Avoid These Costly Landlord Mistakes That Drains Away Profit (Part 2)
While some mistakes merely drain away profits, others are more severe and could get you into trouble with the law.
Without a guided experience, you may end up losing money, time, and sleep over common landlord mistakes on your investment properties.
These common mistakes can be categorised into 4 main areas :
1. Legal
2. Financial
3. Management
4. Marketing
In Part 1, we have already covered the "LEGAL" and "FINANCIAL" type of mistakes. Let's dive deeper into the "MANAGEMENT" and "MARKETING" types of mistakes in Part 2!.
Again, if you are time pressed, these are the mistakes in point form for easier read, otherwise, read on for more details.
MANAGEMENT MISTAKES
1. Not engaging an experienced managing agent 2. Too intrusive
3. Not prudent with tenant checks
4. Not keeping tabs on the tenants during the lease
5. Trying to do everything all by yourself
6. Not doing a proper inspection during move-in /move-out
7. Be personable but don’t make it personal
MARKETING MISTAKES
1. Not pricing it right
2. Failing to realise that waiting for more could mean less
3. Poor home staging
MANAGEMENT MISTAKES
1. Not engaging an experienced managing agent
Many landlords misunderstood that the leasing agent who got them their tenant ought to be an experienced managing agent. In reality, a leasing agent may not have the skill set of a managing agent.
Throughout the lease period, different issues may arise which the landlord may not foresee.
Getting an experienced managing agent can help the landlord neutralise sticky situations with their tenants.
The managing agent will also be able to act as a middle-man to smooth things out before they spiral out of control. Usually, the retention fee for engaging an experienced managing agent is 10% of the monthly rent. However, some of leasing agents are prepared to carry out the role of a managing agent provided the landlord signs on the CEA Prescribed Form that they will pay commission should there be a renewal of lease.
MANAGEMENT MISTAKES
2. Too intrusive
Once you handover the property to the tenant, it is considered "theirs". In other words, their privacy should not be intruded with multiple visits to inspect the unit on the pretext of paying a friendly visit.
Your tenant may deem this as a form of harassment. After all, it is stated in the tenancy agreement the the tenant has the right to have quiet and peaceful enjoyment of the property.
MANAGEMENT MISTAKES
3. Not prudent with tenant checks
Checks such as a valid passport and employment pass should be done well before the signing of the tenancy agreement, Very commonly, employment passes may expire in the middle of the lease. You should set a reminder on your calendar to validate this one month before the expiry. You should also investigate immediately if you receive any complaints from the MCST or neighbours about abnormal activities by the tenants. For example, having a lot of people staying there when the approved number of occupiers is 2 should set you on an alert mode.
MANAGEMENT MISTAKES
4. Not keeping tabs on the tenant
Some landlords want to fetch a higher-than-market rent amount. In order to achieve this, they allow their tenant to sub-let their lease. In return, they charge higher. There have been incidences where exploitative tenants sublet the apartment to more sub-tenants than allowed. In order accommodate more sub tenants, some even built unauthorised partitions in the apartment. It will be in landlords' best interest to include a clause in the tenancy agreement to allow the landlord to inspect the property regularly. You should also ensure that the all the occupiers have valid passports and employment passes.
Do remember that even if it is the main tenant who runs foul of the law, the landlord too will be penalised. Claiming ignorance of the law is no excuse.
MANAGEMENT MISTAKES
5. Trying to do everything all by yourself
The next common mistake that drains landlords is not knowing when to ask for help. Sometimes, landlords forget how valuable their time is and try to do everything by themselves. Just because you know how to fix a water pipe leakage does not mean it makes sense to drive an hour to your property, spend two hours fixing it, and then drive an hour back home.
Alternatively, you can engage a skilled plumber to fix the water pipe and spend those four hours analyzing another property investment.
Knowing how to delegate responsibility will help you succeed as a landlord as well as keep your sanity.
MANAGEMENT MISTAKES
6. Not doing a proper inspection during move-in / move-out
When you do not document the condition of the property during move-in, it will be difficult to prove that he or she caused the damage found during move-out. It becomes a tricky “he said, she said” situation. .
A comprehensive rental property inspection report can help protect the landlord’s investment and clarify expectations with the tenant.
Every damaged item, scratches on the hardwood floor or scuff on the wall should be noted in a report, documented with photographs.
A move-out inspection should be done as well. Proper inspection documentation will go a long way in helping a landlord especially if he or she needs to tap on the security deposit for repairs and replacement.
MANAGEMENT MISTAKES
7. Be personable but don’t make it personal
I'm sure everyone wants to be a nice landlord and still run a profitable business. Leasing out a property is a business with financial and legal consequences. A landlord should act courteously, professionally and provide good customer service.
Sometimes, it is easy to sympathize with tenants and let their problems become your problems. You are being too personal if it interferes with your business goals, especially when it comes to collecting rent on time.
Establish clear policies and stick to the rent due date, applying any applicable penalties for late payments as outlined in the lease.
A one month lapse in rent payment can easily turn into two, meaning loss income before a landlord can even begin a costly eviction process.
As always, keep meticulous records. And, finally, do not accept partial payments, as the courts interpret partial payments from tenants as an acceptance of terms by the landlord. The bottom line when interacting with tenants: Be personable but don’t make it personal.
MARKETING MISTAKES
1. Not pricing it right Over pricing the rental will cost you more than you think. For example, the latest transactions for similar sized property is $3000/mth. However, you expect to close no lesser than $3500/mth because you justify it with unblock view and therefore ought to command a premium. You do not want to lose $500 every month with an offer of $3000. However, you are actually losing $3000 every month as long as your property remains untenanted. On top of that, you still have to payment for the mortgage loan and MCST /Town council fees. Therefore, the real opportunity costs are higher than you think.
One way to know if your property is competitively priced is to check the latest rental transactions from portals such as www.srx.com.sg or www.propertyguru.com.sg
Price it right, rent it out fast.
MARKETING MISTAKES 2. Failing to realise that waiting for more could mean less
Sometimes, More could mean Less.
Some landlords want to have more viewings, or rather hope to have more viewings. They hope to wait for the highest offer even when a reasonable offer comes in.
In reality, the longer your property is out in the market, the higher the risk of getting a lower rent in the end.
This is because, the nearby competitor landlords may get desperate from the fierce competition and decide to reduce the rent to secure the tenant.
For every tenant that is being "robbed" away from you, you will have a smaller pool of tenants to attract. Besides, subsequent tenants may offer you a lower price because your competitors have already spoilt the market.
Price it right, rent it out fast.
MARKETING MISTAKES
3. Poor home staging Some landlords do not want the hassle of sprucing up their properties during the marketing period. They either ask the tenant to take the unit "as is where is" or promise they will "do up" the unit once they secure a tenant.
In reality, a property that is not staged nicely lose out in terms of giving the prospective tenants a great viewing experience. A pleasant viewing experience tend to translate to a better offer. A unit in poor condition will not feel like a home, and it is not easy for the tenant to visualise themselves staying in it.
Do take a leaf from the property developers. They beautify the showroom unit to impress the prospective buyers.
However, landlords need not be as extravagant as the developers. All they need is to ensure that the property is clean and tidy. This kind of home staging will always stand the test of time and showcase your property better.
WHAT'S NEXT?
I understand that each property is unique and the final strategy has to be customised to suit you.
If you are unsure about how to successfully start your business as a landlord or is concern that you may not have the time and experience to perform the job well, do give me a call.
About The Author
With more than 10 yrs of experience in leasing, Jacq has been entrusted by many landlords to lease out their property. She takes pride in providing prompt service and helping Landlords to avoid pitfalls when leasing out their properties. Read testimonials by clients.
Jacq has also specially curated a Tenancy Agreement that is drafted in Layman Terms so that both landlords and tenants are clear on their obligations and clauses.
A Detailed Inspection List with photos will be provided upon handover of premise to the tenant. She also assist in managing tenant's and landlord's enquiries throughout the lease.
Call Jacq Ng at 97642556 to help with the leasing of your property.