What was your biggest mistake starting out as a Landlord?

108 Replies

We've all new to this game at some point. What was the biggest mistake you made when getting started? 

Did you discriminate against someone?

Did you find your lease in the bottom of a Cracker Jack box?

Did you let emotions rule when a tenant lied about going to grammy's funeral . . . for the third time?

@Nathan G. Not sure this was ‘starting out’ but my biggest mistake was being afraid to raise my rent. I made all the excuses to myself, mainly telling myself “You don’t want to lose a good tenant.”

Now, that statement is true, but by the time I raised rents through finding a new tenant the rent went from $700 to $1,100. Over the course of 5 years without raising rents I missed out on a lot of income.

I feel that breaking process has caused the most issues early on. When you break your process, you start to make exceptions, when you make exceptions, mistakes are made and people lose out on money. 

Thanks for sharing, @Corey Hawkinson . That's a common one, for sure! Many Landlords say they want to keep rent low so the tenant will stay longer and "appreciate" the good deal. Unfortunately, if you rent a $1,000 house for $700, you end up with a $700 tenant that treats the home like a $700 home. It almost always ends up bad and you're out a lot of money.

@Nathan G. I’ve got a few things. 

1.  Dragged my feet on evicting someone for two months.  That was a 5,000 mistake. 

2.  Didn’t do proper applications on previous tenants that caused issues with late payments.  

       Next time I buy, any tenant will be re-screened, at my cost because the 40 bucks a background check per person is cheaper than the cost of eviction and headaches that’s come along with it. 

3.  Being too kind. Now I’m not talking being compassionate I’m talking being a pushover. Sob stories used to get me bend my rules.  Not anymore.  

4.  Not writing down my process so it can be repeatable time and time again without being misunderstood.  This I’m working on right now to get squared away so I can step further away from my business of managing and more into the business of finding and buying more deals. 

@Nathan G.

I let my ego become more important than getting paid AND preserving my personal safety. It was maybe the third time a contractor said something vaguely insulting to me. I forgot I was in my late thirties with a lot to lose and acted like a teenager. Oh yeah, I had to get the last word in. I just had to put them down, too.

Originally posted by @Eric C. :

@Nathan G. I’ve got a few things. 

1.  Dragged my feet on evicting someone for two months.  That was a 5,000 mistake. 

2.  Didn’t do proper applications on previous tenants that caused issues with late payments.  

       Next time I buy, any tenant will be re-screened, at my cost because the 40 bucks a background check per person is cheaper than the cost of eviction and headaches that’s come along with it. 

3.  Being too kind. Now I’m not talking being compassionate I’m talking being a pushover. Sob stories used to get me bend my rules.  Not anymore.  

4.  Not writing down my process so it can be repeatable time and time again without being misunderstood.  This I’m working on right now to get squared away so I can step further away from my business of managing and more into the business of finding and buying more deals. 

Great share! Writing down processes will help keep you straight and makes it easier to explain to tenants.

 

Originally posted by @Jim K. :

@Nathan G.

I let my ego become more important than getting paid AND preserving my personal safety. It was maybe the third time a contractor said something vaguely insulting to me. I forgot I was in my late thirties with a lot to lose and acted like a teenager. Oh yeah, I had to get the last word in. I just had to put them down, too.

Wait! Ego is a bad thing? LOL!

 

Originally posted by @Bjorn Ahlblad :

@Nathan G. I failed to insist that my PM inspect an inherited tenant every 6 months. I did not appreciate the importance of doing that and it cost me 2 year's profit. Never conpromise!

Many new Landlords don't realize how costly one bad tenant can be. I'm glad you didn't let it detail your goals.

 

I paid way too much and way too confident after reading some real estate books.  The intention was to live in it a a few years then rent it out.  I never checked out rents in the area and took my realitor's advice that the house was worth the price and would rent fast.  A few years went by. (Late 2007) Times got tough.  I started looking into rents in the area.  Unfortunately in my case a 3 bedroom house only rented for 1k a month.  That would have resulted in over 400 in negative cash flow each month.  Ended up losing the house to foreclosure.  An investor picked it up for 50k.  I paid 175k.

Lesson learned the hard way.  It took me a long time to build my savings back up, restore my credit score and my dignity.

Now I run my numbers multiple times and check the rents in the area closely. I see quite a few that I that are over priced and sitting idle. Especially the townhomes because they have HOA fees 250+ per month. 3 in particular I know of have been vacant 4 months or more. They are trying to rent for 1800+ when a comparable house rents for 1500-1600. I could never get the numbers on a townhome to work as a rental.

When I started 15 years ago I did not value buying in areas that attract good tenants enough. I was to caught up in the numbers. You learn quickly that paper cash flow is just that, numbers on a piece of paper. Your real life returns will more closely mirror your paper returns the better the area you invest in. 

This is a new one for me. On a MF property I bought this year. I didn't check the Sex Offenders Registry. Found an adult tenant living at an apartment not on the lease. Because of my initial lack of action and not researching the law about this, 3 months later I am still dealing with this. So far, 2 office people, 1 Deputy, a probation officer and a lawyer have gotten involved. Had I done research before I would have made removal and eviction a contingency on buying the property.

Updated 3 months ago

As of 12/10/19 the SOR registry has been updated. No longer living at my property. Only took 3m and 20 days.

@Nathan G.

I been doing rentals for nearly 40 years, and learned a few things.

1. On the very first rental, the very 1st applicant accepted, I believed it should go to the first qualified. On this occasion, showed the apartment to a few people who answered the ad, one girl who met the income & credit check requirement first was accepted. Fortunately, the unit won't be ready for two weeks, in the interim she was so annoying making numerous request, not so diplomatically, that even though we had a signed lease, let her out of it, returned her deposit. There after, I decide I won't make any decisions based on who showed up first, even though laws in some area make that difficult.

2. For the first few years, I did individual showings, individual appointments, going the rentals after work, half the people didn't show up, some even driving by the place and driving off. I now do open houses. I market it slightly below market, the showings are generally crowded and no one claimed to be first. It's a come one, come all, attitude so I don't mind tire kickers showing up and rather than wasting my time when it's individual showings, tire kickers helped me rent the place a few times when real renters figure they better grab it before someone else does.

3. Rather selecting ones with the highest income, highest credit scores, I take attitude into consideration. I learned from a boss of mine how to tell bad jokes and see how people react. My wife did a open house showing and we normally tell people to give us two to three days to decide. One applicant insisted on giving us a holding deposit, my wife initially said no, he called and called and insisted, and I finally went over to pick up $50 saying we haven't finished reviewing the applications, and when we're done, we might return it. Then I told a bad joke, he went bat crazy for a few minutes, calmed down after a few minutes, apologized realizing what he did. After a week, we returned the $50. Lucky wee never gave out our home address when he made a number of threatening calls to come by and kill us. 

4. Talking about attitude, when we did individual showings, one applicant who turned out to be a police officer missed two appointments, no explanations, finally showed up on the third, didn't exactly apologized. Rented the place to him, was hardly ever there, stilled lived with his mom, paid rent in cash, saying the cash is from a second job when I asked him if the police department paid by check. Long story short, he left two years later, and the next store neighbor who managed my rental found out he was arrested for corruption with a group of other officers, taking payoffs in a extortion racket, and the apartment was used a headquarters for the group to meet and divide the loot. When he left, took up the carpeting, and when I dropped by to check, he's in the middle of moving, my carpet was rolled up in the hallway, told him to put it back, and he agreed. Came back a day later and it was gone. The security was used up and we decided not to mess with a crooked cop and his buddies. Friends told me, stay away or he may plant some drugs on you to have you arrested. Moral of story? Don't rent to someone who missed two appointments and never apologized. Another, no more cops as I had a bad experience with another. One plus? My water bill went down and I finally figure out why.

Originally posted by @Nathan G. :

We've all new to this game at some point. What was the biggest mistake you made when getting started? 

Didn't screen properly and listened to a sob story.

Then didn't evict quickly enough, afraid to admit the obvious. 

I would've been better off having a PM with my first couple houses. But I persevered and learned.  Lessons are often best learned the hard way!  

Letting people get behind on rent, not squashing bad behavior from the start, and although it only happened once, not viewing a property prior to closing to make certain the repairs the seller agreed to were completed.

First mistake was signing a one year lease in the middle of winter.  They moved out in the dead of winter last year.  That cost me all of my profit because could not find a tenant until winter was over.  Corrected that mistake by finding a new tenant and re-signing a year lease in the summer.  New tenant is military and they have orders to move out.....you guessed it in the dead of winter.   Can't catch a break. 

Hiring the wrong Property Manager.  Lady didn't even let me know she was evicting the tenant, wouldn't return calls or email.  Bad experience all around.

@Nathan G.

My three biggest mistakes-

1) not starting sooner

2) being to nice

3) not wanting to acknowledge everyone is a liar, giving the benefit of the doubt

@Nathan G.

I let a tenant do some remodeling/upgrade. Life happened and he wasn’t able to pay rent or the contractor and after an eviction I ended up with an unfinished renovation and an upset contractor. Never again.

@Nathan G. biggest mistake was not running credit reports. My logic was "I know it is bad so why bother running a report". A credit report reveals more than just a credit score. 

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