The biggest landlord mistakes revealed by novices. Read about how many mistakes inexperienced landlords make to learn how to avoid them.
Biggest Landlord Mistakes Described by Landlords
BiggerPockets, a very popular site for real estate investors, agents, and other related professionals publishes a member’s forum and blog posts. Some of these focus on landlords warning others to beware of the mistakes they made.
One blog post titled, “The Biggest Landlording Mistake I Ever Made” amounted to “self-managing his rental properties”. His blog post explained that while he could do a good job self-managing, it wasn’t smart or profitable in the long run. He described four reasons why he shouldn’t have self-managed his rentals:
1. Dealing with Contractors
Finding and managing contractors created many problems for him. He admitted that even successful investors struggle to find good contractors and effectively managing them. Contractors require constant supervision during a project.
2. Dealing with Maintenance and Communicating with Tenants
Sooner or later expect to get a renter really needy or the property requires lots of upkeep or both. He estimates about 1/3 of his units’ required intense responsive management. Even with brand new construction. He recommends carefully vetting prospective tenants. Make sure they all have at least a 700 credit score. The financial and legal risks too great to slack off.
3. Don’t Be Too Busy
You must be available to tenants 24/7 as problems occur all the time. If you plan to retire soon, cut down on the number of rentals or risk spending your retirement time running around dealing with tenant and unit problems.
4. Don’t Get Personally Involved
Some people find personal involvement with rehabbing properties, landscaping yards, reviewing tenant applications, and helping others too poor to pay the rent appealing. A big difference exists between this romantic vision and reality. Being too personally involved leads to extra risks, a lack of privacy and failure at objective investing. Big blunders await the investor who becomes personally involved.
Moral of the Story
He finally sums it all up with being stupid for not hiring a property management company. He saw the initial expense of using property management like one month’s rent or 10% of the gross monthly rent and decided it was too expensive. Now, he admits that was his biggest mistake.
He recommends investors looking for a truly passive income to delegate all the work and risks to a property management company.
Another Sad Story about Managing Your Own Properties
Another BiggerPockets post titled, “Why Managing Your Own Properties is (Almost) Always a Huge Mistake” makes the same recommendation. This landlord claims his worst decision while he was new to the game was to manage his own rental properties.
He makes three recommendations for fellow newbie landlords:
1. Time is Golden
He found out that managing property all by himself without the help from a property management company wasted a lot of his time.
The amount of time he spent screening potential tenants, chasing after rent, and fixing broken sinks could’ve been used to educate himself and invest in new properties. Self-managing properties lead to wasted time, a precious asset. While you can always make more money, you can’t make more time.
2. Living Like a Medical Resident
Taking on the life of a landlord requires bracing yourself for tough times. Terrible tenants who destroy your home or escape without paying, and evicting tenants demonstrate how tough it gets.
Even good tenants require time. If the sink clogs up during dinner, who does the tenant call first? You as the landlord must be prepared for late-night calls complaining about toilets, electricity, and other emergencies requiring you to fix them.
Landlords always on call like medical residents. No designated “break time” or holidays as landlords get the first call when problems occur. Even at three in the morning, that dreaded phone call wakes you up from your beauty sleep.
3. The Perils for Nice Guys
Landlords need guts. Landlords must be persistent, strong, and mentally unbreakable. The problem with most newbie landlords is they want to be “nice guys”.
As an example, he dealt with a tenant after living in his unit for three months and lost his job. The tenant asked for patience. Let him stay and he promises to pay you back after he lands a new job. A month passes, and no job yet. What do you do? You must make tough choices that you won’t like.
Landlords conduct business. If you can’t play the “bad cop”, let a property management company handle it.
Landlords must be mentally tough and expect plenty of time consumption, requiring a lot of “do it yourself”. If you can’t handle that, don’t become a landlord. Let an expert take all the time and stress off of you.
Advantages of Hiring a Property Management Company
The legal website, Nolo, sums up the advantages of hiring a property management company this way:
“Management companies deal directly with prospects and tenants, saving you time and worry over marketing your rentals, collecting rent, handling maintenance and repair issues, responding to tenant complaints, and even pursuing evictions. Plus, a good management company brings its know-how and experience to your property, giving you the peace of mind that comes with knowing your investment is in good hands. Finally, a management company is an independent contractor, so you avoid the hassles of being an employer.” Source
The biggest landlord mistakes revealed center around self-management.
Dealing with contractors, maintenance, and tenants take time and require management skills.
You can’t be too busy to handle emergencies or get personally involved with tenants. Your time is precious. Tough landlords thrive while nice guys suffer.
Hiring a professional and experienced property management company provides many advantages:
- They deal directly with the tenants;
- They collect the rents;
- They handle all maintenance;
- They respond to all problems and complaints;
- They pursue evictions;
- They protect your investments; and
- As independent contractors, they relieve you of all employee hassles.
Contact Us to learn more about how we can help you with advertising vacancies, screening potential tenants, collecting rents, inspecting properties, maintain tax deduction records, and saving you time.
Steven Rich, MBA – Guest Blogger
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