Landlord Lessons: 7 Mistakes To Avoid When Renting Out Property

Choosing the wrong property

This is the biggest mistake you can make when investing in real estate. Ideally, any property that you rent out needs to be in relatively good condition and also needs to be suited to the type of tenants found in that area. 

Be wary of investing in a dilapidated fixer-upper. Always carry out a survey to determine the exact extent of the work that needs doing. You will need to make sure you have the budget to fix any existing damage and any future problems. If there are too many issues, you could find that such a property is too expensive to restore and maintain - you could end up making a huge loss.

While there are many different types of people who are renters, you need to be realistic about what kinds of people are looking to rent in an area before buying a property. Larger properties can be difficult to rent out unless you’re willing to rent out individual rooms to different tenants. This is because the few people who can afford to rent out such a property would much rather buy. Three-bed houses tend to be ideal for renting out to families and are great for attracting long-term stable tenants. Apartments tend to have a higher tenant turnover, but are often easier to find tenants for because they are more affordable. Renting properties out to businesses is also an option.

Neglecting proper tenant screening

It’s important that you screen tenants to make sure that a) they can afford to pay the rent, and b) they are not likely to damage the property. Taking on bad tenants could cost you a lot of money in lost rent or property repairs. 

When screening tenants, it’s customary to do a credit check and to ask for a reference from a past landlord. You may also want to consider whether a tenant smokes, has kids or has pets. For low income tenants, getting someone else to sign as a guarantor could also be a screening measure to consider to build trust. 

Tenancy agencies can help with this screening process. They may also be able to help market your property and find you new tenants. However, this service does come with additional fees.

Overpricing your property

Charging high rent could make it harder to find long-term stable tenants. You may even struggle to find any tenants. Don’t be greedy - look at what other landlords are charging for similar properties and set your rates accordingly.

In some cases, it can even be beneficial to charge less than other landlords or to offer incentives such as paying for energy bills in order to help you attract tenants. Just make sure that you are not too generous with your rent prices to the point that you don’t make a profit. 

Ignoring your tenants

It’s essential that when your tenants have questions and concerns, you respond to them in good time. This is particularly important if emergency repairs need doing or there are other urgent issues.

Actively encourage communication by not just responding to tenant queries, but also checking in on your tenants. In fact, scheduling a property visit once per year is recommended to talk to your tenants in person and inspect the property for any damage that may need fixing (not all tenants will notify you of damage!). 

Creating a poor lease agreement

The lease agreement you give to tenants needs to be detailed and professionally written so that all information is clear and cannot be misconstrued. A lease agreement that is too vague could lead to misunderstanding and conflict. Some tenants may even deliberately take advantage of it.

A good lease agreement should protect you and your tenants. Work with a legal copywriter when creating an agreement so that you can cover all important aspects and ensure that all your points addressed are clear.

Not budgeting and forecasting

You need to make sure that you have enough money set aside to pay for all the expenses related to renting out property. Without a clear budget, you could overspend and not make a return.

Take your time to track all the recurring costs, while also budgeting for potential emergencies. You could consider using financial forecasting software for property investors to help you budget and forecast. This could be particularly useful if you’re managing multiple properties.

Failing to document everything

To legally protect yourself, it’s important to document everything as a landlord. Too many landlords end up losing disputes with tenants because they didn’t collect evidence. 

Before taking on tenants, take photographs of every part of the property - this allows you to clearly see if any damage is caused when a tenant is living there. Keep a list of any furnishings and fittings that you provide such as chairs, curtains or appliances - if anything goes missing you’ll be able to then tell. When communicating with tenants, try to make sure that any agreements are put in writing - follow up phone calls with emails or texts to confirm anything the two of you may have agreed.