1. Not hiring a real estate service that understands investment property
Only hire a real estate agent with investment property experience. This will ensure that they understand the type of property needed. Investors of rental property can “flip,” rent or sell the property in the near future. An experienced agent will be able to find the property suited for your needs.
2. Not having cash flow from day 1
Successful rental property equivalents cash flow plus appreciation. It is important for an investor to have positive cash flow in order to be able to take care of the property. Also, when the market has a downturn and appreciation is not possible – cash flow is king!
Interest rates fluctuate therefore it is important to review the type of loan you have on the property on a regular basis. Different types of loans can make a difference in whether a property has cash flow or not. Be sure to ask some different lenders about available loan products, terms and rates on an annual basis.
3. Not properly screening prospective tenants
Never go by your gut. Always obtain permission from the tenant to conduct a thorough background investigation including credit information, criminal and civil records, employment verification and landlord references. Ensuring a tenant can and will pay rent on time, take care of the property and be respectful to their neighbors will eliminate problems once tenancy begins.
4. Not being prepared to be a landlord
Being a landlord is not easy. Rental property investments is just like owning a small business and as the owner you need to be prepared to be able to work with tenants, handle the finances, market your property, understand the laws and take care of the maintenance on your property. Join a local association of rental property owners to become educated about rental property management or hire a property management company.
5. Waiting too long to collect rent
Usually the landlord is not helping the tenant by allowing a tenant who can not afford the rent to stay. Once a tenant become late in paying rent it is very hard for them to catch up again. Many landlords wait several months before considering an eviction and then then they are usually angry and upset. Let every tenant know upfront that rent collection is taken seriously and every tenant late in rent will receive a notice to pay rent or vacate.
6. Not actively managing their property
Rental property needs to be actively managed. That means regular contact with your tenants and regular care of the property. The benefits of active management include long-term contracts, lower maintenance and repair costs, improved property values, peace of mind and appreciative neighbors.