5 Common Mistakes First-Time Landlords Make

In the current real estate climate, the rental sector is going strong. Many people are renting, as opposed to buying, because of market fluctuations. This is great news for existing landlords. However, many people are scooping up foreclosures and short sales, turning around to rent them for profit, becoming first-time landlords. Becoming a landlord can be a lucrative career transition, but there are several mistakes that are easy to make if you're not informed and aware. To help you avoid them, let's take a look at the top five.

1. Improperly or unfairly screening potential tenants

When you become a landlord, it's paramount that you put sound tenants in your property. It's your responsibility to check rental histories, employment backgrounds and references in order to ensure that your tenants are responsible. However, under the Fair Housing Act of the Civil Rights Act of 1968, applicants have equal rights to be screened as tenants. First-time landlords, you cannot consider age, race, sex, handicap, marital status and other characteristics outlined by the U.S. Department of Housing and Urban Development as unfair considerations. Be sure to check the Fair Housing/Equal Opportunity website for a full list before screening potential renters.

2. Underestimating repair costs

Every homeowner knows, upkeep and repairs require constant effort. And, it's easy to overlook minor fix-it needs when you're not the one living in a home. It is recommended to put away at least six months of repair funding for each rental property you own. This will cover minor costs, such as broken windows, painting needs, updating some carpet (every five years is an average estimate for full carpet replacement). However, should something large need to be repaired or replaced, such as the roof, the hot water heater or another large appliance, you'll have the extra savings to cover it.

3. Being invisible or lax

If you plan to rent your property and move across the country, then hire a property management company in the area. Don't confuse being nosy with being visible, but it's important for tenants to know that someone's eyes and ears are on the place, for your security and theirs. Like you, tenants need to know there is someone close they can turn to should the need arise.

Also, if a tenant breaks a rule, enforce the predetermined fine. If rent is late, even once, penalize the tenant. You don't want tenants believing they have a pushover as a landlord because this will encourage them to take advantage of your flexibility.

4. Not setting out firm, legal terms in a lease agreement

Don't shake hands with a friend and let his or her word be the basis for your lease agreement. You want to have guidelines, rules and regulations set firmly on paper; reviewed to ensure they meet your state and city's housing and code requirements; and signed by both parties. If there is ever the need for an eviction, having everything in writing will be required.

5. Not insuring your home properly

Most first-time landlords assume that their regular homeowner's insurance will do, but in actuality, some revisions to your coverage should be made once tenants are brought into your property. Your policy should no longer cover the home's contents - excluding major appliances, if these are left in the home. There should also be a liability clause in case your renters or their guests get injured on the property.

The safest way to guarantee you take the right steps as a first-time landlord: talk to a property management company, an insurance specialist, as well as a financial planner. Seek out the advice and guidance of professionals to make sure you cover all of your bases.

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If you're becoming a first-time landlord, consult Boundless Management at http://www.youratlantarentals.com/ for information on how a property management company can make your transition easier.

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