With all the first-year rental investor nuggets of advice out there, it can be overwhelming. You’ll try to adhere to best practices and apply every suggestion you can to improve NOI and your ownership experience. But there are also some common first-time mistakes to avoid. As you develop and improve your rental property management strategy, keep these pitfalls in mind so you can actively seek to avoid them.
Mistake #1: Assuming Your Rental Property Will Always Have Residents
The money only flows when you have residents in your property. And many first-year rental investors forget that vacancies don’t just happen; they’re common occurrences. It’s mission-critical to do your financial due diligence and plan ahead for those months that may fall short of revenue goals due to vacancies. Cash flow analysis can also help you plan ahead to avoid rent payment droughts.
Mistake #2: Underestimating Rental Property Maintenance
This is a big one. Those who are new to rental property investing are generally optimistic and enthusiastic about getting started. And if you’ve finalized the purchase of your first property, you’ll be eager to get it rented. But homeownership, even with rental property, isn’t without its expenses. Property maintenance efforts need to be routine and ongoing to keep your property in great condition and to prevent major component failures. Seasonal visits from HVAC professionals, plumbers, or electricians can add up quickly. Water heaters go out, refrigerators quit, and basements leak. The best way to stay ahead of repair catastrophes is to engage in regular maintenance. Prepare for these expenses and develop a plan for rainy-day savings should those emergency repairs occur.
Mistake #3: Cutting Corners on Resident Pre-Screening
You might be feeling the pressure to get your Lehigh Valley rental property occupied. And the longer a space sits vacant, the more anxiety you might experience. First-year rental property investors need to be mindful during these more pressured times. Becoming desperate to find residents might lead to cutting corners in your pre-screening process. Don’t be tempted. If you’re not verifying employment, calling past landlords, or credit checking applicants, you’re subjecting yourself to poor resident experiences. And signing a lease with an improperly vetted resident will cost you more than the vacancy itself in potential late rent, property damage, or evictions. Stick with your pre-screening process no matter what to reduce these costly risks, no matter how long your property’s been vacant.
Mistake #4: Being an Inattentive Landlord
It’s common for first-time real estate investors to sign their first residents and feel accomplished. But you haven’t “arrived” at a stopping point just because you’ve secured a lease. Those residents can be a valuable asset ongoing, and being attentive will allow you to make the most of the resident-landlord relationship. Thorough communication ongoing is essential to check-in, inquire about satisfaction, and to schedule maintenance. They’ll need to feel connected with you as their landlord, eager to ensure their living space is safe, healthy, and accommodating. Outline processes for them about payment or calling with repairs. And don’t hesitate to tell them about any other rental properties you invest in since they can be a loyal resource for referrals, too. Avoiding them or adopting a “one and done” approach to management will only lead to breakdowns in communication and the relationship as a whole. If they become dissatisfied with their experience, they’ll be quick to vacate.
Mistake #5: Presuming Rental Property Ownership is a Passive Hobby
Unfortunately, the allure of passive income and supplement cash flow can sometimes blind first-year property investors to the truth. Owning and managing rental property successfully cannot be a hobby. It’s a business that requires strategic planning, professional partnerships and cost analysis projections. Ignoring or dismissing any aspect of the business can and will result in potential failures. You’ll need to consult legal and tax professionals. You’ll want to outline processes and guidelines for management operations. And it can turn into a full-time job, especially if you explore owning more than one property.
Mistake #6: Inadvertently Violating Rental Property and Resident Laws
The legal guidelines that govern rental property and resident engagement practices. First-time rental property investors aren’t always up to date on the ever-changing regulations, either. And inadvertently, they can find themselves facing fines, setbacks, or legal ramifications because they simply didn’t know they were in violation. From local building codes to asking potentially illegal questions on an application, avoid making these mistakes by consulting legal professionals who specialize in understanding the rental investment industry.
As a first-year rental property investor, keep these common mistakes in mind. Knowing what not to do can be just as helpful as all those investor expert suggestions out there. And if you’re looking for additional help to avoid these mistakes and make the most of your experience, let Axel Property Management be your guide!
