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6 Fatal Mistakes That Could Cut Your Career As A Landlord Short



By Careers Desk



Wednesday, May 2, 2018.



Property is more than just shelter for the cold. It’s more, even than the psychological comfort blanket that is a home. Sure, it can give us a sense of place, belonging and comfort, but it can also be something much more. It can be a tool of social mobility, a vehicle for financial empowerment and a way in which those of virtually any background can grow their personal wealth while providing a vitally important service to those that need it. In the black community in particular, the notion of financial empowerment is particularly important. Having been denied empowerment for generations, many seek it out wherever we can find it. With this in mind, many people from all sorts of backgrounds, trades, ethnicities and educations are drawn to the notion of being a private landlord. What better way to hedge your bets in an uncertain economy than to purchase a property with the intention of letting it out to draw a stream of income to supplement your wage.


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Think of the possibilities!

It could insulate you from financial risk so that you can cut down on your hours at work to spend more time with your family, or it could even help to facilitate a change of career. After all, we don’t know what the workforce of the future will look like. Perhaps the skills and knowledge we’ve spent a working lifetime developing could be rendered irrelevant overnight. The stream of revenue from leasing out your second property could go a long way to insulating you against that risk. While a sizeable upfront investment, a second property could insulate your family from the financial risks that we all face, especially with the new tax breaks geared towards property owners who buy to lease.


While it’s easy to get swept up in this common power fantasy, the life of a landlord is far more beset with risk than many initially realize. If you think that your obligations start and end with your initial investment, think again. In an uncertain economy, there’s nothing which can be taken for granted and many ambitious investors make mistakes as landlords which cut their careers as landlords unceremoniously short and often with dire financial repercussions. Here, we’ll look at some of the fatal pitfalls that could ruin your nascent landlording activities and what you can do to avoid them…


Taking your eye off the ball

You don’t live in a vacuum, and it could prove a fatal error if you don’t stay abreast of the latest property news. It’s tempting to become complacent and assume that your tenants will keep the same revenue coming in whatever happens, but if history has shown us anything, it’s that property prices are in a constant state of flux. Your chosen area could boom, and you may risk alienating your current tenants by increasing your rent. Conversely, something could happen to make property prices in the area nosedive like unpopular town planning, the gentrification of a neighboring area or simply the whims of the markets.


Keeping your eye on the ball will keep you agile. If you have string reason to suspect you may be holding on to an investment that will shortly become a dud, you have the time to sell up and look for somewhere more profitable. Do nothing, however, and you may be forced to take a huge hit on your rental income or wind up with a money pit that lies unoccupied for months.


Failing to make a business plan

One of the biggest dangers in real estate is over simplification. Being a landlord is more than just buying a property and leasing it out… it’s a business. And entrepreneurial readers will know that every business needs a business plan. You need to carry out a detailed cash flow analysis to ensure that you’ll be able to cover the inevitable costs of repairs, cleaning and the fees of a management agency (should you choose to use one) whether the property is occupied or not. You need to have specific and time bound goals that will help you to get to where you want to be as a landlord. These will dictate everything from where you buy to how much you invest in renovations to how much you charge for rent to how you will maximize your return on investment sustainably, no matter what the market has in store.


Falling afoul of the law

As a landlord you have many obligations. Of course, you have an obligation to yourself and your family as a provider. You have an obligation to your tenants to provide a level of service for their money and you also have an obligation to the law. The subtleties of a landlord’s legal obligations vary from state to state but you have an obligation to keep the property habitable, safe and well maintained. There are certain circumstances (such as tenant evictions) where you will have to adhere to a very specific legal process so it’s important to read up on which state and federal laws apply to you. One of the most important ways in which you can protect yourself is with a comprehensive rental agreement. This useful template can help you to draw one up that covers all the right bases.


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Overspending

Those of a business mind will see their property as a product. And like any other product it needs to have mass appeal. Thus, they’ll sink a lot of their capital into decorating and renovating their property to make it super appealing to tenants. While this is certainly admirable, it’s also very easy to fall into the trap of overspending. Remember that the area in which you buy may place a cap on the rental income you can realistically hope to draw from the property, and you may simply never be able to charge enough to make all the fancy renovations and mod cons worth it.


Underspending

On the other hand, if you fail to make an adequate investment in time and capital in the property, this will place a far greater cap on the rental income you can expect. Some neophyte landlords want to make as much money as possible while also doing the bare minimum. As in any business, overhead costs need to be carefully accounted for an managed but under investment is simply bad business practice and is both limiting and damaging to your brand and reputation. You don’t want to lose tenants and even the prospect of securing more tenants with a reputation as a creepy or negligent landlord. In the digital age, with sites like Rate My Landlord giving prospective tenants greater transparency than ever, damage to your reputation could be particularly crippling, even if you’re paying top dollar for a unit in a sought after area.


Getting too friendly with tenants

It’s absolutely important that you have a positive working relationship with your tenants. But it’s also important to remember that they are your clients, and that your relationship with them remains pleasant but professional. By all means give the nice young couple a hand with their heavier items when they’re moving in, but just because they remind you of your daughter and son in law, that’s no reason to let their rent slide a week late. The more personal you make your relationship with your tenants, the more difficult it gets to assert yourself if they don’t live up to their obligations as per the tenancy agreement.


Even if your tenants have been carefully vetted and screened (which they should be) they can still surprise you by taking liberties such as paying their rent late, asking for an extension (essentially an interest free loan) or failing to leave the unit as they found it.


Manage your responsibilities carefully and treat your activities as a landlord as you would any other business and you’ll establish a strong framework for success.








6 Fatal Mistakes That Could Cut Your Career As A Landlord Short

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