Owning a rental property can be a great way to generate recurring income and gain equity value over time. Real estate investors know that it’s often a very profitable venture when it’s done the right way.
They also know that it’s not a 100-percent passive investment. Any rental property, big or small, requires management. For an individual investor, maintaining the property, collecting rent, screening tenants, and doing the bookkeeping can often seem like a part-time job.
How well or poorly a property is managed can be a make-or-break factor in its profitability. Here are the biggest and most costly landlord mistakes and how to avoid them.
Renting to the Wrong Tenants
Signing great tenants to a lease goes a long way toward making a rental property profitable. Tenants who consistently pay rent on time and take good care of the place can be worth their weight in gold. Conversely, tenants who don’t pay on time and damage your property can stress your finances and mental well-being.
The simplest way to avoid the mistake of entrusting your valuable property to the wrong tenants is to hire a property management company that performs thorough tenant screening. Property management services from Valley Management Group include meticulous background checks on tenant applicants.
Doing deep dives into perspective tenants’ financial histories, possible criminal histories, public court records, and prior landlord relationships is the surest way to avoid renting to problem tenants. Companies with proven track records in tenant screening are likely to do better than rental property owners with little experience in that area.
Not Knowing the Local Market
Another way to hurt a rental property’s profitability is to be unfamiliar with the local rental market. Setting appropriate rental rates is critical. If your rent is too high, it will limit the number of interested tenants replying to your advertising. If you set it too low, you will be leaving money on the table.
It’s also important to know local codes and ordinances regarding rental properties. You don’t want to run afoul of the law, and every municipality has different regulations. If you own a rental property in Milpitas, for example, then the Milpitas property management service provider you use should have knowledge of that rental market and the local codes and ordinances.
Lack of Landlord-Tenant Communication
No matter how good your tenants are, any tenant-landlord relationship can sour if there’s a lack of communication. And it doesn’t take much for that to happen.
A tenant might have a valid reason for missing a rental due date, such as a family emergency or a job change. If they don’t communicate that, it can cause ill will. Similarly, if a tenant attempts to contact a landlord about a problem with the property and that landlord isn’t responsive to the situation, that can also cause a relationship breakdown. No landlord wants to get a midnight phone call from a tenant, but ignoring an emergency is definitely a costly mistake.
Property management services must include 24-hour emergency phone access, ongoing tenant relationship management, and two-way communication with property owners.
Not Seeing the Big Picture
It might sound simple — buy a property and collect rent — but owning a profitable rental property requires a mix of several key factors. Those include selecting the right tenants, knowing the ins and outs of the local market and ordinances, and effective tenant-landlord communication. You can add effective marketing, scheduled inspections, regular maintenance, and accurate financial recordkeeping to the list.
Rental property owners who fail to see the big picture, all of the things that go into making a real estate investment successful, are making a costly mistake.
Partner with an Experience Property Management Company
Valley Management Group provides trustworthy and affordable property management services in San Jose, Milpitas, Campbell, and throughout Santa Clara County. We have served the needs of property owners and tenants for over 40 years and take the stress out of managing your own rental property. Contact us for a free property management quote and one free month of management services when you sign up as a new client.