Have you decided to rent out your property? You may hear many people around you warn you of the risks, while others may endorse your choice! Although we’d recommend never entering into a landlord-tenant relationship without knowing all the possible mistakes that can occur!
Leasing your property can be a great way to generate income without having to go through the hassle of selling it. However, renting your property also comes with its own set of risks and challenges. Unfortunately, there’s no surefire way to guarantee that your renters will be perfect tenants. But you can do a few things to minimise the risk of problems down the road.
This blog post will review the 11 most common critical mistakes landlords make when leasing their properties out to renters. Avoid these mistakes, and you’ll be well on your way to having a successful rental experience.
Not Knowing Your Market & Setting The Wrong Price
When setting rent prices, you need to know what similar properties in your area are going for. Many landlords think they can just charge whatever the market will bear, but this is often not the case. If you charge too much, you may end up with a vacant unit; if you charge too little, you may find yourself in a money pit.
To get an idea of what rent prices in your area are like, look at listings online and see what similar properties are going for. You can also talk to a local real estate agent or property management company to get their opinion on a fair rent price.
Once you know what rents are going for in your area, set a competitive price that will attract tenants while still giving you a good return on your investment.
Not Screening Your Tenants & Conducting a Thorough Background Check
As a property owner, it is your responsibility to screen your tenants. This includes running a credit check, verifying employment, and checking references. Not screening your tenants increases the risk of damage to your property and non-payment of rent.
Another mistake landlords often make is assuming that all background checks are identical. However, there are different background checks, and each will provide additional information about the tenant. For example, a criminal background check will tell you if the tenant has any prior convictions, while an eviction history check will reveal if the tenant has ever been evicted from a rental property. Be sure to choose the right type of background check for your needs to get accurate information about your potential tenant.
Our team of rental agents at Elders Toongabbie also complete a TICA & TRA check for all potential tenants wanting to lease your property. TICA is a national tenant database with over 7 million tenant records; having been around for over 25 years, it is the most extensive database in Australia. TRA (Trading Reference Australia) is an online property management system with an online tenancy application, problem tenant database, inspection app and document storage. Both can provide comprehensive insight for all potential tenants wanting to lease your property. Of course, only some real estate agents offer this, but between these checks, you can have a comprehensive background screening on any tenants.
Not Checking Credit Scores
One of the most common mistakes landlords make when leasing their property is not checking credit scores. This can lead to a tenant with poor credit renting your property and being unable to keep up with rent payments. Checking credit scores is an essential step in the screening process for potential tenants.
Not Doing a Background Check
If you’re not doing a background check on your potential tenants, you’re setting yourself up for a world of trouble. You could end up with tenants who don’t pay their rent on time or, worse, damage your property. You can avoid this hassle by running a simple background check.
Not Screening for Tenant Stability
When leasing your property, one of the most critical mistakes you can make is not screening for tenant stability. This means not running a credit check or background check on potential tenants. Without doing this, you cannot know if the person you’re about to lease to is financially responsible or has a criminal history.
If you’re not screening for tenant stability, you’re putting yourself at risk for late rent payments, damage to your property, and even legal trouble. So before leasing your property to them, take the time to screen your tenants thoroughly. It’s the best way to protect yourself and your investment.
Not Having a Written Lease Agreement & Proper Documentation
If you’re leasing your investment property out to renters, it’s critical that you have a written lease agreement in place. This agreement should outline the lease’s terms, including the lease’s length, the rent amount, and any other pertinent details.
It should be signed by both parties before any tenancy begins. Without a thorough and well-executed lease agreement, disputes are more likely to arise during the tenancy, which can be costly and time-consuming to resolve.
Keep proper documentation of all communications with your tenants, including any repair or maintenance requests. Having a written lease agreement and keeping good records can help avoid potential problems down the road. There have been recent changes to the residential tenancy laws restricting landlords on how often they can increase rents and even evict tenants.
Not Conducting Regular Inspections
If you’re not conducting regular inspections of your investment property, you could miss out on crucial information about the condition of your property and potential problems with your tenants. Not to mention, if any repair or maintenance issues need to be addressed, you’ll likely have to pay for them yourself if you’re not aware of them promptly.
To avoid these costly mistakes, schedule regular inspections of your property – at least once every few months. This will allow you to check in on the property’s condition and make sure everything is up to par. If you notice any potential problems, you can address them immediately instead of waiting until they become bigger (and more expensive) issues.
Our point of difference at Elders Toongabbie is that when our rental agents conduct regular inspections we take and use colour photographs of your rental property. Many real estate agents don’t take photos, especially in colour so damage or issues to your property can be hard to capture.
Not Getting Renter’s Insurance
If you’re leasing out your investment property to renters, one of the most critical mistakes you can make is not getting Landlord’s insurance. As a landlord, it is important to protect your investment by getting adequate insurance coverage. While your renters may have their own renters insurance, this will not cover damages that are caused by them. Therefore, it is essential to get landlord insurance, which will cover damages to your property that are caused by your tenants.
This type of insurance will also cover you in the event that your tenants fail to pay rent or damage your property. In addition, landlord insurance can provide liability coverage in the event that someone is injured on your property. By getting adequate insurance coverage, you can protect yourself from financial loss in the event that your property is damaged or your tenants fail to pay rent.
It is important to note that not all landlord insurance is the same, we recommend that you get landlord insurance that at least covers what Terri Scheer does!
Not Requiring a Security Deposit
Another common mistake landlords make is not requiring a security deposit from their tenants. Instead, a security deposit gives you financial protection if your tenant damages your property or fails to pay rent.
In most states, the law requires landlords to return the security deposit to the tenant within a specific timeframe (usually 30 days) after the lease has ended. However, you may withhold some or all of the deposit if there is damage to the property or unpaid rent.
Some landlords hold onto the money which is illegal. The Rental Bond Board is the independent custodian of rental bonds paid by tenants to landlords or their agents for residential tenancies. Landlords or their agents must lodge tenants’ bond money with the board. NSW Fair Trading administers the day-to-day functions, providing rental bond lodgement, custody, refund and information services on behalf of the board.
Not Following the law & Discriminating Against Prospective Tenants
Landlords must protect themselves from legal trouble with tenants by familiarising themselves with the Anti-Discrimination Act. Discriminating against prospective tenants is one of the most common critical mistakes landlords make when leasing their investment property out to renters. Therefore, you must ensure your rental listings aren’t explicitly targeting or excluding any groups.
According to Fair Trading NSW, the law states you cannot be discriminated against or excluded because of your;
- race (colour, nationality or descent)
- sex (male or female)
- pregnancy
- marital status (e.g. singles or unmarried mothers)
- disability (physical, intellectual or psychiatric disability)
- homosexuality (both gay and lesbian)
- age (both young and old)
- transgender (transsexual).
Not Knowing When to Sell
One of the most critical mistakes when leasing your property is not knowing when to sell. Many landlords think they can wait until the lease is up and then sell, but this often isn’t the case. If you’re unsure when to sell, it’s best to speak with a real estate agent to help determine the right time to put your property on the market.
Not Knowing the Law
Leasing your property can be a great way to generate income and offset some of the home costs. However, there are a few critical mistakes that you could make when leasing your property that could put you at risk. One of the most common mistakes is not knowing the law.
There are numerous laws and regulations governing leases and landlords in every state, and they are constantly changing. Not knowing these laws could put you at risk for non-payment, eviction, or other legal penalties. Therefore, you must consult with an attorney or knowledgeable real estate agent before entering into any lease agreement to ensure you understand your rights and responsibilities.
Not Doing Regular Property Maintenance & Repairs
One of the most common critical mistakes when leasing your property is not doing regular property maintenance & repairs. Keeping the property in good condition prevents expensive repairs down the road and makes it more attractive to potential tenants. Additionally, regular maintenance can help extend your property’s life, saving you money in the long run. Furthermore, by promptly addressing maintenance and repair issues, you can avoid potential legal problems that could arise if a tenant is injured on the property.
This can include anything from not regularly changing air filters and checking the smoke detectors to more significant issues like neglecting to fix a broken window or a hole in the roof.
According to the Residential Tenancies Act 2010 and the Residential Tenancies Regulation 2019 landlords legally agree to:
- Provide a property in a “reasonably” clean state for tenants to live in
- Provide and maintain the property in “reasonable” repair
- Must make and complete all repairs referred to in the property’s original condition report
- Provide repairs for any urgent repairs after being contacted in writing/and or verbal form. If the landlord is unable to be contacted tenants can pay for any urgent repairs to be completed to the “reasonable” costs up to $1,000 and be reimbursed by the landlord within 14 days.
However, not keeping up with essential maintenance puts your tenants at risk and makes them more likely to move out when their lease is up. Additionally, neglecting to do regular property maintenance can lead to severe health and safety issues, which could end up costing you a lot of money in repairs or even lawsuits. Ultimately, regular property maintenance and repairs are essential for protecting your investment and ensuring that your property remains a safe and desirable place to live.
Not disclosing important information to potential tenants
As a landlord, you must disclose certain information to potential tenants. This includes whether the property is in a flood zone, if there are any environmental hazards, and if there have been any previous complaints or lawsuits against the property. Anything that is deemed a health and safety risk that you are aware of must be disclosed to the potential tenants. Failing to disclose this information could result in serious legal repercussions.
Additionally, it’s essential, to be honest about the property’s condition. If you try to hide any damage or defects, it will only come back to bite you later on. Be upfront about any property issues so potential tenants can make an informed decision about whether or not they want to rent from you.
Conclusion
By avoiding these critical mistakes, you’ll be well on your way to having a successful experience leasing your investment property out to renters. Remember to screen your tenants carefully, require a security deposit, and have a written lease agreement before renting your property. With these precautions in place, you can minimise the risk of problems down the road.
Our rental team at Elders Toongabbie have a wide range of properties available for rent and has over 20 years of experience managing our client’s rental portfolios. We can ensure you find the perfect tenant for your lease. If you have a property you’d like to lease contact our team today!