Avoid These Costly Landlord Mistakes That Drains Away Profit (Part 1)
Updated: May 12, 2020
Avoid These Costly Landlord Mistakes That Drains Away Profit (Part 1)
It may sound easy to be a landlord. Buy a property, do some renovations and viola, ready to rent it out!
But in reality, to manage an investment property successfully requires the mindset of a businessman. After all, no one goes into a business to lose money.
Being a landlord can either be a profitable endeavour or a costly one.
But, what if you are losing money in ways you didn’t even realise? Below are some of the costly mistakes that landlords made that eat into their rental profits.
Hence, there's a lot more to consider before one can be an astute landlord. Knowing and avoiding these mistakes can save you lots of frustrations and money.
These mistakes can be categorised into 4 main areas :
1. Legal
2.Financial
3. Management
4. Marketing
To make this a more digestible and easier read for you, this article will be written in 2 parts. In Part 1 of this article, we will cover the 'Legal' and 'Financial' type of mistakes. Part 2 will cover the 'Management' and 'Marketing' type of mistakes.
LEGAL
1. Too trusting and not putting into the contract
2. Not conducting proper tenant checks
3. Not abiding with HDB or MCST rules
4. Not evicting tenant soon enough
5. Too afraid to enforce the terms in the contract
6. Insufficient knowledge of the tenancy law
7. Not keeping a proper record of document
8. Not tapping on the security deposit properly
1, LEGAL - TOO TRUSTING AND NOT PUTTING INTO THE CONTRACT
Some landlords almost never consider rental as a business. As a result, they rely on promises made by the tenant just because the tenant appeared to be "honest looking".
For your own legal protection, it is essential that your tenants sign a tenancy agreement to stay in the property and ensure that he /she understands the terms of the contract.
If you find legal jargons too tedious and difficult to understand, do engage an experienced agent to assist you
In the event you encounter any issues or disputes with your tenant, the tenancy agreement is a binding legal contract that you can rely on to get the the judge to make a ruling.
However, tenancy agreement alone is not adequate to submit to court. Do ensure you get all the legal paperwork verified before the lease starts, otherwise the tenancy agreement would not be accepted in court.
2. LEGAL - NOT CONDUCTING PROPER TENANT CHECKS
While it is exciting to finally secure a prospect as your new tenant, it is not worth rushing ahead without first checking your tenant's credentials. An experienced agent will be able to assist you in getting the documents verfied for you.
You should be extra cautious when the tenant seems desperate to move in quickly and offers to pay much higher than market rent. There were instances whereby tenants stop paying rent after the first month, and the landlords had a terrible time evicting the tenant.
3. LEGAL - NOT ABIDING WITH HDB OR MCST RULES
It is the landlord's responsibility to ensure that the property meets the MCST or HDB rules. Please note that claiming ignorance will not excuse the landlord from the penalties.
For example, some HDB landlords assume that since pet dogs are allowed in the flat, they agree to let the tenants keep their dogs or cats. However, only an approved list of dogs breed are allowed in the flat.
And you might be surprised that it is illegal to keep cats as pets in a HDB flat.
If such rules are not abided, your tenants may have grounds to terminate the lease prematurely without any compensation to you. They may potentially sue you for compensation for undue hassle of moving due to your negligence.
4. LEGAL - NOT EVICTING TENANT SOON ENOUGH
Sometimes, tenants may infringe the MCST or HDB rules. If the "mistakes" persists despite warning or when the tenant defaults on rent, the landlords should take swift action to pursue or evict the tenant as soon as possible.
Not taking action at the early stage can cost you hefty sums later on. If you encounter issues with your tenant and are unsure about your rights or how to proceed, contact either your lawyer or agent as soon as possible.
5. LEGAL - TOO AFRAID TO ENFORCE TERMS IN THE CONTRACT
A good landlord and tenant relationship is ideal. However, there are cases where tenants take advantage on the kind nature of the landlords.
If your tenancy agreement states that there is late fees for late rent payment, charge it.
If your tenancy agreement states that no pets are allowed and your tenant buys a new puppy, enforce the rule.
Many a time, when landlord make exceptions or waive the rules, tenants will deem that this has become their rights on other aspects of infringement.
Your tenancy agreement should have a clause stating that your rights as a landlord can still be enforced even though you have previously decided to waive certain rules on a case by case basis.
6. LEGAL - INSUFFICIENT KNOWLEDGE OF THE TENANCY LAW
Another mistake landlords make is not being familiar with the landlord-tenant law. Not following the legal requirements or meeing certain responsibilities can landlords into legal implications.
Terms and conditions under the "contract law" must be well understood. Neither the landlord nor the tenant can take things into their own hands and interpret the Tenancy Agreement according to their own understanding.
For instance, it is illegal for the landlord to lock up the unit even when the tenant defaults on the rent. Although the tenant had failed in his obligations of the contract, it does not give the landlord the rights to lock up the unit.
In contract law, there is no such thing as a "standard" Tenancy Agreement. Therefore, it is important that you work with an experienced