7 Rental Property Mistakes Newbie Investors Make

7 Rental Property Mistakes Newbie Investors Make

Here’s the truth…

…there are plenty of traps and mistakes that you can make when you’re just getting started with investing in rental property.

And we definitely made some of them.

It’s easy to get caught up in the excitement of looking for deals and viewing properties

and forget about some of the basic things you need to know and follow about investing in rentals.

So we’ve put together 7 mistakes that are often made by newbie (and even seasoned investors) to help save you from yourself!

 

#1 Not asking for verification of numbers

Be invasive.  This is your hard earned money that you’ve saved and plan to invest to help build your short and long term wealth.

Because of that you want to know as much information about the potential property as possible.  

So when a seller or agent tells you numbers for utilities, rents, etc.  ask for verification.  

Ask to see past utility bills and current leases so that you can verify that what you are being told is actually true.

The last thing you want it to buy a property and find out the information you were given was inaccurate.

And I promise you that happens more than you would think.

 

#2 Underestimating maintenance costs

Things happen…even in the nicest, newest properties.

You are going to have some maintenance costs associated with your rental, especially if it’s an older property.

You want to account for this when you are running the numbers BEFORE you buy property.

Because those costs will eat into your net cash flow and actually make your return less than expected.

If you account for this before you buy a property, then you can expect it and have a more accurate return on investment. 

 

#3 Starting the eviction process too late

We are only human.

We want to give people the benefit of the doubt especially when we hear their stories as to why they are late on rent.

This happened to me and let it go for too long.

And the biggest thing I learned from that experience is that not only was it crappy for us as the landlords, it wasn’t fair to the tenant either.

I could have helped get her out of a bad situation a lot earlier and saved us from losing rents had we just started this process when she first got behind.

So even though you may want to give people multiple chances…

…remember that this is business and this is your money.

Follow your lease when it comes to starting the eviction process.

 

#4 Not screening tenants thoroughly

We’ve definitely had those over zealous potential tenants who want to sign on the spot when they viewed our rentals.

While that was exciting to have people want it right there…it also gave us a red flag.

So my advice to you is take the time to really vet out your potential tenants.

Make the phone calls, pull the credit, do the background check.

Because ultimately you want to get the best potential tenant living in your investment.

The person who is going to take care of it like it’s their own and respect it and you.

 

Learn how to get great tenants and self-manage your rental properties with less headaches inside our Pro Community ☞

 

I get it…when you’re just getting started

you’re not sure if this is going to be something that you want to pursue and grow or that you are going to want to quickly run the other way from.

But a huge mistake that rental investors make is viewing this as a hobby and not as a business.

Even with just one property you need to begin to realize that it is a business and you are buying it to make money.

So keeping track of expenses and keeping costs low, starting to put little systems into place is only going to help you run a more efficient rental business. 

 

#6 Overestimating potential rents

In a perfect world, a beautiful property that has been recently updated could demand the highest rent.

But reality is that might not always be the case.  Location plays a major role in what you can actually bring in for rent each month.

So when you are running numbers on potential deals be sure to take time to research what properties are actually renting for where you are investing.

Don’t guess….do the due diligence.

While it may seem annoying in the beginning it’s only going to ensure you make a good investment.

 

#7 Underestimating the importance of cash

Have you heard the saying ‘cash is king’.

It’s never more true than in the real estate investing niche.

While being able to pay all cash for a property puts you at a much higher advantage when it comes to making offers…

..I realize most rookie investors can’t do this ( I know we couldn’t)

But don’t underestimate the importance of having liquid cash after you put down the money for the down payment.

You don’t want to put everything you’ve saved into your investment and be left with barely anything in reserves.

First, if you are using financing the bank will required at least 6 months of reserves…but even still

I would recommend having even more than that available.

Because you never know what life will throw at you and having cash to be able to take the blows when they happen will keep you sane throughout your investing journey.

 

 

 

2 Comments

  • Timmy

    Reply Reply August 5, 2018

    This is really a big help especially for the newbie. Thank you.

    • Emily

      Reply Reply August 7, 2018

      Thanks Timmy! Glad this helped.

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