Top 9 Mistakes DIY Landlords Make

Every market has its share of do-it-yourself landlords. Some do a fantastic job managing their rentals, while others fall short. Maybe you invested in your property with the intention of making it a rental, or perhaps it was circumstantial. Regardless, there are a few ways to protect yourself from ending up in court or getting hit hard financially. Stop the stress and follow these simple rules before its too late. The following are the top nine mistakes “Do-it-Yourself” landlords make on a regular basis.

1. No written lease or rental agreements. Rental agreements and leases are legally binding and create a contract that both parties must adhere to. “Handshake” deals and friend-of-a-friend situations are almost certain to ruin any pre-existing relationship you had with a friend or acquaintance. Without a proper legal contract, it can be nearly impossible to enforce the terms of a lease on your tenants. If you do not have a property manager, I strongly recommend consulting an attorney for your lease agreements

2. Not Inspecting the property. At the end of the day, the property you are renting is still your responsibility. You are responsible for keeping the property maintained both inside and out. The tenant also shares in the responsibility of keeping up the property. Making sure the tenant does their part can often be a forgotten task. Keeping up with the property will ensure fewer phone calls and a happier tenant. Also, keep in mind that as the owner of a rental property, you are required to keep up with the local and statewide health and safety standards for rentals.

3. Vacancies. There are usually gaps in between tenants. While this is normal, vacancies can be a financial burden for a DIY landlord. It takes time to prepare, repair, market and show the property. Make sure you have at least 3 months worth of savings to cover these expenses. Setting up a separate account for your rental transactions is a great way to prepare yourself for vacancies.

4. Delaying Evictions and Legal Actions. DIY landlords often find themselves emotionally attached to tenants. Usually, they have helped the tenant through hard times and tend to be a little softer than property managers. Remember that property managers are immune to sob stories because they have heard them all. Landlords should teach their tenants to be responsible, and that deadlines are there for a reason. If you are not setting deadlines and sticking to them, you will be constantly dealing with late-paying tenants. If you are filing an eviction, find a local lawyer who handles evictions. Make sure your paperwork is accessible to them and everything is in order when it comes to legal situations.

5. Not knowing the market. When preparing to list their property for rent, most DIY landlords check active listings around them to determine their pricing. While this can be effective, you need to take a look at a mix of active listings and rented listings. Make sure you do your research before listing your property. Another thing that most DIY landlords forget to do is increase the rent on an annual basis. They are afraid their tenant may leave or be upset with them. Most tenants know the rent is going to increase, so increase their rent maybe as a little as five percent to pay for rising taxes, repairs, insurance, etc.

6. Credit and Background Checks. The most common mistake a DIY landlord can make is not researching a tenant. Doing credit and background checks is a huge step to ensure that your property will be well taken care of. A good property manager can spot trends and weaknesses in credit and background checks. Make sure that you are verifying employment with pay stubs and getting information from their previous landlords as well.

7. Not factoring the value of time. If real estate is not your full-time career and you often find yourself on your property doing repairs or trying to find contractors to do the repairs, ask yourself what your time is worth. It may be time to sell or hire a full-time property manager to handle the maintenance and tenants for you. Fixing up the property in between tenants can take some time. You may save money being a DIY landlord, but you should know how much your time is worth. Some landlords enjoy doing the work, while others just want to pay to have it done for them. Make sure your property is working for you and not against you.

8. Not giving your tenants a lead-based paint disclosure. On December 6, 1996, the Lead-Based Paint Disclosure law went into effect. According to the law, every owner with a property built prior to 1978 must give all new and renewing renters a disclosure and pamphlet on lead paint. Failure to do so could result in a $10,000 fine.

9. Not accounting for the learning curve. Lastly, a common mistake for DIY landlords is not accounting for the learning curve of being a landlord. “You don’t what you don’t know” is one my favorite sayings. Sometimes, we bite off more than we can chew because we thought we could do it. It is ok to ask for help. Show me a person that is on top of their industry and I’ll show you someone who had a lot of help. Show me a guy who just closed his doors after 4 years of business and I’ll show you a someone who did it all by himself. Consider hiring a property manager to keep you on the straight and narrow. Property Managers can’t do everything for you, but they can keep you legal and give you the advice you will need when handling your rentals.

Falling into the trap of being a do it yourself landlord can stress you out! Make the right choices when managing your assets and lean on someone who can help you. It may be a certified property manager, it may be another investor who can help you as well. Regardless of what you do, I will always be here to help and lend my knowledge.