Owning a rental property in Long Beach, California, is more than simply investing money in a house to rent out. It’s a complete business venture where you risk losing money on your investment properties if you don’t know what you’re doing
Even the most well-read landlords and real estate investors still make expensive mistakes that hinder their investments. However, many of these mistakes are completely avoidable when you’re aware of them.
In this article, we’ll discuss the top costly mistakes new landlords make when owning a rental property in Long Beach, plus an all-in-one solution to help you avoid them at all costs.
1. Underestimating the Impact of Vacancies
A vacant property is one of the most feared situations for property owners, especially those who have experienced long vacancies before.
As a new landlord, though, you may brush off a vacancy as something that simply happens, and that you’ll recover from it in your real estate business. Do not take these vacancies lightly. Remember, when you don’t have a tenant renting your property, you’re losing a lot of money.
With a vacant rental, you’re still paying your expenses like the mortgage, utilities, and property taxes. However, you aren’t cashing any checks to cover these expenses.
If you take anything away from this article, let it be this. Do not underestimate the impact of vacancies on your ROI. They can last for months, digging you a hole that can be difficult to get out of.
2. Overpaying for Maintenance
If you want to have a good return on your investment, then you must have a balance between your expenses and cash flow. One of the main culprits of putting landlords in the red is overpaying for maintenance and repairs.
You may be surprised at just how many things can go wrong with your property when tenants are living in it. From a kitchen appliance going on the fritz to a clogged drain or garbage disposal, these maintenance requests truly add up.
If possible, you can perform simple maintenance and repairs yourself. However, it’s best to find a reliable service that offers a discount for routine work.
3. Unaware of Real Estate Laws
The real estate industry is heavily regulated by federal and state laws and regulations. If you happen to break these laws, the fines can be disastrous.
For example, if you violate the discrimination laws stated in the Fair Housing Act of 1968, you could face a $10,000 fine.
Other regulations include having the proper licenses for your rental property and keeping it up to code. To avoid finding yourself in legal troubles and unnecessary fines, you’ll want a thorough understanding of your local and federal real estate laws.
4. Using a General Lease Template
Some new landlords don’t understand the importance of having a well-written lease. As a legally binding document, you don’t want to miss any important clauses or information. It’s also important to note that each state, and often city, has specific clauses that must be included in the lease agreement.
To save yourself from legal troubles and arguments with tenants later down the road, find a real estate professional or lawyer to write a rental agreement that includes all of your requirements.
5. Forgetting Routine Property Inspections
Don’t underestimate just how important routine property inspections are while owning a rental in Long Beach. You should have at least three inspections during a tenant’s lease, one when they move in, one before they move out, and sometime in the middle of their tenancy.
These routine inspections allow you to see what type of maintenance the property needs and are key to being a successful landlord. If you let a small problem go for too long, it could turn into a large, expensive repair later on.
They also give you a chance to see if your tenants have caused any damage. If so, you can hold them responsible and request that they fix it or take the repair cost out of their security deposit.
8. Not Conducting Proper Tenant Screenings
Before you allow someone to rent your property, you should have them undergo a thorough tenant screening process. This process is key to finding high-quality tenants and avoiding tenant-landlord issues and possible evictions down the line.
During this process, you can search for red flags signaling the tenant may not pay rent on time or damage the property. Reviewing their financial and credit history, talking to references, and a background check can help you identify a quality tenant from one who may be a costly mistake.
7. Having Too Many Expenses
Remember, owning rental properties is a small business, so you have to manage it like one. This means keeping track of your expenses and making sure they are lower than your monthly rental income.
We mentioned this concept earlier, but it’s so important to understand, and you definitely don’t want to make this costly mistake. If you find that you’re spending more than you’re making to maintain or own your Long Beach rental property, then there are two things you can do.
The first option is to cut back on your expenses where you can. This means doing some maintenance yourself or cutting administrative costs.
The second option is to raise the rent when searching for your next tenant. You must be able to justify the increased rent, though, depending on the rental market and the amenities.
Learn about 11 surprising tax deductions landlords should know about.
8. Accepting Partial Rent Payments
How could accepting partial rent payments be a costly mistake if you’re making an income?
Unfortunately, if you collect partial rent and then decide to evict a tenant because they haven’t paid the rest of what they owe you, there is nothing you can do about it. The courts won’t see the situation as the tenant hasn’t paid the rent. Instead, they’ll rule against you and allow the tenant to stay because you accepted some form of rent.
The legal fees and the eviction process are extremely expensive and an expensive mistake you should try to avoid at all costs.
9. Doing It on Your Own
New landlords who think they can manage and maintain their Long Beach rental property on their own are prone to making these costly mistakes. It’s okay to admit that you don’t know everything about managing a rental property.
Fortunately, there are professional property management companies who are happy to help inexperienced and seasoned landlords maintain their properties and increase their rental income.
When you work with a property management company, your chance of making any of the costly mistakes we just talked about decreases immensely.
Avoid Costly Mistakes with CMC Realty & Property Management
Rental property owners in Long Beach, California, can avoid all of these common mistakes when they work with CMC Realty & Property Management.
As the area’s leading Long Beach Property Management company, our team of experienced real estate professionals will fully manage your property, handle tenant relations, scheduled maintenance services, and more. You can sit back and relax, knowing your rental property is in good hands. Contact us today!
