Avoiding Common Mistakes Landlords Make
Avoiding Common Mistakes Landlords Make
Owning a Mississauga rental property, as part of your investment portfolio, is a great diversification tool. By providing a growth alternative to traditional stock holdings, a rental property provides not only steady income but asset appreciation and is an excellent hedge against inflation. Unfortunately many landlords find that their asset provides nothing but frustration and unexpected hassles and costs. Regardless of whether you are a first-time investor or own multiple properties, by avoiding the most common mistakes landlords make, you can turn your project into the positive asset you had intended.
- Jumping Before You Look Research is critical when buying an investment property. Work with a local real estate agent who can help you understand the rental market of the specific community you’re considering. In rentals, even a couple kilometers can make the difference between a great rental location and a dud. Renters are not looking at the long haul; these are short term homes and location and convenience is more important to them. Easy access to shopping, dining and commuter routes will determine if they find your rental desirable more than a lovely, but remote, property.
- Property Condition Since this is an asset; it’s natural to want to save money wherever you can. It’s important to remember that saving a little money up front could lead to huge costs in the long run. A property which is not cleaned or maintained properly will not attract the best tenants or the best rental rates. In addition to the vacancy issue, you are also risking larger repair costs down the road. Before you lease your first property, assemble a team of professional contractors, cleaners and maintenance providers and have a plan in place for each unit.
- Overpricing the Property Unlike selling a home, overpricing a rental is a real risk. Most renters do not believe they can offer less than the asking price on a rental and if your property is priced too high, they will not even see the home. You must realize that rent is an expense to a tenant; they are not investing in anything. They are seeking the nicest options at the best price. By “testing the waters” with your price, you might lose significant time while hoping to find the right renter, this adds costs to your bottom line through the vacancy period.
- Poor Background Checks Evicting a tenant is a long and costly process. While there is no way to guard completely against the need to remove a tenant, proper background and reference checks can certainly help. Ask for and call references provided by your potential tenants. Create a list of questions in advance, designed to pull out information regarding things like timely payment history as well as the condition of the home when they left. Discuss any concerns ahead of time with the potential tenant and ask for further proof if necessary. Verifying employment is also critical. Ask permission to call their employer to verify the information they provide you. Your realtor can provide you with sound advice including any forms necessary with completing the proper paperwork.
- Do-It-Yourself Property Management Once again, trying to manage the property yourself might seem like a great way to save money, but a professional property manager is more likely to do just the opposite. Yes, they do charge a fee, but their experience and support can lead to higher rents, better tenants and lower maintenance costs. They know how to spot and avoid potential problems.
- Insufficient Insurance Coverage Be prepared for the unexpected. Unfortunately things do happen. Someone trips on the front walk or a water leak ruins the home next door. Speak with your insurance provider to ensure you have proper coverage for these unforeseen issues.
Owning a single or portfolio of rental properties is a great way to diversify our investments and build wealth. By avoiding the common mistakes landlords make, you can ensure that your asset provides the benefits you expected and is not a headache to deal with. There are professionals available to help guide you, take advantage of the experts and enjoy passive income and asset appreciation.