9 biggest mistakes that landlords make
Property investors across the country are making the same mistakes, and could be losing a lot of money as a result.
Blogger: Daniel McQuillan, executive director, Investwise
In recent months, our property management department has taken over the management of a number of formerly self-managed investment properties and found the following were the most common mistakes made by the landlords.
* The biggest mistake was not doing a thorough background check on tenants. Very often, tenants are selected on their personal appearance and on very basic and often difficult-to-corroborate personal reference information. Selecting a reliable tenant who will meet their contractual obligations for both the payment of rent and maintenance of the property is the most important part of renting an investment property. Bad tenants – those who do not meet these obligations – are therefore the most common problem encountered by owners of self-managed investment properties.
* Rents were inflated, reducing the number of potential tenants. The majority of tenants have a very good idea of current rental values and by lowering the rental to a figure marginally below the ‘top rent’ the opportunity to have a greater selection of prospective tenants is enhanced.
* The necessary contractual documents were incorrectly completed. Names were wrongly spelled and the contract was not correctly witnessed. These errors could make the contract invalid.
* Verbal agreements. Landlords make agreements outside the contract such as rental payments which, again, are invalid if later challenged by the tenant.
* Bonds. A common mistake is not properly lodging the bond money or failure to collect the right amount of bond money. Bond money is critical if the tenant breaks the lease.
* Friendships. The landlord develops a friendship with the tenants, which makes it personally difficult to take action if the tenant breaks the contract. Leasing a property is a commercial arrangement and landlords should take a professional approach to leasing their property.
*Maintenance problems. Maintenance problems have to be addressed quickly to ensure good tenants remain happy. Landlords who argue with tenants over maintenance problems may find it difficult to retain good tenants or maintain regular rental payments from their tenants.
*Termination. Landlords follow the wrong procedures when terminating the lease. Generally, not enough notice is given or the notice given is not in writing. There are also special procedures which must be followed if the landlord wishes to evict a tenant.
* Insurance. Not taking out the necessary insurance cover to protect the landlord if there are problems with the tenancy.
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