If you are renting out a property for the first time, you should know that there are nuances to this kind of business. To make sure you are not going to lose money while you get the hang of being a landlord, consider the following common mistakes most newbies make and be sure to learn from these.
1. Procrastinating Maintenance Issues
If you put off maintenance issues thinking that it does not need your immediate attention, it could potentially snowball into a bigger and costlier problem. So the moment your tenant complains of that clogged gutter, for instance, make sure you take care of it immediately.
If you do not have the time, you can always hire a company that provides professional property maintenance services in North Bay, such as Dupuis Properties, so that issues will be addressed promptly.
2. Failing to Screen Tenants Properly
Sure, you may be excited about getting your first tenant on board. However, in your excitement, make sure you are not forgoing adequate background checks on potential tenants. Do not be rushed into an agreement without checking their background, references and even credit history first. To enjoy a long and favorable relationship with your tenant, it is wise to start on the right footing.
3. Not Having Enough Insurance Coverage
Another common mistake is trying to save on insurance cost. It is not just your property that needs coverage in case of unfavorable events. You also need protection as a landlord in case of a lawsuit. So chalk up the cost of both property and liability insurance with enough coverage. This might be costly at first, but when unwanted events unfold, you will be glad you shelled out that extra expense on insurance in the beginning.
4. Not Having a Lease Agreement
Do not count on promises unless they are put into writing. Even if the tenant is a friend or an acquaintance, you should never take a handshake in lieu of a lease agreement that covers everything that you have agreed to. This legally binding contract serves as a safeguard for both you and the tenant. It establishes your right as the owner of the property while at the same time, protects your tenant from unlawful financial demands.
A good lease agreement includes clauses on the duration of tenancy, rental amount, security deposit, maintenance, rules of practice, notice period and renewal term, among others.
5. Lacking Due Diligence
As with any business, renting out a property comes with its own unique set of challenges. You will have to deal with vacancies, tenant issues and maintenance problems, to name a few. Make sure you have done your due diligence so that you remain financially stable to pay the mortgage even when any of these unwanted incidents arises.
If you do not want to deal with the headaches that come with being a landlord, hiring a property management company is a good alternative for you. It is a win-win option, as you get to enjoy passive income without having to worry about your property.