New landlords often make rookie mistakes. In the hope of avoiding the cost of paying for the services of property managers many choose to source and manage their own tenants. Some will succeed, but others fall into a number of common traps for new players.
Those traps can include:
1. Failing to screen tenants properly. Bad tenants often target amateur landlords who might not do the same rigorous vetting checks as a more experienced landlord or good property manager. “When I brought my first property I jumped in and didn’t even do any credit checks,” says Andrew Bruce, president of the Auckland Property Investors Association. “I learned that one pretty quick.” Professional landlords use services such as T.I.N.Z , which allow them to do a range of checks on tenants. Bruce says it’s also important to get referees who aren’t friends and family of the potential tenant.
2. Sticking to the law. Failing to understand tenancy law gets newbies in trouble with the Tenancy Tribunal. You need to get a good working knowledge of the the Residential Tenancies Act 1986 (RTA) and to follow the letter of the law. Rookies make many mistakes such as turning up at the property unannounced, increasing the rent whenever they fell like it or a host of other mistakes. Experience teaches you what to look for, says Bruce.
3. Failing to carry out inspections. A rental property is a huge investment, which you’ve handed over to strangers. Too many amateur landlords don’t do regular inspections, which put both the home and their insurance in jeopardy. Inspections are time consuming, says Bruce and some new landlords simply skip them. But if it comes to a Tenancy Tribunal claim and you can’t show evidence of having done checks you may lose.
4. Taking it all too personally. Property investment is a business and tenants are your clients. Newbies sometimes let their former homes to tenants and then get upset at what in reality is reasonable wear and tear, which is allowed under the RTA, says Bruce.
5. Letting illegal dwellings. Amateur landlords can be tempted to let an illegally converted garage, basement or other building as a tenancy. It’s a big risk, says Bruce. Tenants know their rights and the Tenancy Tribunal can and sometimes does order landlords to repay every cent of rent to tenants who have found themselves living in unconsented structures. Landlords may also be breaching the terms of their insurance cover by letting these properties, says Bruce.
6. Failing to maintain the property. Amateur landlords can be tempted to ignore requests from tenants for work to be done. This can both degrades the property and sour the relationship with the tenants. Doing work promptly can help keep good tenants. It also protects your investment.
Amateur landlords can become professionals. To do so they need to educate themselves. That can be done by reading books on the subject, attending property investor association meetings for educational presentations and networking, and joining busy social media groups frequented by landlords.