5 Common Mistakes Made By Rental Owners
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Sometimes the hardest lessons in life come at the expense of costly mistakes,
the same is true in property management. However, you can avoid an expensive lesson by learning from others’ mistakes. Here are five common mistakes made by rental owners.
1. LENIENCY IN COLLECTING RENTS
Effective rent collection starts with selecting qualified residents who have a history of timely rent payment; however, that is not always possible. So, what do you do?
First, don’t let your emotions get in the way. Start collection efforts as soon as the rent is late, even if your resident offers an excuse for not paying the rent on time. If you do not take their late payment of rent seriously, neither will they. Do not let the rent go unpaid, even if it means asking your resident to move-out if they cannot pay. Seldom do residents who fall significantly behind in paying rent ever catch up.
2. NOT PLANNING FOR MAJOR CAPITAL ITEMS
When estimating cash flow, few independent rental owners reserve for major repairs. There will inevitably be one unexpected item that pops up. It may be replacing the water heater, fixing a blown-out central A/C unit, or discovering that the wall behind your properties shower tile is rotted or termite-infested. Accruing a cash reserve monthly for these items will go a long way toward paying these somewhat unexpected bills. If you are fortunate enough to avoid the unexpected one year, will have cash banked away ready for even larger recurring items the following year. Remember, homes require a lot of maintenance and upkeep, no matter how well-cared for.
3. IMPROPER OR POOR RESIDENT SCREENING
Nothing will make or break real estate investment faster than the choice of who lives in your rental property. Some owners still don't do credit checks. Of those who do, many do not truly dig to verify the accuracy of the application.
Be sure to check all references and make sure the person listed as the applicants past landlord is really the owner or the property manager; not a friend acting the part. Do not hand over your property based solely on a computerized credit score. Credit scores do not convey how residents treat properties or whether they have been a nuisance in the past. Handing over a $100,000, $200,000 or $300,000+ investment to someone based on nice 20-minute conversation or a $10 credit report is the equivalent of playing financial Russian roulette.
4. ALLOWING RESIDENTS TO DEVELOP BAD HABITS
It may start as simply accepting late payments regularly, not addressing issues such as loud parties, allowing residents to make their own repairs, or any number of seemingly small items.
You may not be comfortable taking care of these issues when they occur, but these are not the type of issues that will go away if you ignore them. These seemingly minor issues have a way of developing into bad habits and must be addressed and promptly corrected.
5. FAILURE TO ADDRESS MAINTENANCE ISSUES ASAP
It is no fun to receive phone calls about pests, mold, leaky faucets or noise from neighbors. It is easy to delay responding - especially when you don’t have the money needed to make the necessary repairs. However, it is very important to respond - quickly. Small problems can quickly snowball into larger problems. Many times, it is the resident's perception of the problem that determines whether the situation is a minor inconvenience or a lawsuit heading to court. Use trusted contractors or a "handyman" to fix the problem. Many times, it turns out that the resident was over-reacting to a problem and it is an easy, inexpensive fix.
— Briana and Dan Ferguson, of The Ferguson Group, Inc., specialize in residential property management in the Roseville area.
The Ferguson Group is your locally owned and operated full service residential property management and real estate company. We can assist you with all of your buying, selling, leasing, and property management needs. We offer complete property management services for your condominium, single family dwelling or 1-4 unit building. We serve the areas of Sacramento, Placer, and El Dorado Counties. We maximize your rental income and occupancy rates, and manage all of the details, so that you don't have to deal with the stress and problems that can arise when managing residential real estate.
Our clients have the comfort of knowing that our staff is the most qualified to handle any and all aspects related to the proper management of their most valuable assets.
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