It sounds effortless to be a landlord or a property owner – you have a property to rent out, make some renovations, take pretty photos of your property and rent it out to people who need a place to stay. But even if it may seem so, it takes a lot of responsibility to be a landlord. Trusting people to be your tenants and care about your property is a challenging task. Just like in other professions, experience matters a lot. Yes, you will make thousands of euros, but how can you do that without your property costing you even more?
It doesn’t matter how seasoned a landlord you are or if you are just starting. Landlords face particular challenges, and because of that, they make mistakes that can be rather costly. These are the 10 most common expensive mistakes landlords and property owners make:
1. Not collecting the security deposit
Collecting a security deposit from your tenants is the #1 thing you should do once you sign the contract. The reasons for this are many, but the most important one is that the deposit serves you as protection in case your tenants miss paying rent or if there is damage that needs to be covered. If you do not collect the security deposit from your tenants, you will have to front your own money, which is never the best solution. Without the security deposit in place (which most often equals one to three months of basic rent without utilities) and a bad tenant in your apartment, you risk hurting your positive cash flow.
2. Not inviting renters to report issues
When we’re talking about costly expenses for property owners, we should mention unnecessary or unplanned repairs that happen on your property. Of course, repairs are inevitable, but there is a way to keep an eye on all the things that might need fixing in the future. This is why it is essential to always invite your renters to report the issues to know when you have to fix them. Bear in mind that many tenants will feel discouraged to do this in person, which might be the reason why you will be left with a leaky pipe and only realize it when it’s too late. Property management software such as Facilitee gives a good solution to this problem – your tenants can report the issue without talking to you; by simply entering it on the app. Not only will you know about the issue immediately, but you will also have it fixed as soon as possible.
3. Overpriced and cheap maintenance and repair
It is also vital to know who is repairing things on your property, and, of course, when to book them. If you happen to find out about the issue too late, the chances that you will get overcharged by the repairman are very high. But it’s not only being overpriced that is bad – cheap maintenance and repair are also not good, as the price in these cases often speaks plenty of the quality of the job done. One of the things you can do is set aside a fund for maintenance or a potential repair that you will use in case you have no other option, but it’s always better to stay organized and know when and what you have to repair or when to conduct regular maintenance:
Facilitee is one of the examples of technical management software that can help you with this as:
4. DIY Repairs and maintenance
On the other hand, you can always opt to fix and repair the issues on your rental property by yourself. If you have extra time and are very handy, this might be a good and lucrative choice. However, this can very often prove completely different from what you had in mind. Maintaining a property is a challenging and time-consuming task, and the bigger the property is, the bigger the challenge. On the other hand, even if you opt for DIY repairs, you should consider that this might be even pricier if not done right. That is why it’s always good to have a professional connected to your property which will be in charge of repairs and maintenance.
5. Not conducting careful tenant screening
Finding high-quality tenants who will pay their rent on time and care about the property they live in is of the utmost importance for any property owner. This is something that can save you a lot of money in the long run. However, this comes with its own set of challenges, as finding suitable tenants requires careful tenant screening, which can be time-consuming and daunting. It is no longer good enough to put a rental sign in front of the building or place your property or apartment on different websites and apps. This is an even bigger challenge in the Netherlands which is experiencing a housing shortage, meaning there are different types of tenants that might end up on your property.
6. Not advertising well enough
Advertising the property you rent out is important, but promoting it in the right way is even more relevant. You should have your tenant persona in mind and know what platforms you want to use to attract those tenants. Think of different social media platforms your target group uses, websites they like in general and adjust your photography to the target audience. Showcasing your property to a family with kids is, for instance, completely different from showcasing it to millennials who need a cool place to live. Remember that not advertising well enough might be costly as you can end up in a void period with no tenants, and you want to prevent vacancy. This is not a rare issue and is the biggest worry of at least 15% of landlords.
7. Viewing it as a hobby
Renting your property might not be your #1 source of income, which means that you might perceive it as a hobby. Although it might be so, it’s important to regard it as a business. After all, you could maximize your profit, which is why you will need to operate it as such. To do this, you should establish a separate bank account for the property renting income and consult a tax advisor or consultant to ensure you are correctly handling taxes on your business.
8. Not signing anything
Property owners should never rely on simply a handshake. Renting out your property is a business, and in business, people don’t rely on promises. To be legally protected, you must give your tenants a lease agreement to sign prior they move into your property. This way, if you run into problems, you will have a legally binding document.
9. Over/Underpricing the property
If you’re entering the rental property business, you might as well do your best to understand the market. As already mentioned, the Netherlands is experiencing a housing shortage of more than 300.000 homes. Because of this, you should always pay attention to the price of the property you want to rent out.
First and foremost, make sure you do not underprice your property, as this is not the reason you got into the renting business after all. Apart from that, it will not be fair to other landlords and property owners in your vicinity – you should all together keep the prices very similar according to the type of property you are renting out. On the other hand, overpricing your property might backfire as well. Although you might get some tenants who will unknowingly be paying a higher rent for several months, the chances of you ending up with a several months-long void period of time are very high. By carefully pricing your property you can prevent vacancy and always have tenants.
10. Not having insurance
Another big mistake that property owners make which can be rather costly, is not having insurance. However, this is something that goes both ways as both you and your tenants should be insured. That is why two types of insurance can be in place at the beginning of your tenants’ lease:
– Homeowner’s insurance, which is under the name of the landlords and protects him and his rental property in case of a legal dispute or accident such as fire, flood or natural disaster.
– Rental insurance, a policy under your tenant’s name which will cover the cost of your tenant’s personal belongings and costs of any damage that is your tenant’s fault.
Conclusion:
To err is human, but it is always good to know the most common mistakes so that we are always one step ahead. Some of the most common mistakes that property owners make are connected to maintenance and fixing repairs. Others range from poorly selecting the tenants to legal ones. Still, all of these can be easily overcome with the help of property management software such as Facilitee. Thus it is always good to have a check-up list that will help you save your money on unnecessary costs and prevent vacancy.
