10
Sep

7 Major Cash Killers for Landlords

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by Dave Zundel, Co-founder, Realtor ®, Investor.

1-Holding out for a “Home Run” deal

If your home is worth $1,295 in the current market, you can waste months chasing $1,395.  How many mortgage payments are you willing to make trying to get a “home run”?  Home runs can backfire on you too.  Tenants have a knack for finding out they could have had the home next door $100 less every month.  When your Tenant knows they are in a great home at a fair price, it shows in the way they care for the home and how long they stay.

2- Waiting to get Repairs done

“I will paint the house if it doesn’t rent in a couple of weeks”.  Sound good?  This is a really bad idea!  You should always be thinking of the Tenant your home will attract.  If your home isn’t in shape to attract the very best Tenants in the market, you will only get Tenants who don’t care what their home looks like.  You may get the home rented without the cost of the repair, but it may not be the Tenant you want in hour house for the next 12 months.  If you end up doing the work in a couple of weeks… all you did is extend your vacancy and waste more money!

3- Ineffective Marketing

A simple line ad in the paper may be the quick end to your vacancy.  Be careful though – most consumers depend on the internet and our best applicants now come through online ads.  You have to track your efforts to see what media produces the best (not always the most) calls per dollar spent.  A “free” ad can cost you a lot of days vacant if it keeps you from finding the best tenants.

Whether you choose paper or online ads, you must have a well worded ad to get the phone to ring.  You also have to be priced right, and have a rent ready home.  Imagine thousands of eyes scanning the various ads for properties like yours.  If you aren’t getting any calls, it is usually about price.  If you are too high, most people won’t even take a look.  If you are getting plenty of calls but no takers, check the home out to figure out what is turning people away.

When you hire an experienced property manager, you are buying into their systems for marketing and leasing your home so you can eliminate the guess work.   If you decide to “save money” and lease the home yourself, be ready to commit serious time to your education.

4- Using an inexperienced Agent

There are many reasons to use an Agent, but if your Agent isn’t experienced, there isn’t much benefit at all. In any major markets, there are literally thousands of Real Estate Agents who want a commission, but very few with enough Property Management and Leasing experience to make them a good choice.  We get into tips for choosing your expert in another article.  For this article, just be prepared to do your own ads, applications, and tenant screening if you feel obligated to use a (brother, mother, friend, neighbor, etc.) to lease your home.

5- Poor (or no) Tenant Screening

Most Evictions are born in a poor screening process.  By extension, that means most repairs, most days of vacancy, and most legal expenses are also born from letting the wrong tenant lease your home.  This is an area where you MUST do your homework because looks can definitely be deceiving.  Unless you have money to burn, screen well and know when to say NO.

If you screen the parents, but don’t bother to find out the 19 year old son lives at home and has a history of violent crime, you open yourself up to potential liability.

Many people who try to manage their own homes are very trusting and may not use even a basic application. If you want to learn how evictions work, just go with your ‘gut’ feeling on that prospective tenant and hope for the best.

6- Using a Substandard Lease

Most leases on the market are very generic and seem to be built to not scare off a prospective tenant. Do some Tenants refuse to sign our lease because we have a “crime free” clause?  We sure hope so. Does our “no dangerous breeds” language discourage the owner of 6 Rottweiler’s? We want it to.  If your lease has more “tenant protection” than “landlord protection” you will have trouble unless you luck into the perfect Tenant.

7- Lost Time

Losing time is by far the easiest mistake we see new landlords make.  Calculate the rent value of each day on your home… if your home rents for $1,395/month, each day you don’t get rent costs you almost $50!  We see people all the time who “can’t afford $75/month for a professional manager”, but lose a week getting their ad in the paper ($350)… or take a couple of weeks getting the house rent ready ($700)… or feel bad for the Tenant and delay the eviction for a month ($1,400),

If you aren’t prepared to be completely diligent about getting everything handled right, and fast, you probably can’t afford NOT to use a professional manager.  Don’t let sloppy practices with your rental property kill what should be a very profitable and rewarding experience.

SUMMARY

Managing your home is more complicated than it looks.  Do your homework and become an expert (or hire one).  Your rental property (or portfolio of properties) is a business… treat it like one!  The problems outlined here are easy to avoid, but expensive to experience.  Give your business the time and attention it needs and it will pay you back very well over time.

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