There is a common misconception about earning money from a rental property. Even though it’s usually considered ‘passive’ income, the day-to-day management of that property should be viewed as anything but passive. This is because a landlord’s job isn’t as easy as you think. You could purchase a property, make some quick repairs and updates and start renting it out to your tenants, however that’s not where your involvement ends in this arrangement. 

A landlord has many job descriptions and expectations that must be addressed in order to operate a successful rental property. You can either take it as a lesson learned and experience gained, or you can learn from the following mistakes  which are the most common mistakes made by landlords and what you can do to avoid making them with your properties.

Inadequate Insurance Coverage

Landlords often try to cut costs by paying less than sufficient levels of insurance coverage. Some people also choose the wrong type of coverage or fail to add extra protections, like endorsements, that would protect them against various types of risks.

The majority of rental property insurance policies will have property coverage and liability coverage. The former protects you from damage or loss to the home caused by a covered risk. The latter protects you if a tenant or visitor gets injured on your property. However, not all risks are covered, so damage from things like earthquakes, floods, or vandalism may not be included unless you buy extra coverage for those risks. 

Don’t play it cheap with your insurance as it could end up costing you much more in the long run. Make sure you’re fully covered and that your policy limits are high enough to cover the cost of repairs or replacements if something is lost or damaged. 

Lack of Tenant Verification

Provide each candidate with a rental application form and have them complete it. Conduct a standard credit check before both parties sign the lease to avoid future issues. You can easily verify their credit score, payment history, and references. This will allow you to make an informed decision on whether to rent the property to that person.

Anticipating Steady Income

When a landlord expects steady income from their rental property, they often base their financial planning on that income. However, if the property is vacant for even a month, it can drastically affect their finances. To avoid this issue, it's important to conduct a thorough cash flow assessment and set aside some savings for times when the property may be empty for an extended period. This way, you’ll be better prepared for any unexpected vacancies.

Lack of Awareness of Tenants' Rights

Before your tenant signs a lease, you must follow certain federal, state, and local laws. Many landlords aren't familiar with these rules and can end up in legal trouble. For example, you must follow the Fair Housing Act, which bans discrimination based on race, religion, nationality, sex, or disability.

Once a tenant moves in, there are other rules to follow, like how to collect rent, properly handle security deposits, when you can enter the unit, how to avoid unannounced visits, and the correct eviction process. Violating any of these rules could lead to legal action.

Disregarding Tenants 

Tenants are responsible for keeping the property in good condition. However it is your job to make sure the unit is safe. If tenants report issues like leaks or broken fixtures, you should fix them quickly. If you ignore these issues it can make them worse which would make them more expensive to repair, this may harm your reputation as a landlord if future tenants hear about it. Looking after maintenance is an important part of being a responsible landlord.

Neglecting to Enforce Lease Terms

A lot of Landlords are worried that a tenant won’t renew their lease if the landlord is strict about enforcing the terms of the lease agreement. These could include fees added to late rent payments or restrictions on pets. entered the agreement with full knowledge of the terms. It's up to you to enforce those terms, failing to do so sets a poor example.

Delaying Eviction Too Long

It is the last thing any landlord wants to do because of the time, money and problems that come with the eviction of a tenant. This is another reason as to why you want to have a strong knowledge of your legal rights. Many landlords will delay the eviction process for as long as they can as they would rather have some rent rather than an empty property. However sometimes a tenant isn’t worth the wait, and problems can get so bad that sometimes you don’t have any choice. If you’ve decided it’s the right thing to do then don’t hesitate. Initiate an eviction filing as soon as you’re legally able to. It will be worth it in the long run and you can go and find a new and more financially stable tenant quicker.

Conclusion

With proper preparation and dedication to both the property and tenants, landlords can prevent many common mistakes and issues.

Please note, the information provided here is not legal advice and should not be considered a substitute for consulting an attorney about any specific legal matter. For legal advice, it's best to seek guidance from a qualified attorney regarding your situation.