Common Mistakes Made by Landlords
Landlords, like everyone else, can make mistakes—their mistakes just might cost them more than the average person. We discuss some common mistakes you should avoid if you just entered this profession.
Failing to Understand Fair Housing Laws
Fair housing laws protect prospective tenants and homebuyers from discrimination based on race, sex, color, religion, national origin, disability, or family status (whether or not they have kids.) Asking the wrong questions in a screening interview or describing your ideal tenant in marketing materials could result in claims of discrimination and even lawsuits. It’s one of the common mistakes made by landlords. Stick to the property and its features when advertising or showing your rentals.
Using Cookie-Cutter Leases
There are lots of boilerplate leases available online, but their terms may not match your state and local laws, or it may not include the specific policies you want for your properties. Your lease should spell out your responsibilities as a landlord for things such as maintenance and communication, and the tenant’s responsibilities regarding rent, renewal, and notices. Research your state and city’s lease requirements and have your lawyer review your version of the lease for compliance and completeness.
Another common mistake landlords make is assuming that maintenance won’t be much of an issue and failing to budget appropriately for it. Maintenance includes not only repairs and cleaning, but the mortgage, taxes, and utilities you pay on your property. Less money comes in to cover these costs the longer units are vacant. Set aside the equivalent of several months’ worth of maintenance costs to cover unexpectedly prolonged vacancies or surprise repairs.
Misusing Security Deposits
States have different regulations about how you can handle security deposits. Many new landlords don’t realize that their state may require them to keep the money in an entirely separate, interest-bearing account, and they mistakenly treat deposits as income. They’re not—landlords must return security deposits in all but a few, limited circumstances, such as breaking the terms of the lease, failure to pay rent, or damage to the property beyond normal wear and tear. Even then, landlords must justify the amount of the security deposit they retain with documentation and receipts.
Easing Up on Screening
The financial motivation to minimize vacancies shouldn’t result in lax tenant screening procedures. Every prospective tenant should go through a thorough, standardized screening as permitted by your local laws. This may include a credit check, criminal background check, employment and rental history, and references. Landlords should know what they may and may not look into during a screening.
Not Conducting Move-in and Move-out Inspections
A landlord can’t prove that a tenant damaged their property if they can’t prove what condition the property was in before the tenant moved in. Take photos, and walk through with the tenant both before the move in and before they move out. Document what you find and give the tenant a copy. If there’s damage, provide written estimates and receipts for any repairs that you intend to hold back security deposit money to address.
Lax Enforcement and Poor Record Keeping
Landlords should be kind and respectful toward their tenants, give proper notice if they need access to the unit, and get to know tenants well enough to show concern for their well-being. But this doesn’t mean being soft on enforcing rules about late payments and move-out dates. It’s possible to be both kind and strict about policies and rules.
Failing to Seek Help
There’s no shame in admitting when you’re in over your head. Hiring a reputable, experienced residential property management company can provide peace of mind. Your property manager can handle marketing, tenant screening, rent collection, and evictions when necessary.