Many people want to make extra cash flow every month with rental properties, but if you make the mistakes we mention below, you’ll probably be lucky to break even, or may even lose money.
Fortunately, you can rely on many helpful tools to help you make money as a landlord, such as this useful rent estimate tool.
Not Researching Rents Every Year
One of the most common mistakes landlord makes is using the same rent every year, even if the market has increased. For example, home prices have risen dramatically in the US in 2021, which means rents have gone up as well.
You should do a market analysis of rents in your area at least once per year. Then, compare the prices of your rental units in your area that are similar to yours.
As you set new rent prices for the year, double-check that your new monthly rent will cover necessary maintenance for each unit.
If you continue to raise rents in line with what’s going on in your market, you will make better profits on your investment. Also, watching rents ensures that your rents are in line with other businesses so that you can attract the best tenants.
Skipping Credit And Background Checks
One of the essential parts of your job is to get good-paying, steady tenants in your units. However, it’s not enough to check that they have a job. You also need to run credit and background checks on anyone you consider.
Checking their credit shows you if they can make consistent bill and credit account payments, which suggests how steadily they will pay you.
You also should run a background check to ensure the tenant doesn’t have a criminal record.
Remember, you’re better off having a vacant unit than to have it occupied by a non-paying tenant that trashes the place.
Not Repairing Properties
Do you want to attract loyal tenants who cause you little to no problems? Then it’s essential to keep your buildings and units in good repair. People with steady jobs and payment histories will turn and run if they see your building is in disrepair.
Maintain a regular maintenance schedule and get repairs addressed before they become a significant expense. Your bank account will thank you as you attract the best tenants who pay on time every month.
Not Remembering You’ll Have Vacancies
There is almost always a two-week or one-month lag between when the old tenant moves out, you clean up the unit, and get it rented to someone else. That’s why you should maintain a savings account that you can tap when you have a unit or two vacant for 30 delays.
Far too many new landlords assume their units will always be rented; in reality, you can expect at least a 10% vacancy rate per year.
Thinking Cheap Rent Gets You The Best Tenants
Monthly rents are set by what the supply and demand are of the apartment rentals in your area. So the idea that you will attract better tenants by undercutting your competition on rent is wrong-headed thinking.
If you maintain your property well and set a fair price, you will get solid applicants for your available units. Then, when you apply proper screening rules, you can obtain great tenants without resorting to bargain-basement prices.
When you get going in rental real estate, it’s easy to make many mistakes that can cost you money every month. Before you realize it, most of your monthly cash flow is flying out of your bank account. But if you avoid the above mistakes, you will be on your way to a profitable investment.