The 8 Most Costly Mistakes an Investor Makes When Renting a Property
1. Ignoring Local Legal Systems
A superficial or lack of understanding of Florida's real estate law can lead to significant errors, especially when dealing with rental properties. These errors result in loss of money and time. For example, knowing when it applies, how many days it grants, and when and how to deliver notices such as:
- Payment or delivery of the unit
- Violation of the contract with an option to correct
- Violation of the contract with termination
- Disturbance to neighbors
Before proceeding with any legal eviction process, different steps and notifications must be completed, potentially delaying the process by months. Therefore, we recommend having an eviction specialist lawyer on your team.
2. Not Pre-Qualifying Tenants
Pre-qualifying potential tenants is one of the most important processes in this business, often overlooked by many owners. Despite the negative impact of having a vacant property, accepting a non-pre-qualified tenant usually results in higher costs and headaches in the long run. Establish a pre-qualification system and adhere to that criterion, considering local "Fair Housing Laws." Common elements of pre-qualification include:
- Criminal background checks
- Credit reports
- Previous landlord references
- Employment references
- Personal references
- Average duration of stay in each property
3. Ignorance of Local Regulations
Most lawsuits against landlords result from violations of the legal system that protects tenants against discrimination ("Fair Housing"). Many landlords ignore these regulations, relying on their "common sense" to avoid discrimination, which often violates established laws.
These regulations apply not only to the pre-qualification of potential tenants but also throughout the landlord-tenant relationship.
Within the regulations, it is prohibited to discriminate on the basis of:
- Race
- Color
- Religion
- Origin
- Sex
- Family status
- Physical disability
4. Lack of Knowledge of the Local Market
Various tools and systems allow determination of the following within a specific neighborhood or building:
- Actual rental prices for specific periods
- Time units spend on the market before being rented
- Direct competition
- Demand
- Price per square foot or meter
Knowing this information is crucial when buying the property and when listing it for rent. More importantly, continuously monitoring the market to make timely decisions is essential.
5. Absence of a Strategy
As an investor, it is crucial to understand the local market behavior or have a real estate advisor with this knowledge.
- Would your pricing strategy differ if you compete with one property instead of ten?
- If families predominantly inhabit the area, is it easier to rent a one-bedroom or a three-bedroom property?
- If the area mainly has single executives, is it easier to rent a one-bedroom or a three-bedroom property?
- If properties take 45 days on the market before being rented, what strategy can you use to speed up this process?
6. Lack of Preventive Maintenance
Most owners only pay attention to the property when a problem arises. Preventive maintenance is often more economical than repairs or replacements. Depending on the property's age, equipment, and conditions, a preventive maintenance check every six months is recommended for appliances, HVAC systems, plumbing, and potential leaks. Additionally, preventive maintenance allows you to see the conditions in which the tenant maintains the property and check for unauthorized occupants or pets.
7. Poor Contract
The rental contract is your first and most crucial protection. Many investors spend a lot of time and effort purchasing the property but then try to economize by using an online "template" as a standard contract. Remember, the contract is the primary legal protection, where the terms, rules, and regulations supporting the landlord-tenant agreement must be clear. It is always advisable to consult a lawyer specializing in this area to help protect your interests.
8. Lack of a Team
An essential part of this business is creating a team of experts in different areas to help you invest and manage your investment. Each member should contribute solutions within their field of expertise. The basic team should include:
- Real estate broker
- Property manager
- Accountant with real estate experience
- Eviction lawyer
Enrique Vicente Urdaneta
Real Estate Advisor | eXp Realty | EVU Luxury Homes
305.209.6418
www.instagram.com/evuluxuryhomes
Disclaimer: The information presented in this article is intended to provide a general understanding of the topic. However, please note that I am a real estate agent, not a lawyer, accountant, tax, or financial advisor. This content should not be taken as legal, tax, accounting, or financial advice. The laws and regulations related to this topic can be complex and may change or expand in the future. Therefore, it is crucial to consult with a qualified professional, such as a specialized financial or tax advisor, before making any decision based on this information. As a real estate agent, I can provide various options and professional guidance related to the real estate aspects of your investment strategy, and for matters related to tax implications, legal issues, and financial planning, please consult with the appropriate professionals, which whom I have allies I can refer.
