Becoming a Phoenix landlord isn’t a hobby, it’s a way to make money. And if you do it right, owning rental property has the potential to net a steady, passive income that you can rely on.
Unfortunately, many landlords make costly mistakes that dip into their profits and hurt them financially.
Whether you’re new to investing in real estate, or a seasoned pro, it’s easy to make mistakes and lose time, money, and sleep. That’s why one of the best things you can do for yourself is to learn from the mistakes of others.
If you’re a Phoenix landlord and worry about making poor decisions that will cost you money, check out this list of common mistakes landlords tend to make – over and over again.
1. Not Getting a Good Deal on a Property
It should come as no surprise that many landlords don’t know how to get a good deal on a rental property. After all, anyone with a sizable amount of money can buy a property and rent it out.
Not everyone, however, can generate a lot of profit from a rental property.
Here are some of the most common reasons landlords get bad deals on their property:
- Not understanding the national and local housing markets
- Putting too much emotion into a property purchase
- Failing to research the location (g., schools, crime rates, nearby shopping, and dining, etc.)
- Forgetting to check nearby competition and rent rates
- Hiring an inexperienced real estate agent that doesn’t understand investing
- Opting out of an inspection, or turning a blind eye to expensive repairs
If you want to start your landlord career in the red, you’ll buy a property as fast as you can without a plan.
If you want to avoid making one of the costliest mistakes there is as a Phoenix landlord, you’ll educate yourself and be patient.
2. Overpricing Your Property
If you’re one of those landlords that didn’t do enough research before buying a rental, you might also be a landlord that tries to overcharge tenants.
Sure, generating a profit is the key to being a successful Phoenix landlord. And undervaluing your property can cost you lots of money.
But if you charge too much rent for your property, you’ll find it sitting vacant for longer than you’d like. And that means you’ll be making zero dollars a month.
Don’t get trapped into an expensive mortgage hoping you can cover it with expensive rent.
Instead, [cta]get a FREE assessment of your rental property[cta] before you buy it. This way you can make sure the rent you collect will cover the costs of being a landlord. This includes the mortgage, insurance, taxes, and maintenance and repairs.
3. Improper Tenant Screening
As a Phoenix landlord, your income is dependent on your tenants paying their rent each month.
It’s crucial you place high-quality tenants in your property that can pay the rent each month and care for your property as though it were their own. And one of the only ways you can kind of guarantee this is to perform thorough tenant screening.
If you fail to screen your tenants the right way, you risk placing someone in your property that has a no job, limited income, bad behavior, and more.
You might end up with a non-paying tenant and lose out on lots of rent. You might end up with a damaged property at the end of a tenancy that you have to fix with your own money. Worse yet, you might have to evict a bad tenant and deal with lost rent, damages, and even court fees.
To prevent this from happening, have a routine tenant screening process in place. Also, run a background check, verify employment and income, reach out to references, and always collect a security deposit.
You may not be able to protect yourself from every bad situation, but by being proactive you can try.
4. Not Inspecting Your Property
It’s easy to want to place a tenant in your rental and never come back until they’re ready to move out. But this is a huge mistake Phoenix landlords make that sometimes end up costing them in a big way.
Despite thorough tenant screening, there’s always a chance you place a tenant in your property that:
- Lets pets stay in your house, even though you have a no pet policy
- Damages the interior of your property
- Forgets to tell you about minor maintenance issues that later become larger, expensive issues
- Fails to follow the lease agreement and maintain your property as agreed (g., not handling the landscaping)
If you wait until the end of your tenant’s lease term to find these things out, you’re going to have a hefty bill on your hands.
Performing routine property inspections are not always fun. This is especially true if you self-manage your rental. But visiting the property every now and then to check on things is necessary.
Doing this gives you the chance to make sure things are okay, handle maintenance issues, and show your tenants you’re serious about your property. It also lets your tenants know you care about them too, which can help with lease renewals.
5. Allowing a Verbal Lease Agreement
In business, verbal agreements are rarely valid. This is especially true when it comes to rental lease agreements.
In fact, in Arizona, oral lease agreements are only acceptable for week-to-week or month-to-month lease terms. If you want your tenants to lease from you for one year, a written agreement must be in place.
It’s important that no matter who you’re leasing your property to or for how long, you have a signed lease agreement.
Lease agreements are signed contracts outlining the responsibilities of both the tenant and landlord. They protect both parties and offer written documentation should a landlord-tenant dispute arise.
If you have nothing in writing and end up in court, you might lose.
Don’t risk losing out on rent payments, maintenance costs, and legal fees because you didn’t draft a written lease agreement. There are many free templates online you can use.
And if you want a solid agreement drafted, you can always hire a Phoenix property manager to help you out.
6. Not Having or Requiring Insurance
If you want to spend more money than you should, you won’t have insurance in place. Of course, this is ridiculous but is a mistake that many Phoenix landlords make.
And they don’t realize it’s a mistake until it’s too late.
If you want full protection, look into the following insurance types:
- Homeowners Insurance: this insurance policy is under your name. It protects the structure of your property should anything happen to it. For example, homeowners insurance covers fires, floods, and other natural disasters. This way you don’t have to pay out of pocket for any damages, regardless of who is responsible (g., your tenant or nature).
- Renters Insurance: this insurance policy is under your tenant’s name. It protects your tenant’s personal belongings and any medical costs that result from an injury that happens on your property. In addition, it covers any damages as a result of your tenant’s negligence. This will prevent your homeowner’s insurance premiums from rising.
You should always have homeowners insurance for your rental property. It’s also best to require your tenants to have renters insurance if you want to save money in the case of an emergency.
7. Not Using a Property Manager
It may seem like you’re saving money by self-managing your rental property.
But as time goes on, you’re likely to find you’re spending excess money on things like:
- Marketing your vacant property
- Background check fees
- Rent collection software
- Eviction and other court proceedings
- Extended vacancies
- Bad tenants
With a reliable property management company helping you, you’ll enjoy all their services for a small monthly fee. And while paying for a property manager is an added cost each month, the amount of money you save in the long run makes it worth it.
Are you in need of Phoenix property management? If you’re ready to let an expert manage your rental property for you, contact us today.
At Stratton Vantage Property Management, we understand the risks that come with investing in rental property. We also know there’s a lot of money on the line for Phoenix landlords, as well as a lot of money to be made.
It’s our job to make sure you profit from your rental property and that your tenants love leasing from you. That’s why we work diligently to reduce overhead costs, place high-quality tenants, collect rent on time each month, and inspect your property to ensure it’s well cared for. But more than that, we strive to provide the highest level of customer service possible, so you and your tenants never think about going elsewhere.