If you’ve been thinking of managing your investment property yourself, you have most likely done research that has probably told you that being a landlord can be complicated.
Navigating the pitfalls and problems as they arise is vital if you want to protect both you and your property, so we’ve put together a list of 5 things you should not do if you wish to succeed in property management in South Florida.
1. Don’t mismanage the security deposit
The security deposit is just what it says it is. One of the mistakes self-managing landlords make is agreeing for the security deposit to be used in place of rent when the tenant can’t pay.
If you do this, unfortunately, the security deposit is gone and never coming back. So when the tenant moves out, you need to process the security deposit as required by law, and then there will be nothing to process.
Another downfall of letting the tenant use the security deposit toward rent is if there are repairs that need to e addressed once the tenant has moved out, you won’t be able to use it for those repairs. You’ll have to dig into your savings to take care of the damage.
Another mistake self-managing landlords make regarding the security deposit is not mailing it back the way you are supposed to. Florida law requires you to return security deposits via certified mail and not an alternative like FedEx or regular mail.
In the event you are making claims against the deposit, there are specific words you must use in the accompanying letter. If you do this process incorrectly, you may well find you have to return the entire deposit even if your tenants have damaged your property.
So make sure you get sound property management legal advice so that your correspondence complies with Florida law.
2. Don’t be relaxed about rent
It may sound obvious that most landlords want their investments to make money. However, a lot of self-managing landlords do not raise the rent when they should. They also tend to be laxer on rent being sent to them later than the due date.
There are a couple of reasons for this, fear and apathy.
Let’s look at apathy first. If the tenants have been in the property for years and take good care of it, why risk upsetting the status quo? If you have a good relationship with the tenant, often the line between personal and professional blurs so, increasing rent can feel like you are mean or against them.
Fear is the other reason self-managing landlords don’t raise the rent. They worry that if they increase the rent, the tenants will become more demanding as a result, especially if they’ve been self-sufficient previously. So, they take what they think is the lesser of two evils and opt for a quiet life over profit.
But the reality is that not raising the rent is a mistake, that a lot of self-managing landlords must learn on their own.
Your property is an investment. Its job is to make you money and certainly not cost you money. Rent increases are required to keep up with inflation, the cost of utilities, and market rates.
If money is no object, then charge the lowest rent you can live with, but if you’re like the majority of self-managing landlords, you need your investment to cover your costs and then some.
If your tenants are easy-going, it doesn’t mean they’ll change to demanding overnight. They’re probably remaining quiet because they’re hoping that you’ll forget you haven’t raised the rent in five years.
You should be reviewing your rental price every year or two to make sure you’re getting at least the market rate.
3. Don’t ignore the importance of maintenance
You’ve probably heard the phrase a stitch in time saves nine, but you’d be surprised how many self-managing landlords don’t do inspections to catch problems before they grow into big ones.
Many feel like they’re intruding, but they forget they own the property.
If you neglect inspections, you’ll never know if the property was damaged or destroyed until after the fact. Or if it has been sublet to individuals that you don’t know.
At least once a year, do a thorough inspection of your property and make a note of all maintenance and repair issues you’re not already privy to. If everything is in good standing, then you’ll have confidence in your tenants. If not, then you can take appropriate action before the cost far outweighs the security deposit.
Another maintenance mistake self-managing landlords make is allowing tenants to undertake repairs themselves. It can seem like an easy option that saves you time and effort but, it’s a false economy.
Firstly, if you offer a rent reduction in exchange for tenants doing their repairs, you could find the number of reports they make increase as some tenants spot an opportunity to pay less.
Second, unless your tenants are Masters of Building Maintenance, their repairs could cause additional damage, costing you more money than it would cost to get them done by a professional the first time.
4. Don’t treat tenants like family
Owning an investment property is a business, and it’s a big mistake to forget that you are dealing with your investment. Many self-managing landlords find it easy to fall into this trap, and we highly advise you to beware of this.
First and foremost, screen your tenants. Run background checks and get to know who you will be renting to before signing on the dotted line.
Imagine your property was a pile of cash: Would you entrust the care of it to just anyone? Of course, you wouldn’t. If you don’t properly screen your tenants, you are essentially handing over the key to strangers, and that’s an avoidable risk.
Make sure you get formal applications from prospective tenants, run a background check, and get a credit check done. Then formalize the tenancy with a signed lease.
Even when you’ve thoroughly screened your tenants, there’s a temptation for self-managing landlords to drop the formalities once the lease is signed and everything appears to be going smoothly. Don’t do that.
When a tenant you like is late with a payment, charge them the fee laid out in the lease unless you’re prepared to offer the same leniency to all your tenants. If you’re not consistent, you could find yourself in legal hot water on discrimination or fair housing grounds.
On the flip side, you need to remain calm and professional, even when your tenants turn out to be a nightmare. It may feel satisfying to disconnect utilities or lock them out when you’re tired of chasing for several month’s rent you’re opening the door to a lawsuit you won’t win.
When you need to evict a tenant, do it the legal way via the court system.
5. Don’t forget insurance
Whether you have a mortgage or not, you need insurance.
Insurance is not just about damage to the property, but liability should something happen to your tenant in one of your properties. If you’re liable for their injury, you’ll need insurance to handle the inevitable lawsuit, which will cost far more than property insurance premiums.
Many self-managing landlords may ignore property insurance to save a few bucks, but it’s not worth the risk. Insurance protects you, your property, and your tenants, so don’t skimp on it.
Property management in South Florida requires legal and professional expertise if you want to protect your investment. Take the time to properly research the hazards of self-management or consider using a property management company to do the hard work for you.