Mistakes New Landlords MUST AVOID!!!

There are many aspects to Real Estate Investing, but becoming a landlord and creating passive income is a reward that can last for more than one generation. Creating passive income is a great vehicle to financial freedom, but getting started can present challenges. After the acquisition and rehab the toughest thing to consider is the tenant screening process. Here are some hard lessons I had to learn early in my career, and I would like to help others starting out to avoid these mistakes.

1) The biggest mistake new landlords can make is to follow their emotions and not their tenant procedures. Tenants will do anything they can to secure housing especially if they have a checkered past. Every landlord should have in place the standard operating procedures for filling vacancies. If you as the landlord are not following a procedure then you will possibly rely on your gut feeling about a prospective tenant. Character judgments are difficult to evaluate when someone is not creditable. Always follow your procedures, then after that you have a gut feeling then go with it.

2) The second mistake that should be avoided is also in line with tenant screening, do not overlook conducting personal checks. This is a mistake that can cost a landlord thousands of dollars. Do not be so comfortable or confident in what an applicant’s says, always screen their backgrounds, and credit. You have to know who is in your property not only for the financial hardships it could cause you but the hardship it could cause the community. There is nothing worse than to find out after you have placed a tenant that this person’s criminal history (or co-tenant) is extensive, and the community is aware and you are not aware. I have a great horror story about this I will reveal in the future.

3) Do not be lenient in the start of your lease. Starting out by doing things that go against your procedures is a bad habit to start. For example do not extend utility transfers, or allow the tenant to make security deposit payments. Mean what you say and say what you mean. Everyone has heard the saying “if you give an inch they will take a mile” always remember that in the beginning.

Lastly, I was taught a motto that transcends all aspects of real estate investing “be comfortable with people being uncomfortable”, this may sound easy but it can be very difficult at times. You have to be so confident in what you’re doing that you can know the other party is uncomfortable and yet you are fine with that.