The top costly mistake that new landlords make is mishandling finances. You have to be able to manage money, plan ahead of time, and budget properly in order for your property to come out on top. Otherwise, instead of earning passive income, you might end up in a hole of debt.
Charging Too Much for Rent
Potential tenants are going to do their research, so make sure that the price you are charging is fair. While you want to earn a certain amount to cover your own expenses and time, you need to check the prices of your local market and the competition. Consider the shape your property is in and how it ranks compared to neighboring rentals.
Charging Too Little for Rent
On the flip side of charging too much for rent, you also don’t want to charge too little on your Henderson property. Gather data on what you should charge and list it at that price; you don’t need to undersell your property just to fill it quickly. If it’s taking too long, consider lowering your price or figuring out what else might be going on, but charge what you and your financial advisor think is right at the start.
Forgoing the Security Deposit
Always collect a security deposit from new residents at move-in; this will help both of you in the long run. A security deposit serves as a cushion of cash in case of damages that need to be paid at the end of the lease. This deposit typically costs the same amount as a month of rent, and the tenant gets the full amount back at the end of their lease if nothing was damaged. Make sure to save the security deposit somewhere it won’t get mixed up with other money; you need to hold on to it so that you don’t have to end up paying the resident back out of your own pocket.
In the same vein as separating the security deposit, make sure to keep all of the rent money paid to you in a location that won’t get mixed up with your personal money or other earnings. As bills and taxes come in, you want to make sure that you are calculating the correct amount of how much you’re profiting from your rental property in Henderson.
The second costly mistake you want to avoid as a new landlord is taking shortcuts. No matter what the area, this never pays off and ultimately will end up with you owing more at the end of the day. Take your time to get it right the first time, and your property will start paying for itself.
Never ignore repairs that need to be made. Over time, the issue will get worse and lead to either more damage or a safety hazard. Even if it seems like a small maintenance issue that could be put on hold, remember that once someone moves in the property will suffer some wear and tear. It’s a better investment for you to start off with everything in top shape instead of having to run around fixing crumbling pieces with an unhappy tenant on your hands.
No Tenant Screening
Don’t take the easy way out when it comes to screening potential tenants either. Check their rental history and ability to pay. The two main things to look out for are a steady source of income and a clean record of any past evictions (and of course any major standouts like a criminal conviction). Even if they seem great and say they can right away, make sure they’re a reliable tenant who will be able to consistently pay rent on time. Hire a property manager if you need help sourcing good tenants.
Ignoring the Rules
A final mistake to avoid is ignoring the rules. While you may not maliciously try to break the law, you don’t want to let anything slip under the cracks because you didn’t know any better and end up having to pay a fee or settle a lawsuit. Read up on local code, federal laws, and the requirements that go into being a Henderson landlord.
There are two lenses to look through when it comes to local rules and regulations: tenant relations and tenant rights. When it comes to landlord-tenant laws in Nevada, research the following:
- Security deposit limit
- Late fees
- Tenant right to withhold rent
- Eviction rules
- Landlord access to property
- Tenant protection against retaliation
As for some of the Nevada tenant rights, look into:
- Dwelling structures
- Electrical outlets and wiring
- Garbage removal
- Adequate ventilation
- Air conditioning
- Floors, walls, ceiling
- Bed bugs
With a proper lease agreement signed by both parties, all of your responsibilities should be addressed and recognized. The tenant is also responsible for not causing significant damage, paying rent on time, and being respectful. Having a formal document will set expectations from both sides and help in the case of legal trouble.
Insurance is another way to help both you and your tenant in case of any unexpected situations. With the proper insurance, it’ll be a lot easier to cover expenses when nobody, in particular, is at fault for an incident like a fire or flood.
While running a property can be an easy way to make some extra money, there are also a lot of responsibilities to keep in mind. If you need help managing your property in Henderson, contact us at Robinson Realty Management to get started.