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My wife was 2 and I was 24 when we first became landlords.
We were college students and did not possess the skills or knowledge of how to be professional landlords.
Now we are more seasoned but looking back at our experiences we wish we would have avoided some mistakes!
In this article I will go over 7 mistakes you will want to avoid as a new landlord.
If you prefer to watch instead of reading this article, please see my YouTube video below.
Table of Contents
1. NOT doing credit and background checks
Although you may be anxious to rent your house, it is not worth rushing the screening process to find your first tenants. Failing to check each renter’s background and credit history might result in a nightmare tenant.
The correct thing to do is conduct a professional tenant screening process.
We did not conduct any credit checks, payment history, or background checks when finding our very first tenants for our first rental property.
We completely relied on using ‘face screening’ when finding renters for two reasons –
First, as we mentioned at the beginning we were only 22 and 24-year-old college students and this was our first experience renting out a property.
We had no experience or knowledge of the screening process and relied on our gut feeling only.
Second, we were in the process of buying our second condo property and were in a little rush to rent out our first property.
We needed to provide leasing documents, rental deposits, and proof of first-month rental income from our tenants to our lender in order to get a house loan.
We were fortunate enough to find good tenants our first time, but we still consider not going through a formal screening process a huge mistake.
You never really know a person during a short meet-up and without any tenant screening…
Now we have more experience and always conduct tenant screenings. We used Zillow and apartments.com to list our property for rent and send out screening applications.
Signing up was very straightforward and we just used their free services.
2. NOT taking before and after pictures
After you have completely cleaned and have your property ready for renters, make sure to take LOTS of photos before your tenants move in.
Properly document the condition of the property so that you don’t hear “it was like that when I moved in”. All the photos you take become evidence will back you up.
Also, remember to take a lot of photos immediately after your tenants move out and return the keys to you. Check the condition of the apartment and inform them immediately after they move out if there are any issues.
This way they will be less likely to dispute any damages they have caused to your property.
Take out the appropriate repair costs from their deposit if there are damages.
3. NOT treating it as a business
No matter your style of being a landlord, treat your rental property like a professional business.
I still remember when first becoming a landlord. We just wanted to be cool and chill since we are a similar age to our renters.
Since we were young at ages 22 and 24 years old at the time, we even told the people looked at our house that we are chill landlords, etc.
This is not good because it could be taken the wrong way. Your rents could be thinking “oh, they are chill and wouldn’t mind if I’m late on my rent”.
We also feel bad and would have a difficult time saying “no” because we wanted to be nice. Don’t be afraid to say no!
We rented out our first townhouse property to a newlywed couple. They were close to us in age and were very, very picky…
They loved asking us to fix small things and even when many times the contract said it is their responsibility. For example, the main sink in the kitchen got clogged. Instead of having them fix it I went over, added some Drano, and it was fixed in minutes.
Our lease agreement clearly said such problems are the responsibility of the tenant(s), not ours. We always wanted to be nice and so I would go fix it.
When they moved out we noticed scrapes on our wall, floor, and some other small damages. We could have taken some part out of their initial deposit, but instead, we just felt bad and wanted to be nice.
Don’t make our mistake, please!
Instead, we just fixed it all on our own with our money and gave them the full deposit back.
We really did not treat our rental property like a professional business at all. The good thing is that we have improved a lot and will continue to improve moving forward.
4. NOT changing home insurance to landlord insurance
Our rental property at the beginning was our primary residential property. When first purchasing the property we bought home insurance. We did not know that we needed to switch to landlord insurance.
During the process of buying our third single-family house property, we talked with our insurance agent and realized we needed to switch to landlord insurance.
One big advantage of having landlord insurance is having the option to have ‘loss of rent’ coverage if renters are unable to pay rent.
Having this additional coverage was only a little extra than regular landlord insurance but was not expensive at all.
Quick Tip: Generally it will be cheaper when you bundle car insurance and home/landlord insurance together.
5. NOT increasing rent price if you recieve tons of applications
After first posting our townhome for rent we received tons of interested people and applications, I mean TONS.
When this situation occurs, you can definitely increase your rental price a little bit but we had no idea, haha.
We also did not look at various resources to see the current rental price in that community at the time.
Later on, we found out that we could have rented our place out for an additional $100-$200 per month!
Thinking about how much money we lost is a bit disheartening but more important is we are focused on doing better moving forward.
6. NOT raising rent when renewing the lease
Many landlords are happy their rental properties are stably rented out without the thought of increasing rental prices.
Make sure to do your research to ensure that your rent is suitable for your area.
If you have already rented out your property but never increase the rent when the lease is renewed then you are losing out on extra income.
The market price has been increasing but also the cost to make repairs. Periodically having small increases in rent will benefit you in the long run.
You may think renters do not expect their rent to be raided but in fact, many renters expect a small increase every year or so.
It’s common to fear is the tenant will move out and you need to find new renters if there is a price increase. We’ve seen if you have good long-term tenants and you want them to continue to rent out your house then you can rent them out at a little lower than the average market rental price.
We wouldn’t increase the rent too much but instead just a little in order to keep them.
Back with our first tenants we did not do this and kept the price the same, regardless of being under market value. Life is all about learning lessons thought, right? 🙂
7. NOT remodeling before renting out
During the first year we lived in our first 2 bedroom/1.5 bathroom townhouse we did some remodeling and switched old appliances to new inexpensive ones.
As college students, we both did not have much knowledge on how to remodel/rehab properties. I was also not a natural handyman at the time so we did not do a ton of remodeling before renting out our first property.
Thinking back we kind of regret not doing more remodeling since it would have let us rent at a higher price and add more value to the property.
Here is a recap of each landlord mistake to avoid:
We understand every city and location is different. I am sharing our own experiences and lessons while investing in real estate in Utah.
Regardless of location, all of us landlords need to educate ourselves and establish contacts with other experienced landlords and related professionals.
After reading this article, you probably know more than the average new landlord. At least you can avoid the mistakes we made as new landlords!
We’d love to hear your experiences or tips, feel free to drop a comment below!
Disclaimer:
We hope the information in this article provides valuable insights to every reader but we, the Biesingers, are not financial advisors. When making your personal finance decisions, research multiple sources and/or receive advice from a licensed professional. As always, we wish you the best in your pursuit of financial independence!
