Being a landlord is a tough job, especially if this is your first time renting out units. It may sound simple to buy a home, renovate the units and then find renters, but it’s a huge undertaking. Without experience or knowing what to watch out for, you can quickly find yourself spending much more than you planned on or not having the cash flow you expected. Read on to learn six of the most common profit-killers for property managers in Richmond.
1. Spending too much time preparing units
If you’re a new landlord, you probably want to make sure the units are as perfect as possible before renting them. However, spending too much time getting the units ready for move-in means you’re not gaining any income during that time period. There’s no need to over-renovate a perfectly good unit. Your rental properties should look nice and function properly, but spending too much on upgrades and renovations make it impossible to get a healthy return on investment. Seasoned landlords can get a unit ready in a matter of days; don’t spend months working on a single unit. If necessary, hire extra help so that you can make the renovations and repairs in less time.
2. Pricing units without verifying market costs
Pricing a rental unit isn’t something you can do in a hurry. Don’t assume you should rent the unit for a specific price simply because that’s what other units in the area are going for. For example, if a similar unit from another property manager is renting for $1,000, you may think that pricing your unit at $1,000 is fair. However, if that unit hasn’t been rented for six months, it could be because the cost is too high. On the other hand, if those $1,000 units get rented out immediately, you may be able to price your unit higher and still find plenty of renters. You have so strike a balance between too high and too low. A new landlord should spend time talking to locals, marketing their units via advertising and conducting market research to find the right price.
3. Letting units sit vacant for a long time
When a unit is vacant for an extended period of time, the property management company is stuck paying things like insurance and taxes without any rental income coming in to replenish what’s going out. Additionally, the longer a unit sits vacant, the more chance there is for things like vandalism and squatters to ruin or damage the unit. Even a new landlord should strive to have a list of renters who are waiting for a unit to open up. Your goal should be to have as few vacant days as possible. Also, since there may simply be times when you’re doing everything right but the unit is still vacant, you have to budget for this in advance. Make sure you can afford the mortgage for at least a few months even if you don’t have any tenants paying rent.
4. Accepting tenants without running checks
You may be ready to get a new tenant into a unit immediately, but if you fail to run the necessary credentials checks, you could end up with someone who can’t pay their rent on time. It’s important to check a tenant’s credit report before accepting their application. Even a tenant who may be able to pay a big deposit up front can become a hassle if they’re never able to pay their rent on time. While you want to rent the units quickly to avoid vacancy durations, be smart about it so that you don’t accept a tenant who further drains your resources.
5. Failing to charge a late fee
A quality property management company in Richmond will ensure that their tenants understand and sign a lease before moving in. The lease should cover what will happen should a tenant pay their rent late. If the terms say that a late fee will be added, it’s necessary to enforce this rule. If you don’t stick to what both you and the tenant legally agreed to, you could end up getting rent late month after month. Additional lease terms should be adhered to as well. For example, if you don’t allow smoking or pets in the apartment, make sure your tenants follow these rules. Otherwise, this could cost you money when it’s time to rehab the apartment – it’s not easy or cheap to get the smell of smoke out or fix damage from an unruly pet. To protect yourself, make sure that your tenants understand their lease and that they sign in before moving in. Document everything so that if you do need to take the next legal step, you have the proof to back up your case.
6. Being unprepared for regular maintenance costs
Units, both ones that are rented as well as those that you’re working on or that are vacant, require a certain amount of maintenance on a regular basis. This is necessary to budget for, but many landlords completely forget about upkeep once a unit is move-in ready. Tenants won’t rent a unit or stay in a unit if it’s not well-maintained. Part of the rent you charge should cover these costs, which include things like carpet cleaning and window cleaning between tenants, new paint (both interior and exterior), parking lot upkeep, changing the locks, snow removal, etc. You also need to be prepared for an emergency or one-time maintenance projects, like replacing large appliances or fixing damage caused by a storm.
Avoiding these all-too-common landlord mistakes will save you time, money and mental stress. Being a landlord should be approached as a business, not a hobby or an on-the-side job. By being prepared in advance, understanding the realistic costs you’ll need to pay and staying in tune with the market, you can avoid foreclosure on the properties you own.
