Real estate investment can be quite profitable for the owner of a rental unit. Like all investments, one has to know how to manage the property to maximize value. Mistakes in managing the assets can cost you money, time, and aggravation. Here are the top five failures:
1. Failure to Screen Potential Tenants
Rental property will not generate income without paying tenants. People may seem responsible when they interview the landlord, but looks can be deceiving. Failure to conduct credit checks can lead to lost revenue.
Tenant management conducted by a competent property management company will minimize the risk of non-payments and illegal activities.
2. Failure to Have Policies & Procedures in Place
Anti-discrimination laws are strictly enforced. Complaints of a landlord’s discriminatory actions require only an accusation. It is up to the landlord to prove the actions are not discriminatory. Policies must state the landlord does not engage in discriminatory practices.
A property management company will have policies and procedures in place to prove non-discriminatory behavior. Anyone who has had to fight discrimination charges will agree this feature alone is worth the expense of retaining a management company.
3. Failure to Place Rental Deposits in Separate Bank Accounts
Most states require rental deposits be kept in a separate bank account with proof the funds are not mingling with company funds. A property management company has the expertise to properly handle rental deposits.
4. Failure to Repair the Property Quickly
A property that is not well-maintained will create unhappy tenants who will invoke the “Tenant’s Bill of Rights” action. The landlord is required to provide a healthy habitat and to make major repairs quickly. A property management company requires funds held in escrow to cover major repairs.
5. Failure to Understand that Rental Property is a People Business
It is all about people. Some are dependable, and some are untrustworthy. Some pay rent, and some are irresponsible. Keeping the good tenants and weeding out the bad ones requires people management skills.
A property management firm has trained people managers on staff. They understand tenant management requires weeding out the deadbeats and developing desirable tenants to ensure maximum return on the owner’s investment.