“Land is the only thing in the world worth working for,” goes the famous quote in ‘Gone with the Wind.’ And if you are a landlord or aspire to be one, then you know land can make you rich especially if you build a rental empire. But only if you avoid these top four landlord mistakes.
4. Buying the wrong property. Some landlords follow the rule “buy the best you can.” These owners expect their quality properties to attract corresponding renters. Of course that’s not always the result. Some seemingly honest tenants can be fronts for criminal activities, but if your rental is in a neighborhood where folks pay attention then the odds are in your favor. If your rental is out in the country far from caring neighbors, then tenants may feel uninhibited in recreating ‘Breaking Bad.’ That’s one reason why some smart landlords look for duplexes and triplexes – because neighboring tenants are often the best security guards.
3. Ignoring your landlord rights. As a landlord, you may believe you have the unlimited right to choose your tenant, set rent, and enforce the tenant’s obligations. But your rights are checked by the tenant’s rights to not suffer things such as housing discrimination, improper rent increases, or uninhabitable premises. Each state has a different set of rules, some requiring disclosure of mold, lead-based paint, radon, and liens. And some local jurisdictions have added additional requirements, such as the bed bug disclosure in New York City. You’re also limited in what you can ask prospective tenants about being single, married, having children, or a disability. You also need to know the rules on notices to terminate which range from “immediate” notice in Mississippi to 30 day notice in New Hampshire, New Jersey, and Wisconsin.
The good news is there are online sites that will walk you through the rules of disclosures, tenant applications, damage deposits, and evictions. You can also find standardized forms online, but a highly-rated real estate attorney in your area will save you money in the long run. Why? If you’ve ever read an online article on fixing something like your Toyota computer’s system, you know the information is helpful but an expert will get the job done right. That’s why the best way to be a successful landlord is to take the time to interview three recommended attorneys and pick the one who will be the best for you and your business over the next decade. Work with your attorney to develop the best set of rental agreements that disclose everything required under the law and still protect you. Some states allow you to include a clause for attorney fees in certain legal situations, but just one mistake in an agreement could wipe out your empire. That’s why your real estate attorney will be a key player in growing your real estate wealth.
2. Neglecting the broken window theory. Most people know a broken window left unfixed will attract more destruction and crime. The same theory holds true for litter. If litter is not picked up around a building then people are more likely to start dropping off bags of garbage and other detritus. Let’s look at the theory when it comes to rental property maintenance. If you are not picky about tenants, and not picky about maintaining your landscaping, you may find your lawn becoming a cigarette butt graveyard and soon old strollers and car seats start appearing as landscape art. Inside, if you put off painting the living space then don’t be surprised to see a corresponding lack of respect by the tenant. When she moves out without notice you may find yourself re-carpeting the entire place, an expense larger than the damage deposit. To avoid these problems, treat your property with respect and demand the same treatment in return. A good rule of thumb is to repair a broken window as soon as possible, but no later than one week.
1. Selling too early. There will be recessions. Bubbles will pop. Your investment may look like a bust, but over the past 100 years there’s one rule: After a recession, properties eventually increase beyond the bubble value. So, if your property is treading water and you want to get out of the rental business, make sure you are selling at the right time. Gather information from your team of professionals, including your real estate agent, attorney, and accountant so you know how much you will owe in taxes. And if you decide to remain in the game, take comfort in knowing that you own the one thing worth working for.
