Tenant Screening
If you have watched our other videos, you know that not properly screening tenants is one of the biggest mistakes housing providers make. Complete your due diligence and run a detailed credit and background check. More importantly, make sure you use the same process for every single applicant. If you don’t do that, you’ll find yourself in hot water.
Security Deposits
Tenants who don’t have the money for a security deposit, or want to make payments towards the security deposit, are a bad idea. If a tenant doesn’t have the full security deposit before moving into your property, I guarantee you’ll have a hard time collecting rent. Don’t accept anything less than 100 percent of a security deposit.
Unlicensed Vendors
Another big mistake is using unlicensed vendors to work on your property. This may save you a couple of bucks in maintenance costs, but in the long run, it costs you so much more. Either you’ll find the work was not done correctly or the materials are not holding up. You’ll need to change the carpet between every single tenant or have the same job done again. Or, something will happen and a tenant will get hurt and sue you. You’ll find yourself in court, where you’ll have to admit to using someone without a contractor’s license. Don’t work with vendors who are unlicensed.
Renting to a Friend
It might seem like a good idea to rent to someone you know; a friend or a coworker or a family member. You know them, so you assume they will take good care of your property. But what happens when they stop paying rent and you have to evict?
That will get awkward and your friendship will be dead. Don’t mix business with friendship or business with family. It’s always best to rent to someone you don’t know. Relationships stay intact and there are no hard feelings. You don’t want to sit across the table at Christmas dinner from a cousin you had to evict from your property.
Smart Improvements
Another huge mistake is not making smart improvements. For example, a lot of housing providers will get excited about buying rental property with a swimming pool. That’s not a wise improvement or amenity. Not only does it add an extra expense which will cut into your cash on cash return, you’ll also have a lot more liability at your property. What if tenant’s child drowns?
If you think you’re not responsible, remember this is California and you need to protect yourself. Housing providers will install granite countertops and expect an extra $200 in rent per month. The rental market doesn’t think that way. The only things you should consider are the durability of the improvement and whether it will help you collect a higher rent every month.
Evictions
Some housing providers will serve a Three Day Notice and hope it was served correctly. However, if you accept a partial payment after serving that Notice, the eviction process stops. You have to start all over again. We aren’t saying you shouldn’t take partial payments; you just need to know the ramifications.
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These are some common mistakes. If you want to avoid them, please contact us at Bruce Croskey Real Estate, and we’d be happy to share our expertise with you.