There are three common mistakes that we see landlords make that end up costing them a lot of money over the term of them owning a rental property. I want to share those three mistakes with you so perhaps you can avoid those mistakes for your rental properties.
The first common mistake is some landlords fail to be concerned about the condition of their property. They don't make sure that they have a regular schedule for painting, for replacing the flooring, making sure that the outside of the property is kept up nice and neat. By failing to do that then pretty soon over the course of a couple of years and a couple of tenants things are going to deteriorate to the point where you can't really get market-rate rents for your property. And it will take you longer to find a tenant who's willing to move into your property because you haven't taken care of that regular maintenance and upkeep. So pay special attention to the condition of your property. Make sure you keep that condition up very well and the return on your investment in that will be favorable.
The second thing we see is that we see owners forget that they need to raise the rent every year. If a tenant decides they're going to stay past that initial 12-month term you need to make sure you’re raising the rent some for the next 12 months. Even if it's only $25 a month - You've got to have some small increase in the rent so the tenants get used to paying a little bit more every year and that helps you as the owner of the property cover the additional cost for your insurance policies, for your taxes, and other things. We often see that an owner comes to us and they’ve had a tenant in place for 3, 4, 5 years and they just said, oh yeah we never raised the rent because we like these tenants and they paid on time. Well after three or four years we do an analysis and we find that they're grossly under collecting in terms of rent. So they might be a $150, $200, $250 a month lower than what the market is at for that particular property. As an owner then you're leaving thousands of dollars a year on the table if you fall into that situation.Make sure that you have a process whereby you are increasing the rent every single year on a tenant who stays in your property.
The last area that we see owners sometimes leave money on the table is when it comes to pets now over 50% of all tenants have some kind of a pet. The reality is if you say no pets in my rental property you are eliminating over 50% of the potential tenant pool. That means you're going to have longer vacancies and you're going to be harder for you to rent that property. When you do allow pets the understanding has to be that pets will cause some damage to your house. So to account for that we always recommend that there is a monthly charge that tenants are paying to make sure that you have sufficient funds to take care of any problems after they move out.
Now yes you can go into the security deposit and tap into that if you need to fix pet damage, but charge something every month for a pet or for pets so that you have that money coming in on a monthly basis during that tenancy. The reason why we like to charge a monthly fee for pets is because if you charge upfront fee for pets and then that tenant stays for three years, we've only collected one fee one time. But if you're charging a monthly fee for those pets and they stay for two or three or four years, you're collecting that fee every month and you end up having some more money in your pocket as the property owner. Therefore you have more funds to take care of any additional damage that that pet might do over the length of that stay.
So watch out for the property condition - Make sure you keep up your property well. Watch out for rent rates - Make sure that you are looking every year at raising at least (even a small raise) to your monthly rent. And then make sure you're charging some kind of a monthly fee for pets when they are in your rental properties. I hope that information is helpful to you. If we can answer any questions please feel free to reach out to us here at New Heights Property Management.