It’s easy to see why rental properties are such a popular vehicle for passive income. After all, if you’re able to acquire a few properties in an in-demand area, you stand to generate a small fortune every month. However, if you’ve never invested in a rental property before, there are a number of rookie mistakes you should actively work to avoid. These blunders stand to lose you money, damage your professional reputation and land you on the receiving end of lawsuits. So, if you’ll soon be purchasing your first rental property, steer clear of the following missteps.
Failing to Properly Vet the Property
You should never invest in a rental property – or any property, for that matter – without having it thoroughly inspected by seasoned professionals. When considering how to invest in real estate, you must never underestimate the importance of property inspections. Even if you do a detailed walkthrough and don’t come across any problems, it is imperative that you have the relevant pros weigh in. No matter how well-maintained a property appears to be, there could be issues lurking in places that non-pros would never think to look. So, before you start filling out paperwork, make sure the property has been given the all-clear by experienced plumbers, electricians, and building inspectors.
Failing to Properly Vet Tenant Applications
Good tenants are the lifeblood of every successful rental property. In the absence of tenants who consistently pay their rent in a timely manner, it would be impossible for many landlords to properly maintain their properties. With this in mind, make a point of being extra-thorough when reviewing applications from prospective renters. While an applicant may be a perfectly nice person, a credit history full of late rental payments and/or evictions should make you think twice about taking a chance on them. After all, if they were unable to keep up with rent at their previous residences, why should this situation be any different?
Not Having Any Emergency Funds
Believing that unforeseen problems will never arise with a rental property is pure folly. Regardless of how new or well cared for a property is, you’ll have to contend with the occasional maintenance emergency. That being the case, it’s in your best interest to always have emergency funds at your disposal. If a big problem rears its head and you’re unable to afford the necessary repairs, you’re liable to have some unhappy tenants – and potential legal action – on your hands.
Placing Tenants’ Needs on the Backburner
Even the most desirable rental property is nothing without good tenants. In order for your foray into property ownership to prove profitable, you’ll need to find tenants who consistently take good care of the property and are timely with rental payments. Of course, just as tenants have a role to play, you too have certain obligations to fulfill.
Although some landlords won’t hesitate to place tenants’ needs on the backburner, this rarely serves them well. For one thing, the prominence of new technology has ensured that unsatisfied renters have many platforms on which to make their displeasure known. Needless to say, if you develop a reputation for being indifferent and inattentive to the needs of your tenants, you’re likely to receive far fewer applications from prospective renters. Furthermore, depending on the degree to which you ignore tenant needs, you may even find yourself in legal trouble.
In addition to helping bolster your professional reputation, regarding tenant needs as a priority is simply the right thing to do. After all, few things are more frustrating than living in a rental property with a thoroughly indifferent landlord. If you reside in a rental property, it stands to reason that you’d want your concerns addressed in a timely manner – and there’s no reason you shouldn’t extend that courtesy to others.
Anyone interested in generating passive income would do well to consider investing in rental properties. The right property investments stand to bring in a fair amount of money each month, ensuring that you’re never at a loss for income. However, this doesn’t mean that every foray into property investment is guaranteed to be successful. As many first-time investors have come to discover, some seemingly minor mistakes can wind up costing you quite a bit. In the interest of avoiding such situations, fledgling property investors should actively avoid the previously discussed blunders.