McWhorter Property Management Blog


The Top 10 Mistakes Made by Rookie Landlords

Kevin Chatham - Sunday, October 16, 2016

People make the decision to become a landlord for various reasons. Perhaps, your job has transferred you and while you need to move, you’re upside down on your house and can’t sell without a financial loss. Maybe you want to start earning a passive income on the side and decide to rent your primary residence. Or, perhaps you want to upgrade to a bigger house and decide to keep your smaller one as an investment property. Whatever the reason(s) you may have, you’re probably thinking, how hard can it really be as a landlord? We’ve all be rookies at some point in our lives, whether it was a new job, sport, or even as a landlord.

Over the years, I’ve met many a rookie landlord. Generally these discussions arise due to some sort of problem the rookie has encountered and they are now seeking advice to resolve it. As a property manager, I tend to see the same rookie mistakes over and over.

The following are the top mistakes I see from rookie landlords. If you can avoid these, you’ll have a much higher chance of success!

1. Failing to Properly Screen Tenants

This is likely the most important aspect of being a landlord. Too often, rookie landlords fail to properly screen tenants. Instead, they simply take them for their word. A credit and background check are imperative, but many rookies fail to perform these. Also, are you sure the previous landlord they listed on their application is not Uncle Bob giving them a five star review? “They always paid on time!”

In addition, social media is a great (and free) way to conduct a bit of investigative work as a landlord. Be sure that you’re properly screening your tenants. They can make or break you!

2. Accepting the Sob Story

Susie was late on rent last month, but her car recently broke down and she had to spend money unexpectedly so she’s going to be late again this month. Your instinct is to take her word and allow her to pay late again this month. Everyone has financial woes from time to time and after all, you don’t want to be an insensitive jerk, right? Wrong! Rent is due per the terms of the lease agreement that they chose to sign. Does your credit card company let you slide when you’re having car trouble? Will your mortgage company? No! This does not mean that you cannot make arrangements with your tenants when exceptional circumstances arise, but do not buy the sob story.

3. Having an Inadequate Lease Agreement

I’ve seen many instances where a rookie landlord simply goes to Office Depot and purchases a “standard” lease agreement. In some cases, I’ve even seen some rookies rent a property on a handshake. Both of these can lend themselves to huge headaches and may not provide the legal protection you need should a dispute arise. Ensure that you are utilizing a lease agreement that protects you and your property. And remember, always get everything in writing!

4. Lack of Understanding the Law

Some rookie landlords think that since it’s their property, they can simply change the locks and turn off the utilities when a tenant doesn’t pay. There are landlord tenant laws that protect both parties from these types of situations. Be sure that you research the law and consult with an attorney that is familiar with real estate law. Making assumptions about the law can end up costing you a lot of time, money and aggravation.

5. Failing to Get Everything in Writing

Rookie landlords will often do a deal with a verbal agreement and a handshake. Many times these verbal deals lend themselves to a tenant having a memory lapse. Often, you will get burned later with the “I thought you said rent was this much?” Insist on having everything in writing.

6. Not Understanding the Costs of Investment Properties

As long as my mortgage is covered, I should be fine, right? No! How much does it cost to rehab a property when a tenant moves out? What if their pet destroys the carpet? Who is doing the taxes each year? I thought the tenants had to clean the gutters? If you do not understand the costs of owning an investment property, you are setting yourself up for failure. Ensure you have a reserve set aside to manage unexpected costs. Investments can generate a great cash flow, but you have to be ready to cover your expenses.

7. Renting to Friends and Family

I’ve seen this go bad really quick. You think that renting to your friend you went to school with will be great because he will always pay on time and keep your property tidy, right? Wrong. Rookies often think these scenarios will work out well. When money is involved between friends and family, trust me when I tell you that too often it ends in disaster. Be cautious and do not rent to friends and family.

8. Failing to Perform Regular Inspections

Many rookie landlords tend to collect their rent money, but forget about the property itself only to show up 12 months later to a nightmare. Once the damage is done, it’s done. Be sure to perform inspections at your property. I typically recommend performing quarterly inspections, but at the very least be sure to check out the property every 4-6 months.

9. Not Treating Investment Properties as a Business

This is one of the worst ideas as a landlord. An investment property is a business and should be treated as such. I’ve seen many rookie landlords co-mingle funds, lose receipts, allow tenants to walk all over them and generally keep things unorganized. Landlording is not a hobby. If you want to make money as a landlord, treat it like a business.

10. Not Starting the Eviction Process

As a landlord, it is important to know when to file for eviction. As a standard, if one of my tenants does not pay rent on or before the due date (generally on the 1st of each month), the rent is late. Period. If a tenant has not paid me by the 5th, they’re issued a written notice to terminate the tenancy. I’ve seen many rookie landlords who simply feel bad about filing an eviction and want to continue giving the tenant multiple chances to fulfill their obligation to pay rent. Keep in mind that you did not force them to sign your lease agreement. This was a voluntary act on the tenant’s part and they agreed to pay you on the due date stated in the lease agreement. If they do not pay, they do not stay. It’s really that simple. Familiarize yourself with the eviction process and the legal requirements in your state. It is important that you remove a non-paying tenant as quickly as possible or you will continue to lose money.

What would you add to the list of rookie mistakes? How many of these mistakes did you make when you were a rookie? If you want to avoid these costly mistakes, ensure that you avoid the above items or better yet, hire a professional property manager.


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