Being a landlord can be a lucrative way to make some extra money or could even be a primary source of income if you do it correctly. However, it's easy to make mistakes, especially when you're new to renting out property, and some landlord mistakes can reduce the income that you're getting from your rental, or even cost you more than you're making as a landlord. Take a look at some common first-time landlord mistakes and find out how to avoid them.
Violating the Fair Housing Act
The Fair Housing Act (FHA) is the federal law that is meant to prevent discrimination against tenants on the basis of race, color, national origin, religion, sex, disability and the presence of children. Now, chances are that you have no intention of intentionally violating the Fair Housing Act. Most landlords don't want to discriminate. But it's easier than you might think to accidentally violate the act.
For example, one area where many landlords run into difficulty is when it comes to service animals. It's not uncommon for landlords to disallow pets, or to charge an additional deposit for tenants with pets. This is understandable since pets can cause damage to the property. However, service and assistance animals are different. You're required to make reasonable accommodations for a tenant who requires a service animal, and these animals should not be subject to pet fees. You can't refuse to rent to someone who has a disability just because they require a service animal. You can, however, seek compensation from the tenant if their service animal damages your property, and you can still charge a security deposit – just not additional pet fees.
This is just one area of the Fair Housing Act that sometimes causes confusion. It's important to familiarize yourself with the law and its implications for landlords, as well as any applicable state or local laws. Knowing the law is the best way to avoid violating it.
Failing to Make Repairs Promptly
It can be easy to put off making repairs to a rental property. You may not feel a sense of urgency about the repair since you're not the one living in the property. Or you may be tempted to put off the repair if you're having cash flow problems. However, there are several important reasons to make repairs promptly.
Your tenant has the right to expect timely repairs to the property, especially if the problem affects a necessary fixture in the home, like the heating or plumbing. If you don't make the repair in a timely manner, your tenant may legally be able to withhold rent, pay for the repair themselves and deduct the cost from the rent, or break their lease to move out. If an injury occurs that could have been prevented with a timely repair, you may be held liable for the injuries. All of these scenarios could cost you.
Also, as a practical matter, fixing problems with a building early is usually less expensive. A small leak, for example, will become a big leak over time, costing more to fix and possibly leading to water damage as well. Timely repairs are always in your best interest.
Not Prioritizing Rent Collection
You definitely want to make sure that you collect your rent on time every month. This sounds like a no-brainer, but it can be easier than you might think to let a late payment slide. If you have other properties or another job, one tenant's rent may not be at the top of your priority list every month, and it's possible not to notice right away if the rent doesn't arrive on time.
It's also easier than you might think to accept excuses for late or missing payments. It's natural to feel sympathy for tenants who have a sincere hardship, and you may not want to be the "bad guy" who insists on timely payments.
However, if you don't prioritize rent collection, some tenants will take advantage of that to pay as little or as late as you'll let them get away with. Make sure that your rental agreement is in writing, and that you have a clearly-articulated plan for what happens if rent is not paid on time. If your agreement says that tenants will be charged a late fee after the first of the month or that you'll start eviction proceedings if the rent isn't paid by the tenth day of the month, stick to that.
You should consider using a property management company to help ensure that you avoid these types of mistakes. A property management company will be familiar with the applicable laws, have contacts and relationships with contractors who can make needed repairs in a timely manner, and can enforce timely rent payments if you find yourself having difficulty with it.