There are many pitfalls and challenges to managing rental property. One key to being a successful landlord is to learn from the mistakes of your colleagues. Below are several traps many of us have fallen into in the past and some things you can do about them.

Leniency in Collecting Rents:

Obviously, effective rent collection starts with selecting good residents who have a history of timely rent payment. However, that is not always possible. So, what do you do? First, start collection efforts early, before the rent is past due. Then, if a resident offers an excuse for not paying the rent timely, focus on solutions. Help the resident make a game plan of where and how they can find the money. This might include finding out if they have any available credit remaining on their credit cards, having them contact family members for help, or furnishing them with a list of local agencies that provide emergency rental assistance. As a landlord, you will encounter this situation and you need to think through what options might be available in advance. If the resident is unable to come up with the money despite your combined efforts, or seems unwilling to do their part, then it is time to help move them out as soon as possible. It is easy to be understanding and not want to push hard on rent collection, but seldom do tenants who fall significantly behind ever catch up.

Not Planning for Major Capital Items:

When estimating cash flow, few independent owners reserve for major repairs. I can tell you from experience, there is always at least one ‘unexpected item’ that will pop up. It may be the need to replace the water heater, fix a blown out central A/C unit, or discovering that the wall behind your shower tile is rotted or full of termites, but it seems inevitable that something will always come up. Building up a cash reserve monthly for these items will go a long way vs. scrambling for cash when the ‘unexpected’ event occurs. And, should you be lucky and not have a major surprise one year, you will have banked away some cash for even larger recurring items such as a new roof or repainting the property, which are sure to eventually arrive.

Improper/Poor Screening of Tenants:

Nothing will make or break your real estate investment faster than the choice of who lives in your property. Even in this day and age, some owners don’t do credit checks. And those who do, many do not truly dig into the information on the application to verify whether it is real or not. You need to screen your tenants thoroughly. Check all references. Make sure the person they put down as their ‘landlord’ is really the owner of the property and not some friend acting the part. Also, do not hand over your rental property based solely on a computerized credit score! Credit scores do not tell you about how a resident treats the property or whether they’ve been a nuisance in the past. Handing over your $50,000, $100,000, or $150,000 investment to someone based on a nice 20 minute conversation or a simple $10 credit report with a credit score is the equivalent of playing Russian roulette with your finances.

Allowing Tenants to Develop Bad Habits:

It may start as regularly accepting late payments, not addressing issues like loud parties promptly with written documentation, allowing tenants to start doing repairs themselves and then deducting the cost from the rent, or any number of seemingly small items.   But these issues have a way of developing into bad habits the longer you allow them to go on without ‘hitting the reset button’. Realize that it a slippery slope from a well-managed property to one where the tenants run you. Treat your rental property ownership as a business – and get things back on track early.

Failure to Address Problems with your Rental Units ASAP

It’s no fun to get calls about pests, mold, leaky faucets, or noise from neighbors, and it’s easy to delay responding – especially when you don’t have the money to fix things. However, it is very important you respond. Small problems can quickly explode into larger problems – and many times it is the resident’s perception of the problem that determines whether or not you have a minor inconvenience or a lawsuit in court. If you can’t make it yourself, send out a contractor or handyman you trust. Many times it will turn out that the resident was over-reacting to a problem and it is an easy fix.

Focusing on Filling Vacancies rather than Preventing Vacancies:

Most owners are ‘complaint driven’. If the tenant calls in a maintenance complaint, the owner will usually get it fixed. But few owners have a strategy designed to keep their residents in the property longer. Little things, like an occasional upgrade, a gift certificate for a pizza or to the movies, or doing things to help connect your resident with the community go a long way in extending tenancies. Although much lip service is given to resident retention, few people actually have a pro-active, planned strategy toward keeping their residents. And while making your tenants feel as if they have a great place with a great landlord does not guaranty a longer tenancy, studies show that nearly 2/3 of all move-outs are preventable. As one wise landlord said, “the easiest way to reduce losses from vacancies is to prevent them in the first place.”

There are many ways landlords can make mistakes that are costly and emotionally draining, and in extreme cases, even cause owners to leave the business. Don’t let your business run you. Learn from the mistakes of your colleagues and avoid many of the unpleasant situations that have impacted others.