The ten biggest
mistakes made
by landlords
After convincing a mate of mine to get into property to gain financial independence, I was shocked when after a while, he mentioned he'd had his investment property put up for sale and was keen to sell even if it meant selling below market value. 
I had helped with every aspect of the purchase from the cashflow down to the price and I know he got an above average deal. So what had gone wrong? He had let it to his family at a reduced rental! I couldn’t believe it as I thought I had covered the landlording scenario adequately and this was one of the no-no’s of landlording; but his daughter was different of course, until
the rent started coming in late, then came the demands for new carpets, fences and landscaping and finally, the dog (which didn’t exist) had bored through the backdoor. All that just in 6 short months and with some grey hairs in the process! Although landlording doesn’t require degrees from several universities, it should be stressed that those who entertain unrealistic expectations as to the work factor involved can turn their potential gold mine into an expensive liability.
 
Effective landlording
Your income-producing property imparts certain responsibilities which must be recognised in order to realise the fullest potential of your investment. Besides, you should employ the basic concept of maximising the benefits and minimising the costs. One responsibility is the duty you have vis-a-vis the structure itself. This involves:
Upkeep, maintenance and repairs to protect value.

The other responsibility is towards the tenant who lives in the house. This relationship is normally and usually described in your rental agreement and you must protect your interest while not infringing upon the tenant’s legal rights.
 
Mistake # 1
Obtaining services from inexperienced professionals.
How you choose your manager, your lawyer and accountant will constitute your first challenge. Try to find out what areas of law, real estate or accounting they specialise in. Don’t use firms that are everything to everybody. If it’s tax advice you need - find a tax specialist; if it is property law the same applies again. Property rnanagers come in assorted lots, so test, test and test again before
committing your single most important decision into the hands of professionals if that’s what they are. A healthy sceptism is in order until they show you differently.

MISTAKE#2
Insufficient insurance arrangements
Always verify the specifics before you pay up. Things which need to be looked at are whether the policy allows for vandalism and theft, especially if you’ve got furnished or partly furnished properties. Does the policy ensure for loss of profits (through rents) should there be a fire or flood? I found out just the other day, that my fence blew over and my insurance policy did not cover this event though my neighbour’s did. Insuring for accidental damage to windows & shower screens may be another area to look into because of the tenants being negligent.
You have a better chance recouping your losses than just attempting to claim against the bond monies of the tenant. Also look at extra cover on things like the laundry, building storage areas, not forgetting electrical and plumbing mishaps including leaking roofs, etc. 

Mistake #3

Using non-specific pre-printed rental agreements
In many cases, landlords will purchase pre-printed rental agreement from their local stationery store. However these need to be added to in order that tenants understand clearly their obligations and duties. Legally, you may have a problem to enforce certain clauses but I have found that if you are fair and specific your interests will be looked after in 95% of cases.
In the forms I use, there is a clause which states the carpets are steam cleaned by a specified method on termination of the lease. If you are relying on the rent to pay off your mortgage then you might allow a small discount if the rent is paid on the day before it’s due.
I also have a pre-printed 4 or 5 page form which outlines what I expect from my tenants (a form package is available from The Firs for a cost of $15 including postage) . This details things such as noise, rent payments, etc.


Mistake # 4 -
Inaccurate evaluation of cash flow potential
Don’t take the word of the real estate agent who is working for the

vendor; in many cases they have nothing to do with the property management department of their firms. Accurate market rentals can be determined by contacting real estate agents in the area and phoning the people advertising rentals in the newspaper. The reason for actually phoning is to ask if they are actually renting the properties at the prices being advertised...
Another factor not to be overlooked is that one month’s vacancy at say $800 per month is the equivalent of lowering your average rent to $733 per month.
There could also arise another problem: the tenants themselves may not be receptive to rental increases, especially if they have been on subsidised rentals by negligent landlords for a long period of time. Put this together with the biased views of the courts and tenant laws towards landlords and you may find yourself struggling to find money to pay the mortgage payment. So have a cushion of funds put away for just such an event.

Mistake #5
Getting into debt for tenants
A common mistake is putting the electricity and water bills in your name as landlord and then trying to extract the money from your tenants. When they decide to leave, guess who is left holding the baby? In fact, one beauty that has happened to me is where the tenant left a week earlier than expected on a monthly tenancy. Closed all the curtains and left all the lights burning - guess whose name the S.E.C. bill was in!
Another pitfall is getting emotionally involved and taking on debt on behalf of the tenant. Don’t overlook tenants who specialise in extracting as much as they can from the supposedly ‘‘wealthy’’ landlord via non-payment of rents. Thank goodness the vast majority of tenants are quite proper about the whole business, but it’s always best to check their credit credentials before you hand over the key. Put your feelings on hold and don’t judge every book by its cover.
Don’t let your mistakes get you down. They must be looked upon as opportunities to become the best landlord in town!

Mistake # 6
Improper methods of raising rents
You should have a policy of raising the rent on every renewal of your lease term. That is not to say that you will obtain the higher rentals but you will know when rents are moving up rapidly and that you are not left behind. If there are any laws in your state concerning rent increases you may have to act in time to effect a rental increase (30 to 60 days is not uncommon)
Always do this in writing and, get a signature by mailing it registered mail or by having at least a witness at the handover of the rent increase notice.

Mistake # 7
Sporadic inspections with no follow-up.
A quarterly inspection is mandatory. It can also often prevent major losses when the tenant is ready to leave town. A good method of visually keeping your property in the best condition is to take photographs of the garden, the exterior and the inside rooms. This way there can be no disputes afterwards regarding the written property inspection form, which should be completed as well. follow-up report should include all the maintenance required plus whO is responsible for what - tenant or landlord.
After allowing a reasonable time to elapse for the required maintenance to be completed,. a; follow:up inspection is a must. Waiting until the next property inspection the next quartel might, be too late. 
Also check all appliances to see that they are in good working order including stoves, lights, ovens, fans, etc.
 

Mistake#8 Incomplete tenant qualification prior to renting.
There are two rules of thumb when considering tenants. They should be adhered to under all circumstances. First, looks don’t count and second, never accept a personal cheque or bank cheque, cash only for the first month’s rent and bond monies.
Proper qualifications of tenant include confirmation from the current landlord as to rent payment history and the reasons the tenant is leaving. A good way to get the true picture is to contact the landlord previous to the current one, who has no interest in evicting a poor tenant, whereas the current one may not tell you everything because he might just want to get rid of him/her. Be wary, and listen very carefully to how the answers come even more so than their contents.
Verify with the prospective tenant’s employer their wages and length of employment. Ensure the work is full time and not seasonal.
I would also recommend a credit check (with the tenant’s permission) for payment history which will indicate the rent payment habits one might expect.

Mistake # 9
Retaining expensive recurring expenses.
Recurring expenses which many landlords end up paying for are such things as rubbish bag collections, gardening services, pool maintenance, excess water bills, etc.
The sure way to eliminate this area of stress is to explain exactly how you expect your property to be maintained before the signing of the lease. Exactly who will pay for the service and why. Often you are better off getting an outside maintenance service to contract with the tenant for this upkeep. Otherwise you had better make sure you have factored this site expense into your cash flow projections.
Pools and gardens are hassles even to owners so that tenants often put this in the too hard basket. You may have to accept that your lawn is not going to remain like a bowling green after you rent your property out.

Mistake # 10
Being intimidated by the tenant whilst showing a new prospect your property.
There are laws covering exactly when and how much notice is required in order to disturb the tenant’s privacy. I have experienced many ploys. I went to a ‘‘home open’’ the other day and found the estate agent standing outside. The tenant had locked the security door so that even though the owner had the front-door key this was of no help. Always have duplicates of every access key on your property.
If you are showing a prospective tenant or purchaser always arrive early so that you have the opportunity of a quick spruce up or airing the unit out beforehand though remember, never, but never, interfere with tenant’s property’
Some tenants are especially difficult when a home open occurs. I have no time for these tenants who abuse their rights knowing full-well that the landlord cannot take any legal remedy because of the biased way landlords are perceived by the courts. Remedy - give notice and hope the tenant’s next landlord is going to check their credentials with you!
Finally remember that you are the one whose money is on the line and although you should always respect the tenant’s rights you should remember that they are only passing through whilst your association may be a lot longer. 
 

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