Owning rental properties can be a fantastic way to generate passive income and bolster your personal finances. In fact, depending on how many properties you own – and how much income they’re able to bring in – you may even be able to turn property management into your full-time occupation.
Of course, this isn’t to say that every landlord is guaranteed success – especially the ones who have little interest in actually doing their jobs. So, if you’re looking to become a successful landlord, it’s important to educate yourself first.
Here Are 3 Main Reasons Why Rental Property Owners Fail:
1. Lack of Real Estate Knowledge
If you want to become a landlord, a working knowledge of the real estate market is likely to serve you well. Unsurprisingly, investing in something as large as a rental property without first taking the time to get educated can have far-reaching financial consequences.
So, before committing to purchase your first rental, take some time to research the location and general condition of the property. By extension, you should never invest in a property that hasn’t undergone a thorough inspection by a certified professional.
You can also benefit from consulting with a knowledgeable real estate investment company. Seasoned experts will teach you about the tenets of profitable rental properties and favorable locations. They’ll also be able to address any other real estate-related inquiries you’d care to make, such as why you should start investing early.
2. Lack of Attention Paid to Maintenance
It should come as no surprise that landlords who habitually ignore maintenance generally aren’t well-liked. Depending on the types of maintenance issues being ignored – and the length of time for which they’re ignored – such behavior can have a considerable impact on tenants’ quality of life.
Placing maintenance issues on the backburner also stands to lose you money in a number of ways. For starters, it’s liable to result in low renter retention, and the fewer tenants you have, the less rental income you’ll be taking in each month.
Secondly, the longer certain problems are ignored, the more damage is liable to be done to your property – and the more damage is done, the more fixing it is likely to cost. In some instances, ignoring maintenance problems can even lead to lawsuits and other legal troubles. So, if staying on top of maintenance isn’t currently a top priority, this needs to change immediately.
In addition to addressing maintenance requests in an expedient manner, you’ll need to employ knowledgeable maintenance personnel – especially for large multi-family rentals. Furthermore, make sure your tenants have a phone number and email address at which you can be reached during the workday, as well as an emergency number to call in the event of after-hours maintenance mishaps.
If you can’t be present to address and delegate maintenance tasks, consider hiring an experienced property manager.
3. Lack of Interest in Tenant Screening
In the absence of proper screening practices, you’re liable to take on a number of high-risk. Not only does this stand to hurt you financially (i.e., tenants being unable to pay rent), it may even result in considerable damage to your property (i.e., tenants with violent criminal histories being allowed to move in). So, no matter how uninteresting or cumbersome you find the screening process, take care to regard it as a priority.
To help reduce your likelihood of winding up with high-risk individuals, make sure that everyone who submits a rental application is subjected to a thorough screening process. After obtaining an applicant’s permission, have a look at their credit score, income situation, and criminal background.
As you’ll find, people who are adept at presenting themselves in a favorable light don’t always make the most reliable tenants. If you simply can’t be bothered to carry out the screening process on your own, work with a dedicated screening service or delegate this task to your property manager – provided, of course, you have one.
Not every landlord is able to generate healthy returns with their respective rental properties. Although this is sometimes due to factors that are well outside of the landlord’s control, many property owners fail as a result of their own short-sightedness.
While there’s no denying that rental property owner has their challenges, avoiding the mistakes made by unsuccessful landlords doesn’t have to be an uphill battle – especially if you’re not afraid of a little hard work.