’ credit and background, and take your time to verify all their application data — past rental history, employers, etc. (Just make sure to abide by all fair housing laws in the process).