In theory, using rental properties as an investment instrument seems rather simple and straightforward: all you have to do is find a reliable tenant who agrees to pay the amount you ask for, and then patiently wait for the money to flow into your account, month after month. What could possibly go wrong? So glad you asked, because, as it turns out, a lot of things can happen that can ruin your plans.
The reality of generating profit through rental income is a bit more complex than most property owners imagine, with plenty of pitfalls and challenges that many find out about the hard way. But you don’t have to go through these troubling experiences yourself to figure out what you should and shouldn’t do as a rental property owner. You can learn from other people’s experiences and save yourself from making mistakes that may be difficult to recover from. So, let’s take a look at some of the most common errors that people make when renting out their properties, and see what you need to do to stay on the safe side.
Neglecting marketing
Just because you have a nice property that you want to rent out doesn’t mean it’s going to be easy to find tenants. Some think that it’s enough to list their properties on a dedicated platform, and applications will start pouring in, but that’s a bit unrealistic – and lazy. If you want to attract tenants, you need to put in a bit of work and actively promote your property to make sure it gets noticed. Otherwise, you’ll end up with fewer applications and longer vacancies, which is not ideal for your budget.
The best way to approach property marketing is to have it listed on various platforms. Multiple listings mean your offer is going to be seen by more people, and a wider audience increases your chances of finding the right tenant. You also have to craft a detailed description of the place and attach relevant, high-quality pictures, so those who may be interested in the property know exactly what to expect. Attention to detail signals professionalism and trustworthiness, something that tenants will surely appreciate.
Disregarding maintenance
Rental properties, just like all other real estate assets, require constant maintenance to remain valuable and profitable. Appliances stop functioning properly or break down, pipes start leaking, the paint on the wall starts to peel off, the windows and doors begin squeaking, furniture and carpets inevitably wear out – these are all normal issues that happen in any home. What’s not normal is for landlords to disregard maintenance and ignore these common problems, which, unfortunately, they often do, because they don’t want to deal with the hassle and the expenses of constantly fixing things.
However, skipping regular inspections and putting maintenance tasks off until they can no longer be ignored always leads to higher costs as issues get bigger with time. Apart from that, the discomfort that residents have to endure may force them to move out and search for a better rental. These situations can chip away at your profits, so the lesson here is simple: prioritize property inspections and stay on top of maintenance at all times.
Setting the wrong price for your rental
Some owners don’t know how to evaluate their rental properties correctly and set the right price, which can go two different ways: they either set the rent price too low or too high. Both extremes can impact the profitability of a rental property. When you price it above the market, you can lose tenants and struggle with prolonged vacancies. On the other hand, underpricing means you’re reducing your long-term ROI.
If you don’t want to lose rental income, you need to find the sweet spot in pricing by researching the market, looking at listings for similar properties, factoring in costs, and basing your pricing decisions on accurate, recent data instead of guesswork.
Superficial tenant screening process
Oftentimes, landlords can’t seem to figure out why their tenant turnover rate is high and can’t find reliable residents, even though their properties are accurately priced and offer great conditions. In these cases, the problem might not lie with the property itself or the way it’s being handled, but with the tenants, or better said, the way they are chosen.
If you never put in an effort to properly screen candidates, you shouldn’t be surprised that you keep having issues with tenants and have to find new ones constantly. Since every period of vacancy translates into lost profit, it’s important to have a thorough screening process in place that can help you find trustworthy residents, instead of rushing to fill in your rental and then having to start the entire process all over again.
Treating residents as friends
There’s also something to be said about the relationship that landlords develop with their tenants. Ideally, both parties should demonstrate mutual respect and strive to maintain efficient communication in order to avoid misunderstandings.
Being friendly and polite is important if you want to maintain a good relationship with your residents. However, make sure you don’t become too friendly because when the lines get blurry, it becomes difficult for you to act as a landlord and enforce lease terms, which can lead to all sorts of unprofessional situations, rule violations, and delayed rent payments. That’s why it’s recommended to maintain healthy boundaries, establish clear rules from the get-go, and make sure your residents are aware of them.
Final thoughts
Renting out properties can become quite a lucrative investment as it can ensure a stable income stream in the long run. But in order to make a profit, you need to know how to manage your rental properties efficiently and prepare for the challenges and issues you might come across along the way. This implies focusing on aspects such as compliance, maintenance, marketing, and screening, and, ideally, learn from other people’s mistakes, so you don’t end up repeating them.