There is a lot to learn as a new landlord, and it’s easy to make mistakes. Even seasoned property owners can let things slip through the cracks if things get overwhelming as they often do when it comes to running a property.
As a professional property management company in Phoenix, we know the most common mistakes to avoid as a new landlord. We can also help you with any of the below if you need help managing everything at once.
Not Getting Proper Insurance
If you don’t spend a little extra on liability insurance, you’ll have to pay much more if something happens like a fire, maintenance issue, or tenant injury. Make sure that your policy covers everything that could go wrong; while it might seem like a great area to save on, it’s not worth the risk. A lot can go happen that is totally out of your control, like a natural disaster or break-in, and it’s best to be covered.
Charging Too Much for Rent
Do your research to charge a fair price for monthly rent. You need to understand the market, your neighborhood, and the value of the property in Phoenix itself before determining rent. While you don’t want to undersell yourself, overselling your property will lessen the number of prospects interested in touring your property,
If you aren’t sure what counts as a fair price, hire a property manager in Phoenix to help you set a budget and source potential tenants.
Taking Maintenance Shortcuts
Ignoring maintenance needs is another mistake that will end up costing more in the long run. Aside from needing insurance as we mentioned previously, you also don’t want the issue to grow into a more costly one. For example, a small faucet leak is easy to fix. It may not seem like a big deal, but if you let it go, it could turn into mold, a flood, or another hazard.
If you have too many properties or too many other things going on to regularly check in and be on-call, hire a dedicated maintenance person or team to do the work for you.
Not Getting a Security Deposit
Always take a security deposit from tenants. Its intended use isn’t just to take extra rent money to ensure they can pay the first month but to cover damage that may occur. A deposit also helps cushion the financial blow if a resident terminates their lease early (in which case they will not get the deposit back) or doesn’t pay rent on time.
Another costly mistake around security deposits is not saving them correctly. While you want the money on hand in case something happens, the tenant should get it back at the end of their lease if nothing goes wrong. Don’t prematurely spend the deposit or accidentally mix it in with your other finances.
You may also want to consider asking for the last month’s rent. This will cover the last month in the lease agreement and it helps narrow your pool to higher-quality applicants.
Not Enforcing the Lease Agreement
Every property manager in Phoenix should write a detailed lease agreement from the start that includes rent amount, security deposit, added fees, how amenities are charged, and who is responsible for damages, appliances, and whatever else.
From there, stick to your end of the bargain. Is rent always due by the third of the month? If so, enforce the late fee. Are tenants responsible for setting up their utilities? Hold them to that. Remember that the contract is non-negotiable, and letting things slide to be nice is only hurting you in the long run. On the flip side, honor your commitment to the tenant and make sure to repair any damage that isn’t their fault, create a livable space, and return their deposit.
Spending all Their Earnings
Another common mistake new landlords make is not accounting for gaps in residency. While it’s great to have a positive outlook and a solid plan in place to find new tenants when needed, you can’t always prepare for every situation that may arise.
A good idea with any business is to have some cushion money for times when profit is low. Set aside a separate bank account for your property funds and keep receipts in an organized filing system to avoid forgetting to lose money.
Not Meeting Property Requirements
In the same vein as keeping up with maintenance issues, make sure that you are meeting code requirements. Failure to do so may result in hefty fines, repair costs, or worst-case scenario, legal action taken against you. Some common violations to look into for your Phoenix property, according to phoenix.gov, include:
- The refrigerator not working
- The only toilet is clogged
- The bottom toilet in a two-story is clogged
- The kitchen sink is clogged in a two-story unit
- No electricity to the cooler or refrigerator
- A water line leak
- A leaking water heater
- Broken windows
- Broken entry locks
- A lock change in case of an emergency
Not Screening Potential Tenants
A final mistake to avoid is not properly screening tenants before they sign a lease. Take the time to check on your potential tenant’s history and credit score, even if they seem reliable and can immediately pay the first month’s rent. Beyond just having some cash on hand, they need to have a reliable, consistent, and legal stream of income that shows they will be able to pay rent throughout the length of their lease.
Don’t worry if you have already made a few mistakes as a new landlord in Phoenix; everyone makes them, especially when they’re first starting out. Just take the time to get to know the local laws, your tenants, and everything that goes into owning a property.
If it turns out to be more than you bargained for or if you want someone to help you keep everything organized, hire Real Property Management in Phoenix to take care of all your property needs.