Leasing your real estate property to a tenant is an excellent source of passive income. All you have to do is charge a rent that’s more than the monthly mortgage and you’re good to go. Also, you don’t have to deal with the maintenance hassles that arise when a property remains vacant for too long.
But leasing your property isn’t as straightforward as finding a tenant who is willing to pay you the right amount of money. You need to maintain your property to attract potential tenants, as well as screen them before finalizing the lease. Also, you need to lay down clear regulations for ongoing maintenance and rental payments.
Likewise, you should be aware of the federal and local landlord-tenant laws. Otherwise, you might have to deal with expensive lawsuits from disgruntled tenants in the future. When you’ve made a few real estate investments or are leasing your property for the first time, you’re prone to make a few mistakes.
From negotiating faulty lease terms to buying the wrong insurance cover – some of these mistakes will end up costing you more money, effort, and time. That’s why in this blog, we’ve outlined a few key mistakes you must avoid when leasing your property. Let’s take a look.
1. Going the DIY Route
Owning a couple of properties in different cities is one thing. But finding and retaining the right tenant for a rental property is a different ball game altogether. Even if you’ve tried your hands at subletting a house before, leasing your real estate property isn’t going to be easy.
To begin with, you’ll have to develop a deep knowledge of relevant laws and understand your obligations as a landlord. Also, you must be familiar with the housing codes in your area. You even have to list your property on various real estate rental websites with a compelling description and eye-catching photographs.
Needless to say, this isn’t a one-person job that can be handled by an aspiring landlord. Instead, it’s a good idea to hire a professional realtor service or property manager. They’ll take care of attracting and screening tenants, as well as showing them around.
Take Maser Condo Sales for instance. The Santa Monica-based realtor service assists you at every step of the leasing process. From outlining a leasing strategy to negotiating payment terms – they handle complex steps while you can focus on making the property more attractive.
2. Not Screening Tenants
The last thing you want is to end up with a tenant who delays monthly payments and doesn’t follow the lease terms. Worse still, you might start receiving complaints about them from concerned neighbors. While you can resort to legal action in such cases, it’s going to an excruciating experience.
The best way to avoid this scenario is to thoroughly screen potential tenants before signing the lease agreement. Ask them to fill a rental application form and provide details of former landlords and the current employer. Run a background check to identify red flags, such as loan defaults and evictions.
While the screening process could delay the lease by a few weeks, it’s going to be worth the effort and time. Even if a tenant is willing to pay the deposit right away, don’t bypass screening to finalize the lease.
3. Ignoring Landlord Insurance
Here’s the thing – your go-to homeowners’ insurance won’t cover damages or destruction caused by tenants. Also, it won’t cover your legal expenses, in case you get sued by a tenant.
That’s why it is a good idea to consult a trusted insurance agent and get the right type of insurance policy. At the very least, you should get property insurance and liability insurance. Also, make sure you get the proper amount of coverage to account for potential damages and legal obligations.
4. Being Over-Friendly with Tenants
Some people have a natural flair for making friends wherever they go. If you belong to this group, you should be extra-cautious while dealing with your tenants. Of course, you need to maintain a polite and cordial rapport with tenants.
But become friendly and lenient might tempt them to take undue advantage of your relationship and ignore lease regulations. It’s wiser to draw a line and maintain an amicable yet professional with your tenants.
5. Neglecting Paperwork
This is a common mistake homeowners make when trying to lease a property on their own. Of course, outlining a lease agreement that complies with state laws and regulations will be a herculean task. But ignoring this step could land you in trouble in the future when, say, a tenant causes significant damage to the property or repeatedly defaults in rent payment.
It’s wiser to hire a legal advisor who can guide you through the process of creating the lease agreement. Make sure it clearly outlines lease regulations, such as the due date for monthly payment, the penalty for late payment, etc.
Do you have any useful property leasing tips for first-time landlords? Share your suggestions in the comments section below.
