10 Property Management Mistakes That Could Be Costing You Thousands
Property management is not an easy endeavor, though many think otherwise. Some mistakes in the real estate field could cost you thousands of dollars. If you are a new investor, it’s best to make sure you avoid making those errors by first learning about them.
Understanding the mistakes that could be costing you money in property management helps you prevent them and keep your business going smoothly. So, without any further ado, let us explore 10 property management errors that you should be aware of.
1. Not Collecting a Security Deposit
Security deposits are there for exactly that: security. They protect you from big financial issues that your tenants may cause. Even if you go through a thorough tenant screening, new residents can still be unpredictable. Negligence by tenants may end with property damage, and late rent payments can set you back financially. A security deposit acts as a safety net for the landlord, while it also makes the tenants more cautious, since they will be afraid of losing a large sum of money.
2. Ignoring Preventative Maintenance
Small maintenance problems can escalate into great and expensive property damage. Preventive maintenance is important to stop growing issues in their tracks or to avoid them altogether. A small problem, such as a leak in the ceiling, for instance, may seem like a minor inconvenience at first, but it may cause mold to grow in your home over time, making it an expensive and dangerous problem.
Preventative maintenance includes
Thorough annual or seasonal property inspections
Encouraging tenants to report any minor property damage
Fixing minor maintenance problems, such as ceiling leaks, cracks by the window, or HVAC malfunctions, in time
Creating a budget for emergency repairs
3. Overpriced and Cheap Maintenance and Repairs
If you want to be a good property manager and achieve success in your business, you should know the difference between overpriced and reasonably priced repairs and maintenance. Hiring the cheapest contractor you can find may save you a lot in the moment, but more often than not, it results in a poorly done job. The issue is solved temporarily, but it will come back stronger, and you may even have to start a whole property renovation. On the other hand, you may find an expensive contractor who talks big, but the job may not match the price, leaving you with a drained budget.
The smartest thing you can do is to get multiple quotes from different contractors, check references and reviews, and, after a thorough investigation, make your choice. It may seem like a hustle, but it’s much better than having to spend your profits on huge damages that could have been prevented.
4. DIY Repairs and Maintenance
Some maintenance problems appear so small that you may think, “I can do that,” but it’s often a huge property management mistake unless you are very experienced in maintenance. Otherwise, you may be looking at something you don’t understand, and instead of fixing the problem, you could be causing a bigger one. Which is why it’s advisable to have a professional look at maintenance issues, even if they are minor.
5. Failing to Conduct a Thorough Tenant Screening
As mentioned before, even if you conduct a careful tenant screening, some residents may still be negligent or make late rent payments. Evicting a tenant will cause a vacancy period that will cost you a certain amount of money. Sometimes, problems with tenants can even escalate into legal disputes, which is another expensive problem for a property owner. Therefore, you must go through a careful tenant screening process before choosing a resident to live on your property.
6. Not Marketing the Property Well Enough
Attracting tenants to a long-term property or guests to an STR is impossible without proper advertisement. We live in a digital age where most people find homes online. If you wish to attract many potential tenants, you should consider every modern marketing tool. Post your property to social media, leveraging apps like TikTok and Instagram, where most of Gen Z and millennials spend a lot of their time. Create an attractive listing with professional images, highlighting the best features of your property, and upload the listing on multiple websites.
7. Not Taking Property Management Seriously
Many landlords use rental properties as side incomes, so you may be perceiving your additional property management job as a hobby. However, creating a separate bank account for your passive income and consulting a property management firm can help you make the distinction.
8. Not Signing Contracts
Although a verbal contract is just as important as a written contract, it’s still difficult to prove something if you don’t have it in writing. As a property owner, you need to sign everything so you have a written confirmation of every deal you make. A lease agreement is the most important agreement you need to focus on. Before you let tenants on your property, you have to make a clear list of terms and conditions and sign it so the rules you have on your property are protected.
9. Overpricing or Underpricing
The property management market is a competitive one, so you have to create a price for your property that is just right. An underpriced property may make you only a portion of the profit you deserve. Moreover, if you ask for a low rent price, when it comes to property maintenance and insurance, you may have to pay from your own pocket, making your property a liability instead of a source of income.
Overpricing your property, on the other hand, can create issues, such as long vacancy periods. Although you may be able to find tenants who are willing to pay a higher price than necessary without the knowledge of the market, there’s still a huge risk that you will end up with months of vacant property.
10. Not Having Insurance
Overlooking the importance of insurance can cost a property owner thousands. Without the insurance, you may have to suddenly spend thousands on emergencies. There are two types of insurance when it comes to rental properties:
Homeowner’s insurance: for the landlord, to protect you from emergencies or legal disputes.
Rental insurance: for the tenants, to cover the cost of their belongings and for any damage made to your property by the tenant.
Conclusion
We are all human beings, and we all make mistakes, but some mistakes may cost us a lot more than others. If you wish to avoid property management mistakes that could cost you thousands, you need to understand the fundamentals of your field and consult professionals.
