7 Ways to Kill the Bottom Line
1-Holding on for that "home run" deal
If the area supports it and the property is $1,295 in the current market, you can loose/waste a couple months income chasing $1,395. How many mortgage payments are you willing to make trying to get a "home run"? Home runs can backfire on you too. Tenants have a knack for finding out they could have had the home next door $100 less every month (and will choose to).
2- Waiting to get repairs done
"I will paint the house if it doesn't rent in a couple of weeks". Sound good? This is actually a really bad idea! You should always consider the tenant your home will attract. If your home isn't in optimal shape to attract the very best tenants in a competitive market, you will only get tenants who don't care what their home looks like. You may get the home rented without the cost of the repair, but it may not be the tenant you want in your home for the next 12 months.
3- Ineffective marketing
A simple "For Rent" sign or independent line ad in the paper may be the quick end to your vacancy. Be careful though - most consumers depend on the internet and some the best applicants now come through online ads. You have to track your efforts to see what media produces the best (not always the most) calls per dollar spent. A "free" ad can cost you days or months of vacancies if it keeps you from finding the best tenants.
Whether you choose paper or online ads, you must have a well-written ad to get the phone to ring. You also have to be priced right, and have the home available to rent. If you aren't getting any calls, it is usually about price. If you are too high, most people won't even take a look. If you are getting plenty of lookers but no takers, check the home out to figure out what is turning people away.
4- Using an inexperienced agent
There are many reasons to use a leasing agent, but if your agent isn't experienced, there isn't much benefit at all. In any major markets, there are literally thousands of real estate agents who want a commission, but very few with enough property management and leasing experience to make them a good choice. Be prepared to do your own ads, applications, and tenant screening if you plan to lease your home yourself, or through the help of an inexperienced friend, neighbor or relative.
5- Poor (or no) tenant screening
Most evictions are the result of a poor or inadequate screening process. By extension, that means most repairs, vacancies and legal expenses are also due to approving the wrong tenant. This is an area where you MUST do your homework and not rely on first impressions or instinct. Looks can definitely be deceiving. Unless you have money to burn, screen well and know when to say NO.
Take a close look at the entire family of your prospective tenant. If you screen the parents, you might not know that their teenage son has a history of violent crime - leaving yourself open to a high risk of potential liability.
Many people who try to manage their own homes are very trusting, sometimes even skipping the use of a basic application and background checks. If you want to learn how evictions work, just go with your â€˜gut' feeling on that prospective tenant and hope for the best.
6- Using a substandard lease agreement
Most leases on the market are very generic and seem to be built to not scare off a prospective tenant, rather than protecting the landlord. Do some tenants refuse to sign our lease because we have a "crime free" clause? We sure hope so. Does our "no dangerous breeds" language discourage the owner of 3 Pitbulls? You want it to. If the lease protects the tenant more than the landlord, then you are headed for trouble unless you get lucky finding the perfect tenant.
7- Lost time
Losing time is the easiest and most common mistake that we see new landlords make. Calculate the rent value of each day on your home. If your home rents for $1,395/month, then each vacant day costs you almost $50! We see people all the time who "can't afford $75/month for a professional manager", but lose a week getting their ad in the paper ($350)... or take a couple of weeks getting the house rent-ready ($700)... or feel bad for the tenant and delay the eviction for a month ($1,400).
If you aren't prepared to be completely diligent and focused on the details, then you probably can't afford NOT to use a professional property manager. Sloppy practices with your rental property can kill what should be a very profitable and rewarding experience.
Managing rental property is more complicated than it looks. Do your homework and either become an expert, or hire one. Every rental property is a business and should be treated like one. The problems outlined here are easy to avoid, but expensive to experience. Give your business the time and attention it needs and it will pay you back very well over time.
Don't get tricked by a suspiciously cheap management solution; by the time you find all the hidden ways that the "cheaper" guys make money, it will be too late. The cheaper a property manager looks on the front end, the more they make up on the back. A great property manager will make your life easier and save you money. Remember - Good Property Management does NOT cost you; it saves you MONEY... For more information contact Jason: firstname.lastname@example.org Visit: www.RentalPropertyRenegade.com