You might be one of the most experienced real estate investors renting out homes in California. It’s still possible to make a mistake. If you’re a new investor or you happened to fall into the position of being a landlord, it’s even easier to make an error. You can misunderstand your tenant’s qualifications or under-budget for the maintenance your rental home will require.
Have you made any of these common mistakes? Do you understand the consequences and the damage they can do to your entire investment experience?
Let’s identify the easy errors first and help you avoid them.
Mistakes with California Rental Laws
Some of the worst mistakes you can make will potentially land you in court. Legal mistakes are almost always a result of not understanding the state, federal, and local rental laws. When you’re renting out a property in California, you need to understand rent control, security deposit laws, eviction laws, and habitability standards.
Here are the mistakes you can easily, and often unintentionally, make:
- Fair housing missteps
The fair housing laws in California are actually stricter than the federal fair housing laws. Make sure you know the protected classes and understand the difference between a pet and a service animal. If you don’t know the first thing about fair housing, you could find yourself paying thousands of dollars in fines. You could be sued by a tenant. Get to know what fair housing means and how these laws are applied to rental homes. Even your marketing materials have to avoid specific language that could be seen as discriminatory.
- Security deposit laws
There are limits to what you can collect (two months’ rent for unfurnished properties) and timelines you need to follow when returning the security deposit (21 days from move-out). It’s also necessary to know what you can and cannot deduct from the deposit. Tenants can sue you for up to $10,000 if you make a security deposit mistake. Don’t find yourself embroiled in such a dispute. Document everything and make sure you only deduct what you can prove is damage.
- Rent control and eviction
California has strict rent control laws statewide, and there are also particularities when it comes to eviction, and whether you’re tossing a tenant out for cause. First, you need to know if your property is subject to or exempt from these laws. Find out, and comply accordingly.
Pricing Mistakes Are Costly
Your property’s rental value will depend largely on the market, and a lot of landlords make the mistake of ignoring the market and pricing their home according to what they think it’s worth or what they want to earn.
Another mistake is to underprice the home in a desperate attempt to eliminate vacancy days.
Pricing your property too low means leaving money on the table. It’s also dangerous because you may struggle to ever catch up with the market rents.
Pricing your property too high means a longer vacancy period. It will take longer to find someone willing to rent your home at a price that’s too high, and you may find yourself losing an entire month’s rent before you lower your asking price and find a tenant.
Take a look at what homes similar to yours are renting for in your neighborhood. Price your home competitively to avoid those long vacancies, but price it profitably too, so you aren’t losing money as soon as a tenant signs the lease.
Choosing Unqualified Visalia Tenants
So many mistakes can be made when you’re screening tenants.
Some landlords forget to provide a set of standard qualifying criteria. Others focus on the credit score rather than looking through the credit report for a full financial picture.
Most commonly, landlords don’t do a thorough job of evaluating the qualifications of an applicant. It’s a mistake to simply run a credit check and then approve or deny the tenant based on a credit score.
Unqualified tenants can lead to late or unpaid rent, eviction, and property damage. Don’t make the mistake of placing the wrong tenant. Screen carefully and consistently, and check everything from national eviction reports to income to rental history.
Deferred and Unreported Maintenance
You need a plan in place for preventative, emergency, and routine maintenance. This needs to be a priority for you, and mistakes are likely to occur if you’re not responding to repair needs right away or taking a preventative approach to maintaining your property.
Good maintenance policies protect the condition of your investment and retain your tenants.
Don’t let deferred maintenance become an issue. Make those small repairs immediately, no matter how minor they may seem to you. Reinforce with your tenants the importance of making maintenance requests right away. You don’t want them to leave something unreported just because they don’t think it’s a big deal.
Visalia Property Management
Another common mistake? Trying to do everything on your own.
The do-it-yourself energy is great for so many things, but not for leasing, managing, and maintaining your rental property. When it comes to protecting your income and your investment, you need a property management professional. This will make a notable difference in your rental experience and your income.
Don’t make the mistake of trying to do everything yourself. You don’t have to. Leverage the expertise that local Visalia property managers have. We know the market, we know the tenants in this market, and we know how to position you and your property for success.
These are just a few of the common mistakes we see landlords make when renting out their homes. The best way to avoid them is by working with a qualified Visalia property management company. We can help you earn more and spend less by steering clear of these common – and often expensive – mistakes. Please contact us at The Equity Group for more information.