Some Very common errors landlords make, that cost them thousands in the Long Term.
What Are Some Common Mistakes That Cost Landlords Thousands To Deal With?
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Managing properties might seem like an easy task in theory, but practically, it can be a challenging task. It takes years of working and learning in the real estate industry to become a successful property manager. It costs landlords thousands of dollars when they are making few common mistakes. Landlords can either make mistakes themselves and learn from them, which can be a costly method, or they can learn from others' mistakes. Even if you think that you know about property management, you might neglect some things. There is always room for improvement; hence make sure to look at the common mistakes given below:
1. Not Being Flexible.
Many landlords have made up a single amount of rent they will be charging for their property. If you have fixed your mind on a single amount, there is a high chance that you are going to miss out on rent for a few months. There is flexibility required in negotiations unless the property is very appealing to prospective tenants.
Even when you are listing properties for sale, add some flexibility to the offer price. List the price higher than the target price and leave room for negotiation. Although, make sure to not leave a large room for negotiation which can inflate the price of the listing by a lot that can drive away potential tenants.
2. Taking Rental Properties Lightly
Many people treat the rental properties lightly as they are owning them on the side without paying a significant amount of attention to the business. It is one of the notable mistakes that landlords make, which costs them thousands of dollars. It is necessary to keep yourself updated with the laws, regulations, rental markets, and maintenance.
Treating rental properties as passive income results in properties that have not been well maintained, fines, and charging lower rent than the market. When you treat rental properties as a proper business, you are also looking to invest your earned money into buying new properties, and you are hesitant to spend the extra income.
3. Not Marketing The Properties
The goal of marketing is to get the right product and services to the right customer. You will only sell your property or get tenants if you reach the right target people. Even though you might believe that your properties do not require marketing, you can still benefit from marketing by getting higher prices for properties or higher rent. Various listings provide a competitive landscape to your properties, and you need to spend on marketing to get an edge over other listings.
4. High Maintenance Costs
For your properties to stay livable, you need to account for repair and maintenance regularly. Do not underestimate the maintenance costs, as a simple plumbing job can cost over 200$. When you are calculating profitability for renting out your properties, keep in mind all the maintenance costs. Look out for the tasks that are costly but can be done more cheaply. Handypersons can do some repairs, which are being handled by experts costing hundreds of dollars. However, make sure that you hire people from licensed companies.
5. Hiring Property Management Companies
At some point, you might feel like leaving the responsibility on a company to manage your properties. It can be a costly idea even though the management and leasing fees are low. There are hidden charges such as annual inspection fee, fees after connecting with a tenant, bookkeeping fees, etc. There are other problems with property management companies. They only onboard clients with multiple properties, property managers might not have your properties as a priority, and you lose the chance to learn to become a successful landlord. It is not feasible to rely on a property management company that will be eating up a large part of the revenue in the long run.
6. Vacant Property
When you buy a property, you likely opt for a mortgage or a loan. When you are doing calculations to see if you are going to make mortgage payments or check the payback period, you need to account for vacant property. You need to ask yourself if you can make the payments even if it is not rented for an extended period. Even though you might think that the property you are purchasing is excellent, this idea can be wrong. It might come as a shock that properties can stay vacant for a long time.
7. Tenant Turnover
You might overestimate your property and think that you can get new tenants in no time. A small argument with the tenant or a delay in rent payments might make you wonder if you should get new tenants. The other way round, if the tenants are not happy with your policies, there are high costs associated with tenants leaving your property. Due to turnover, you will have some lost income, you must repair the property and market the property again. All these costs usually add up to thousands of dollars which is not feasible.
Property management can seem very easy but can be a challenging task. Avoiding common mistakes such as not being flexible with price or rent, having high tenant turnover, hiring property management companies, not marketing, and taking the business as part-time can be costly. Even though you might think that these are small costs, they add up to thousands of dollars and are simple mistakes commonly seen in the market.