Becoming a landlord or property manager is a great way to supplement your income or even be your own boss, but this particular line of work does not come without risk. Renting any type of property requires much more than simply collecting rent, and here is a look at five of the most common costs and losses that you shouldn't let sneak up on you unexpectedly.
It is a simple fact of life for most landlords that they will have to evict a tenant at some point, and this can often be an expensive task. These easiest way to minimize these costs is to remain firm but fair with every tenant and carry out thorough background checks. Giving a tenant permission verbally or in writing to delay their rent could result in months of legal fees and red tape if the situation turns sour.
The other side of evictions is when people move out without providing you with proper notice. This is seemingly one of if not the most annoying challenge that property managers face as they will have to track down the former tenants to collect rent and any other fees that they may owe. Then the property manager has to look for new tenants to fill that vacant apartment so they can start collecting money on it again.
Just as with any other form of income, landlords and property managers should be prepared to pay additional taxes. If you plan on treating rent as an additional income, then you will need to add it to your income tax return. Those that would like to protect some of their private assets will need to file as a business which requires a number of additional fees.
Failing to maintain the property until a tenant moves out can be a costly mistake for the owner or manager. Even if the tenant keeps the property in relatively good shape, you should consider carrying out some basic seasonal maintenance to prevent more expensive problems down the road. This should include snow removal after heavy snow, weeding, cleaning air filters, and having the HVAC system serviced (Source: Pro Lawns Incorporated who specialize in lawn maintenance and snow plowing in St. Louis).
No one should ever sign documents with their tenant until they are absolutely sure that they have the correct insurance policy in place. This part of the process is relatively complex depending on the state and the type of property that is being rented. At the very least, property managers will need to have comprehensive liability insurance for injuries, death, and property damage before anyone moves into the home.
In addition to some basic seasonal maintenance, the property owner or manager may also be responsible for a variety of problems that arise as long as it is classified as basic “wear-and-tear” for the home. The manager should check the local regulations on exactly what they are liable for, but some of the most common maintenance includes structural problems, plumbing issues, and broken appliances.
A little extra planning is the absolute best measure for any property manager that wants to avoid some of the most common financial pitfalls in their career.