Top Mistakes New Landlords Make (And How to Avoid Them)
- dwbakerj
- Feb 7
- 3 min read
Becoming a landlord can be a lucrative investment strategy, but it also comes with its fair share of challenges. Many new landlords make avoidable mistakes that can lead to financial losses, legal issues, and tenant dissatisfaction. To help you succeed, we’ve outlined some of the most common mistakes and how to avoid them. Whether you are looking for a partner to enhance your current operations or are looking to improve your self-managed portfolio, below are some helpful things to keep in mind.
1. Underestimating Expenses
New landlords often miscalculate the costs associated with owning and managing rental properties. While rental income is appealing, expenses such as property taxes, maintenance, repairs, insurance, and vacancies can quickly add up.
How to Avoid It:
Create a comprehensive budget that includes both fixed and variable costs.
Set aside a reserve fund for unexpected repairs and vacancies.
Work with a professional property management company to optimize cost efficiency.
Be proactive and address routine maintenance in a timely manner to avoid costly reactive, repair work.
2. Not Screening Tenants Properly
A bad tenant can result in unpaid rent, property damage, and legal headaches. Skipping or rushing through the tenant screening process is one of the biggest mistakes a new landlord can make.
How to Avoid It:
Conduct thorough background, credit, and rental history checks.
Verify employment and income to ensure affordability.
Establish a consistent screening process that complies with fair housing laws.
Acquire a deep familiarity with Chicago laws and regulations and stay abreast of changes to avoid costly mistakes (more on that below!)
3. Ignoring Landlord-Tenant Laws
Chicago has specific landlord-tenant laws that govern security deposits, eviction procedures, and property maintenance. Failing to comply with these regulations can result in costly legal disputes.
How to Avoid It:
Educate yourself on local and state landlord-tenant laws.
Consult with a real estate attorney or property management expert.
Keep detailed records of all tenant interactions, lease agreements, and maintenance requests.
4. Poor Lease Agreements
A vague or incomplete lease agreement can lead to disputes and confusion between landlords and tenants. Many new landlords rely on generic leases that fail to address key property-specific terms.
How to Avoid It:
Use a detailed lease agreement that clearly outlines rent, rules, and responsibilities.
Specify policies on late payments, maintenance requests, and tenant obligations.
Have an attorney review your lease before signing with tenants. Alternatively, work with a property management company that has done the legal work for you.
5. Neglecting Maintenance and Repairs
Delaying necessary repairs can lead to bigger, costlier issues and dissatisfied tenants. Neglected properties may also result in legal trouble if the unit is deemed uninhabitable.
How to Avoid It:
Conduct regular property inspections to identify maintenance needs early.
Address repair requests promptly to maintain tenant satisfaction.
Work with a reliable property management company to handle maintenance efficiently.
6. Overpricing or Underpricing Rent
Setting the wrong rental price can deter good tenants or lead to financial losses. Overpricing can cause prolonged vacancies, while underpricing leaves money on the table.
How to Avoid It:
Conduct a market analysis to determine competitive rent rates.
Consider factors such as location, amenities, and demand.
Adjust rent strategically to balance profitability and occupancy.
Work with a property management company that has experience in your area and deep expertise on your local neighborhood market dynamics.
7. Poor Communication with Tenants
Failing to maintain clear and professional communication with tenants can lead to misunderstandings, dissatisfaction, and turnover.
How to Avoid It:
Be responsive to tenant inquiries and concerns.
Use written communication for lease agreements, policies, and important notices.
Set expectations from the start regarding maintenance, payments, and conduct.
8. Self-Managing Without Experience
Many first-time landlords try to manage everything themselves without realizing the complexities of property management. Handling tenant issues, maintenance, and legal compliance can be overwhelming.
How to Avoid It:
Consider hiring a professional property management company to handle day-to-day operations.
Educate yourself through real estate courses and networking with experienced landlords.
Utilize property management software to streamline tasks like rent collection and maintenance requests.
Conclusion
Avoiding these common mistakes can help new landlords protect their investment and maximize profitability. By properly screening tenants, understanding legal responsibilities, maintaining the property, and considering professional management services, landlords can set themselves up for long-term success. If you need expert guidance in managing your property, our team is here to help!
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