It’s easy to make a mistake when you’re renting out your property, even if you’re an experienced investor. Today, we’re identifying the three most common mistakes that landlords make.
Mistake No. 1: Not Understanding the Laws
One of the most common mistakes we see with landlords is they don’t know or understand the local laws in San Diego. One of those laws would be the new rent control law that started January 1, 2020. Landlords need to be aware of these laws because there are a lot of them. If you don’t follow the laws, you can face fines and in some extreme cases, even jail time.
There are also HOA rules that need to be followed. Every community association has its own set of rules and regulations.
A lot of new investors fail to understand that they are running a business when they own a rental property. If you don’t understand the laws, you’re putting that business at risk. These laws aren’t static. They are always changing, and you have to keep up with them. We mentioned the new rent control laws, but things could change in six months. The law could be totally revamped or the election in November could have new implications. If you aren’t up to date on the laws, you could find yourself in the middle of an expensive and complicated lawsuit.
Emotional support animals and eviction laws need your attention. Approach your rental property like it’s a business. Put policies and procedures in place that will ensure you’re in compliance. A lot of advocacy groups and agencies protect residents. Make sure you know the laws and stay current.
Mistake No. 2: Trying to Do Everything Independently
Next, it’s easy to think you can run everything yourself. This is a normal response when you buy a property and think that all you have to do is find a resident and collect rent.
This is a mistake, not because you aren’t capable, but because you could be bringing extra liability on yourself. You might hire a worker to paint your property or clean your gutters. If that worker isn’t licensed and insured, you’ll be responsible for anything that happens. If the worker falls off a ladder or causes irreparable damage to your property – you will assume all that financial and legal risk.
You’re in a vulnerable position when you manage your own property, and it’s easy to make big mistakes without realizing it. If a resident can’t reach you during an emergency, you could find yourself in a lot of trouble. Not only will you be violating habitability laws, you’ll put your resident and your property at greater risk. You have your own life and there are other situations that require your full attention. Paying attention to your rental property may be difficult, and that’s why you have to surround yourself with experts.
Don’t try and run the whole show yourself. Personally, we have never met anyone who was more successful by doing everything on their own. It just doesn’t happen. Understand how to leverage the expertise of others, and remember to trust but verify. When you buy a property, you own four walls and a roof, and there is a business running inside that property. It requires systems and experts. This is often where landlords succeed or fail: successfully running a rental property takes a team of people.
Having people work on your property that are not licensed or bonded or insured is something that could really hurt you. There have been numerous cases of emergency maintenance that weren’t handled properly, leading to mold or water damage. The incorrect handling of work orders and maintenance can lead to property damage and thousands of dollars of repairs. It can also lead to court cases and potential criminal punishment for the way that the work orders were handled. It’s definitely important that you hire the right people and trust the right people. That’s what we do as San Diego property managers. We handle the hiring of people to take care of situations that come up.
Mistake No. 3: Incorrect Rental Values
Being unrealistic with market prices is another reason why landlords fail in the San Diego rental market. Maybe you think you’ll be able to get a little more for your property, or maybe you have a personal financial situation in play, and you’re looking for more cash flow. So, it seems easy enough to raise the rent.
This might be okay if the increase matches the market. But, it can also leave you with a vacant property.
We often see investors who might have a higher mortgage, and their perception is that they need to ask for a higher rental amount even if the market doesn’t support it. With a property that’s vacant for longer, you’re actually losing more money. Vacancy is going to kill your ROI, and you want to avoid it. Don’t overprice your home. This is one of the most common mistakes we see, and it always hurts investors more than they realize it will. You want to be realistic in terms of setting your price point.
There’s a lot more advice we can give you about how to avoid these common landlord fails. Please contact us at Mynd Property Management, and we’ll ensure you have a successful investment experience in San Diego.
You can also visit our Facebook group of investors, which is called Master Mynd. It’s a real estate investors’ club, where you can exchange ideas with other owners. Check out our weekly podcast as well, called The Myndful Investor. We invite leaders in real estate and property management to talk about their success and, more importantly, their failures. There’s a lot to learn from this relatable content.