If you want your rental lease to be profitable and trouble-free, then it's crucial to know what are the deadly pitfalls to avoid. Find out what are the common yet lethal mistakes that landlords make and rescue yourself from any unnecessary headaches.
Mistake 1: Failing to Screen Your Tenants Properly
Professional property managers often have a saying, “Picking the right tenant will eliminate 80% of your potential problems. "
Some landlords tend to be very casual when picking new tenants for their rental lease. They may simply accept the first applicant who agrees to their rent or choose people who seem friendly enough.
However picking a tenant is Not the same as choosing a best buddy. The proper way to do it is interview any potential tenant on the phone first followed by a face to face meeting with him to show him around the property.
It's also a good idea to have him complete an application form so that you can learn more about him and possibly contact his former landlord for references if necessary.
Mistake 2: Not Running Credit Checks on Potential Tenants
As a landlord, nothing is more important than your rental income. One of the most effective and cheapest ways to find reliable, rent-paying tenants for your rental lease is take a good look at their credit reports.
Your tenant's credit report contains a wealth of helpful information including the debts he currently owes and whether he has been punctual in paying up. If your applicant is riddled with mountains of credit card debts or is already 2 months behind in his car loans, it's an obvious warning sign to avoid him.
It's also important to find out how your tenant makes his living and if he has other income sources. For example you can probably expect more timely rent payments from a full time government worker versus an entrepreneur who's just starting out.
Your tenant doesn't have to be raking in millions, but as a general rule of thumb the rent should not exceed 25 to 30% of his total income. If your applicant has an excellent credit score and owes little debt, it still makes sense to consider him even if he earns less.
Mistake 3: Mishandling Your Tenant's Security Deposit
Knowing when to deduct money from your tenant's security deposit is important for avoiding ugly conflicts with your tenants.
If your tenant damaged your property due to neglect or abuse, you are allowed to deduct money from his security deposit to pay for the repairs. If the rental lease has ended and your tenant still owes you rent or utility bills, you also can make use of his security deposit to foot the bill.
Other than knowing when you are allowed to take money from your tenant's deposit, it's also crucial that you learn the right way to do it.
Whenever you take money from your tenant's security deposit, you will have hand him a deposit claims form stating the amount and reason for every deduction. If you are making claims for property damages, your claim form has to include an item by item listing for every repair.
To avoid any protests from your tenants, be sure to keep a written copy of all the relevant bills and receipts.
Teo Zhenjie has been showing landlords how to manage their tenants and rental properties effectively on Propertydo / - To learn more important tips on rental lease , visit his website today for step-by-step real estate guides, free resources and forms.