Common Mistakes Property Owners Make & How To Avoid Them
Real estate proves time and time again to be one of the best investments a person can make to grow their wealth. American business executive Louis Glickman once said, “The best investment on earth is earth.”
As a landlord, your rental property is one of your most significant financial assets as it provides you with rental income in addition to equity. While it’s plain to see that owning a rental property is a smart financial investment, many landlords do not realize the complexities of managing their real estate properly. To help property owners avoid headaches, we’ve compiled a list of the most common mistakes property owners make and how to avoid them.
5 Common Mistakes Property Owners Make
#1 Not Having A Written Lease Agreement
As a rental property owner, it’s essential to think and operate like a business owner. Would a good business owner hire an employee, purchase machinery, or take on a new client without a written contract? NO! If a business owner wouldn’t do it, you shouldn’t either.
While it may be tempting to rent to a friend or family member with a verbal agreement, a formal lease agreement is an essential legal document that will protect you and your renter should issues arise. Click here to read about the legalities of renting a property in Boston.
#2 Not Checking References
Before signing a rental agreement, you should verify a tenant’s identity, credit history, and income and call references from current or past landlords. It’s most important to call the previous landlord because you will get honest feedback, whereas the current landlord may just want to get rid of a bad tenant and tell you they are wonderful.
Overall, contacting references can tell you a lot about a prospective tenant’s payment history, cleanliness, and overall behavior as a renter. Failing to check references could mean missing major red flags.
We suggest calling one to two previous landlords and the applicant’s current landlord.
#3 Renting To Someone With Bad Credit History
An individual’s credit history represents their ability to pay back money they owe to creditors. When a prospective renter has a poor credit score, it can mean a few things: they don’t pay bills on time, defaulted on loans, carry high balances on credit cards, co-signed on a loan, or applied for a lot of credit.
Barring any sort of identity theft, renters with low credit scores should be avoided. A FICO score of 670 or higher is a solid credit score for most rentals.
#4 Allowing Pets Without A Pet Interview
Whether or not you’re a pet lover, pet-friendly buildings tend to be much more attractive to pet owners, and your pet policies may play a significant role in an applicant’s decision to rent from you. In Massachusetts, no pet fees or deposits can be collected by a landlord, so it’s crucial to ensure the pets in the home are house-broken and well-behaved.
We suggest conducting a “pet interview” to view a pet’s behavior before drafting a lease agreement. Aside from service animals, you have the right to restrict the types, numbers, and sizes of the pets you allow. A landlord can charge a security deposit of up to one month’s rent in lieu of a pet fee or charge higher rent to compensate for potential damages.
#5 Not Being Responsive To Tenants & Ignoring Routine Maintenance
Although life is busy, failing to conduct regular check-in with your tenants on the condition of your property is not only bad customer service, but it’s also detrimental to your bottom line. If you check in irregularly, your tenant may fail to tell you about a broken window or loose wiring.
Regular maintenance is your responsibility as a property owner, and avoiding it could mean costly repairs down the road. Ignoring mold in the bathroom or a leaky faucet could come back to haunt you later. Moreover, you could end up with a bad reputation as a landlord if you continually avoid routine upkeep. Try to check in with your tenants once per month.
At CJL, we make owning rental properties in the greater Boston area more manageable than ever. We manage single-family homes, condominiums, apartments, and commercial properties.
Call or email us today and experience the best in property management services!