Being a landlord is no walk in the park, it’s a tough job! Anyone who has been a landlord for a while can probably attest to that and they most likely have a list written or otherwise of some mistakes to be wary of. I have a tenant that is vacating one of my rental properties this next month and that always switches my mind back to “landlord mode”. I began thinking about some of the mistakes I made when I was just starting out as a landlord. My first, and worst experience, at being a landlord was not ideal in SO MANY ways. I would like to share my story and hope that you will find some tidbits of helpful information throughout as well as some entertainment.
1. Managing From a Distance
The first property I managed was over 200 miles from where I reside so, so much for active management and property inspections! Funny side note: the opossum that crawled under the house and died had to be retrieved by my 11 year old nephew who lived near the property, thank you Jeremy!! I now drive past my properties once a month and have a look inside at least every 6 months. Many landlords fall into thinking that if their tenant is paying the rent on time every month there is no need to inspect the property but it’s very important to make sure your property is being well cared for.
2. Shared Interest
This particular property was my father’s home. At the time my father was in the Philippines and terminally ill so when he asked if I would please manage the property and split the income with one of my three sisters, I couldn’t refuse his request. Because there were multiple parties with an interest (my 3 sisters) questions of repairs and the fact that the rental income was not split equally, as you can imagine, became a strained situation. Me and my siblings are all on good terms today but it was a bit awkward for a while. If at all possible I would avoid dealing with real estate with shared interest particularly if that shared interest is with family and friends.
3. Condition of the Property
My father had been out of the country enjoying retired life for a couple years and the property quickly fell into disrepair. Once we decided to rent the property I spent a long weekend doing what I could to get the home habitable. In the end it still was not what I would consider in rentable condition. One of the toilets didn’t work, leaky faucets, broken dishwasher, bad carpet, and on and on. The people who wanted to move in were friends of my cousin and they were willing to make the repairs, which brings me to my next point.
4. Discounting Rent
So as I said in point 3 above the tenants were willing to make repairs to the home and deduct those repairs from there rent payment. With the home in the condition it was in and my inability to make the trips back to the property to do the repairs myself I said OK. Everything was going along great, the property was becoming more habitable and the tenants were glad to have a discount on rent. This went on for several months. By the third month there were a lot of labor charges for doing things like clearing blackberries on the far property boundary along the creek and I knew I had to put a stop to the work. The tenants were not happy at all and actually were very rude and verbally intense on a phone call. This situation went bad quickly and if I had to do it over again I would have hired a handyman to make the needed repairs.
5. Tenant Screening
Using a professional tenant screening company like Rentec Direct is so important. Even in a case like this, where a relative highly recommends a tenant and basically has saved you from having to find a tenant on your own. Several months after the tenants moved out I found out from a neighbor that the police were over there multiple times and there was a lot of domestic abuse and even some child abuse that was occurring there. I feel sick about having something like that going on in a house that I am responsible for managing and would never skip out on tenant screening again.
6. Tax Implications
At the end of the year as I sat down to sort through my files and started plugging numbers into my tax software I suddenly came to the realization that I had all of this untaxed rental income that I would have to report and pay taxes on. I hadn’t kept very good records of expenses and missed hundreds of dollars in deductions. Having a tax accountant help you sort through your deductions, deprecation, and income can save you a tax audit, as well as save you lots of money.
This is just one instance in my 10 year landlording history in which I made mistakes. This was not an ideal situation by any means and so there were plenty of mistakes to be made. Being young and very inexperienced I made them all. Good luck with your landlording experiences be prepared and avoid some of these silly mistakes.