4 Biggest Challenges of Managing A Property on Your Own
Many people invest in a rental property with dreams of passive income—to be able to sit back and relax and let all that rent money take care of the rest. But let’s take off the rose-colored glasses for a second and take a look at what you’re really getting into.
These are the most difficult challenges you’ll face that can turn your dream into a nightmare.
1. Finding the Right Tenants
With mortgage rates and home prices continuing to rise, more and more people are renting instead of buying. For anyone with rental property in the market, this means there’s good demand to help fill any vacancies. The question is whether those prospects are a good fit for your property.
Bad tenants aren’t just difficult to deal with, but they also turn away ideal residents from your property. The best way to handle a bad tenant is to avoid getting them in the first place through a rigorous screening process. This can involve the following:
- Background Checks: Let’s you see if the prospect has a history of evictions, a criminal record, and other information indicated in their public record.
- Credit Report: Shows you their credit history and current debt to help you evaluate if they have the financial capacity to make rent payments.
- Employment History: Allows you to confirm that a prospect has a stable income.
- Contact the Previous Landlord: Find out if they were a good resident at their previous place.
As you can imagine, most of this information is private. Before you start digging, you need to have the express consent of the prospect and follow the Fair Housing Act on how you can use this information to make your decision.
2. Following Legal Requirements
The Fair Housing Act is just one of the many legal statutes you have to consider. There are several laws that dictate what you can and can’t do as a property owner or landlord.
For example, you might think that you’re well within your rights to refuse to repair something that a tenant broke, but that’s not always the case. As the owner or landlord, you are responsible for keeping your property in a habitable condition. Even if some fault lies with the tenant, there are things that fall on your shoulders to fix.
There are also laws surrounding how to deal with non-paying tenants, evictions, how to handle security deposits, increasing rent, and so on. You have to at least be familiar with all the state and national landlord-tenant laws. The last thing you want is to do something illegal without even knowing it.
3. Repairing Unexpected Damage
While it’s up to you to keep the property in good condition, you can’t avoid wear and tear. This is the deterioration of the property due to the normal use of its occupants. Fortunately, regular maintenance is often enough to fix or mitigate issues caused by normal wear and tear.
But what do you do when there’s damage on the property that’s not normal? Do you know what you’re responsible for fixing and what the tenant is liable for?
Most of the time, tenants know when they’re in the wrong and will take on the cost of repairs. But if you happen to have a bad tenant on your hands, getting them to pay for anything can be an uphill battle.
There’s also the issue of repairing whatever damage your property has incurred. Getting it fixed is not something you can avoid, regardless of who’s responsible. You need to find a reliable vendor to work on repairs, get a fair price for those repairs, and make sure their work complies with local codes and regulations.
Just like with legal requirements, you need to know your way around when it comes to keeping your property in good shape.
4. Having Difficult Conversations
Even if you’ve done your due diligence, life happens, and a tenant’s situation can change in the future. They could be running late on the rent or just no longer able to pay, so they have to be evicted.
We’ve already mentioned that there are legal procedures that you should follow regarding this process. However, you still need to inform the resident—and no one wants to be the bearer of bad news.
So, you decide to be a nice guy and give them a chance. That’s a big mistake that could cost you your house. Basically, you’re letting them stay for free!
If you’re managing your own property, you’ve got to be ready to handle these awkward situations. Things won’t always go the way you want them to, after all.
At the end of the day, managing your own property is like having another job. Sure, it can be a great source of income but it takes a lot of time and effort for all that hard work to pay off.
If you’d rather be more hands-off, consider working with a property manager like American Real PM. Instead of doing it all on your own, they can take care of both the property and the tenants for you. Leave being a landlord to the experts so you can actually enjoy the profits from your investment.