The Top 4 Profit Killers for New Landlords

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What are the big risks and pitfalls facing new landlords?

Owning rental property is great. A buy and hold strategy has many benefits, and the passive income it can provide can certainly put individuals right where they want to be for retiring. Of course, there can be a significant learning curve. That can leave new real estate investors and landlords exposed to risk. So what are the most common factors that trip them up and threaten financial disaster? How can you beat them?

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The Top 4 Profit Killers for New Landlords

Taking Too Long To Get Units Rent-Ready

Taking too long to go from acquisition to bringing in income can be disastrous. You don’t want to go broke before you’ve even landed your first tenant. It is mind-blowing to see some new landlords take months and months to renovate a new acquisition and get a tenant in. Others seem to manage it in just days.

You should make repairs right and do a quality job. No question about it. But every day is money. Even without loan payments, you are accruing property taxes and insurance, and your ROI is declining while you are missing out on tenants. If you’re in a Midwest market that has rough winters, this is especially critical when those months are coming up.


Related: The Financial Threat More Catastrophic to Property Owners Than Simple Vacancy

Allowing Extended Vacancy

The same risks as above also apply to extended vacancy periods while you own the property. This can happen any time you turn tenants (which is why savvy landlords treasure long term tenants). This loss of income and extra risk of exposure to damage, vandalism, and squatters during vacant periods may seem palatable if you have just one unit. Wait till you have 10 (or 100) sitting empty. Experienced landlords leverage the best technology and systems to hone in and make sure rental units are rent-ready again in just a few days. They also make sure they have a constant pipeline of renters — and often a waiting list — so there are as close to zero down days as possible.

Failing to Verify What You Can Rent for in Advance

Never, never, ever just take someone’s word for what a rental may rent for. Never. Not the seller and not the listing agent. Always do your own due diligence. Don’t look at asking rents. For vacant units, pull comps in the neighborhood, talk to people, run ads, and test the market. For example, if there is a similar house to yours with an asking rent of $850 and it has been on the market for 4 months, then chances are that is not what the market is willing to pay. Price accordingly. The market will always let you know whether you are priced too high or too low.


Related: The Rookie Landlording Mistake Most New Investors Make

Over-Rehabbing the Property

Over-improvements will bankrupt you and will put you in a negative equity position. Please avoid it. Make your units nice, but don’t overdo it and rehab the property to attract a $1,500 a month tenant when no one in the neighborhood is paying more than $800 per month.

Watch out for these pitfalls and you’ll be well ahead of the curve.

Landlords: Have you experienced any of the above? Would you add anything to this list?

Let me know your thoughts with a comment!

About Author

Sterling White

With just under a decade of experience in the real estate industry, Sterling currently manages over $10MM in capital, which is deployed across a $26MM real estate portfolio made up of multifamily apartments and single-family homes. Through the company he co-founded, Holdfolio, he owns just under 400 units. Sterling was featured on the BiggerPockets Podcast and has been contributing content to BiggerPockets since 2014, with over 200 posts on topics ranging from single-family investing and apartment investing to wholesaling and scaling a business.


  1. Ryan Canfield

    Hi Sterling,

    Great article, those points are so true!

    My wife and I know a newly married couple who are currently committing 2 of your points listed above. They owner occupy a 3 flat and had a unit go vacant at the end of June. As of today, they still do not have the unit rent ready nor any idea of when it will be ready. They also have not posted the unit for rent. Their original goal was to have the unit rented out for August 1st! As you know with fall and winter rapidly approaching, it’s important that they get their unit marketed and rented before fall comes, especially since we’re in Chicago. This article is a great reminder for all landlords.

  2. Alden Simpson

    Great tips Sterling. I think its important to understand that rental units are expected to be functional and clean. Friends of mine that rent, if they have children, rather go for a rentals that are functional and reasonable in price. A property that has expensive upgrades can be intimidating, in fear of high repair costs if accidentally damaged.

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