Key Takeaways
- DIY landlords can gain valuable hands-on experience, but they also need to understand legal, financial, maintenance, and tenant management responsibilities.
- Common mistakes like using generic leases, skipping inspections, poor communication, weak tenant screening, and mixing finances can create serious risks for rental property owners.
- Working with a professional property manager can help investors reduce costly mistakes, protect their rental property, and manage operations more effectively.
When you’re just starting out as a property investor, managing your rental property yourself can be one of the best ways to learn what it takes to operate a successful rental. However, first-time DIY landlords can also make mistakes involving regulations, marketing, tenant relationships, maintenance, or rental finances.
At Five Star Property Management, we know how costly these mistakes can become when they are not addressed early. This article covers 12 common mistakes DIY landlords make and how to avoid them so you can better protect your property, reduce risk, and manage your investment more effectively.
12 Costly Errors to Avoid as a DIY Landlord
Before deciding to manage a rental on your own, it helps to understand the mistakes that can create the biggest legal, financial, and operational problems.
Using the Wrong Ownership Structure
A huge mistake many new real estate investors make is holding their rental property in their personal name versus vesting ownership in a business entity. Holding the property under an LLC may help create separation between your business and personal assets, but investors should speak with a qualified professional before choosing an ownership structure.
Failing to Separate Personal and Rental Finances
Do not make the mistake some landlords make when they mix their personal finances with their property’s finances.
Create a separate bank account for your rental property with its own credit cards so your income, expenses, and financial records stay organized.
Using a Lease Contract Downloaded from the Internet
Do not use a template you got online as your lease agreement. Your lease contract should be unique to the needs of your rental and your goals as the owner. A generic document may not address your property, location, or legal requirements.
Have a licensed attorney create a proper lease agreement for you. A good lease should set clear expectations with new tenants from the beginning.
Ignoring Local Housing Laws
Most localities have strict rules on how you can operate your rental property and relate to tenants. These rules and regulations cover everything from safety to security deposits, rent increases, pests, building codes, evictions, property maintenance, marketing, fair housing for certain classes of people, and lots more.
Failing to familiarize yourself with these laws will get you into serious trouble with the authorities or expose you to the risk of lawsuits by tenants.
Setting the Rent Emotionally
Regardless of how much you want to maximize profits on your property, you cannot single-handedly decide how much rent to charge. The optimal rent for the rental depends on supply and demand dynamics in your local housing market.
If you underprice the property, you will lose income, but if you overprice it, you will increase the risk of vacancies. Before pricing your property, do a property rental market analysis.
Viewing Tenant Screening as a Mere Formality
It is a mistake to rush tenant screening because you are eager to fill a vacancy in your property.
Renting to the wrong tenant comes with many risks, including delayed or unpaid rent, property damage, noise disturbance, and endless litigation.
Contact the references provided by a prospective tenant to verify the information, since understanding what landlords need to know about screening can help you make more informed rental decisions.
Not Doing Move-In, Move-Out, and Quarterly Inspections
Move-in and move-out inspections help you avoid disputes with tenants over the handling of their security deposits.
On a tenant’s first day in your property, do a walkthrough of the unit with them, documenting the physical state of the home and having the tenant sign off on the inspection report. Repeat this process on the day the tenant moves out. To prevent property damage, conduct quarterly inspections throughout the tenancy.
Not Doing Maintenance Until Tenants Submit a Repair Request
Some landlords view maintenance as something they do for the benefit of tenants. While it is true that tenant satisfaction hinges on how well you maintain your property, the main reason for doing maintenance is to protect your rental property, reduce its operational costs, and improve tenant retention.
Do not wait until your tenants complain before you repair the building or do maintenance.
Poor Tenant Communication Systems
A rental property without clear communication systems will often struggle. Without effective communication, rent payments, repairs, and tenant questions can be delayed. Even qualified tenants may become dissatisfied if communication protocols are unclear or inconsistent.
Overlooking the Importance of Landlord Insurance
It is a mistake to think that the standard homeowner’s insurance will suffice to cover the needs of your rental property. Landlord insurance provides cover for additional perils that landlords are vulnerable to. These include risks like property damage, liability claims, and lost rent.
Depending on your location, you may want to get flood and earthquake insurance also. Requiring renters’ insurance from tenants is another good step.
Underestimating Vacancy and Repair Costs
New landlords often assume that they will always be able to find tenants for their property. Almost no rental property has a 100% occupancy rate. Vacancies will happen in your property for reasons that are totally out of your hands. To protect yourself from the impact of vacancies and unexpected repairs, factor them into your financial management plan.
Make sure you maintain a reserve fund for these unexpected events. Since vacancies can quickly reduce rental income, landlords should also understand how to minimize vacancy rates before self-managing a property.
Trying to Do Too Many Things Yourself
DIY landlords often overestimate how many things they can effectively handle in their rental property. They fail to see that rental property success requires the inputs of a team of diverse experts. Some of the professionals you need on your team are a real estate attorney, an experienced CPA, an honest contractor, a reliable handyman, and the counsel & company of more experienced property investors in your locality.
Bottom Line
To conclude, remember that self-managing your property is not the only way to manage an investment property. You can hire a professional property manager to oversee the property on your behalf.
The advantage of doing this is that a property manager already has the expertise and experience to solve all of the problems discussed above. A good property manager will help you avoid pain while letting you accelerate your way to profits.
Frequently Asked Questions
How much money should I keep in reserve for a Pocatello rental property?
There is no single reserve amount that works for every property. Owners should consider the age and condition of the home, insurance deductibles, typical repair costs, and how long they could comfortably cover expenses during a vacancy. Building the reserve before a major expense occurs can prevent an unexpected HVAC, plumbing, or turnover bill from disrupting cash flow.
Which landlord responsibilities are usually worth outsourcing first?
Start with the tasks that carry the greatest risk or require the most consistent attention. Tenant screening, lease administration, maintenance coordination, rent collection, and financial reporting are common examples. Five Star Property Management provides these services for Pocatello area owners, allowing investors to delegate operational work while remaining involved in larger decisions about their property.
How often should I inspect my rental if there are no reported problems?
Inspections should not be limited to move-in and move-out. Periodic visits during the tenancy can uncover deferred maintenance, lease concerns, or developing property damage before those issues become more expensive. Owners should establish an inspection schedule in advance and make sure every visit complies with the lease and applicable notice requirements.
Does hiring a property manager mean giving up control of my investment?
No. An owner can still make important decisions about the property while having a management company handle routine operations. Five Star specifically notes that professional management is intended to take day-to-day landlord responsibilities off the owner’s plate rather than remove their control over the investment.
Can Five Star Property Management help if I own more than a single-family rental?
Yes. Five Star is a locally owned, full-service company that works with single-family homes, townhouses, condos, apartments, and homeowner associations in the Pocatello area. That range can be useful for investors who plan to diversify or expand their local rental portfolio over time.
