Our topic today is the five mistakes that new landlords most often make.
Family and Friends
The first mistake we see a lot is renting to family or friends without checking them out. Even if you think you know a person well, you don't want to just let them move into your house. Check their credit, look for evictions and check past landlord references. You also want to verify their income and make sure they can afford to rent your home. Ideally, they will make at least two or three times the monthly rent. For more details on tenant screening, check out a blog and video we've done previously on how to manage a thorough screening process.
Another mistake new landlords make is not collecting a deposit or collecting a deposit that is less than a full month's rent. When your tenants leave the property, the security deposit will cover any damage that might be left behind. If you don't have a deposit to pay for that damage, you're left paying for it yourself. That will cause problems, especially if you rented to a friend. Remember that you cannot collect more than two months rent in California because it's against the law.
Written Rental Agreement
It's always important to have a written agreement, even with friends and family members. You want to have all your expectations in writing. The agreement should say when rent is due and what happens if it's late. Spell out whether a late fee will be charged or if you will immediately serve a Three Day Notice. Make sure the agreement includes whether pets are permitted or which appliances are left behind for the tenant's use and who's responsible for maintaining them if they stop working. The agreement should include whether there is a gardener and a pool service. Don't agree to things verbally. You need all the expectations in writing.
Move In Inspections
A major mistake new landlords make is not doing a move in inspection and taking a lot of pictures. You want to make sure you document how the house looked when the tenants got it. An inspection and photos will enable you to demonstrate there was a clean rug and new paint and no holes in the walls. Take pictures of every room, in the front and back and in the bathrooms and kitchens. Photograph the outside of the house as well in case someone runs into side of the house with a car. You want to show how the house looked in the beginning. You'll do the same thing when your tenant moves out.
Collecting Rent on Time
Take the emotion out of it and get your rent on time. Even if your tenant is a friend or family member, make it clear that rent is due on the first of the month and late after the fifth. If they call with an excuse such as they didn't get paid or they had to make car repairs or buy their kid a new bike, explain the importance of paying rent first. Don't take late payments because if you do, they will always pay late and they'll think you allow it.
It's important to avoid these five common mistakes when you're a new landlord. If you'd like some help, or you have questions, please contact us at Property Management Experts.