Planning on investing in Detroit rental properties? If so, you’re making a smart choice!
Right now is the perfect time to buy a rental in Detroit Michigan because home prices are still very low when compared to the national average and with low mortgage interest rates, there’s no reason why investors shouldn’t add more properties to their portfolios right now.
Before investing in a local rental property though, there are some landlord mistakes that you don’t want to make including the following.
This is by far the most important landlord mistake that you do not want to make during the process of purchasing Detroit rental properties because, if you start self-managing your rental properties now, it’s going to be harder for you to let that go and hire a property management company in the years to come.
If you never hired a property management company before, some of the services that a professional property management company in Detroit can offer you include:
Thankfully, when you hire a Detroit property management company to manage your rental properties, you can count on the rent being collected on time every single month and that money will be either deposited into your account or a check will be mailed to you.
With the rent being collected on time from your Detroit rental property this will be cash flow that you can depend on and ultimately reinvest into purchasing another rental property in the area or use those funds towards fixing up and improving your existing rental property.
Many landlords often get into the habit of performing routine maintenance on their rental properties themselves like plumbing, electrical, or landscaping work. Sadly, the average landlord is not trained in one or all of these maintenance areas and they can put themselves at risk when performing maintenance on their rental properties plus potentially harm their tenants as well.
Besides maintenance and on-time rent collection, some of the other benefits that you can count on receiving when you hire a property management company include:
Learn more about the Detroit Property Management Services that we can offer you. Contact us today by calling (734) 744-5080 or connect with us online.
Another mistake that you don’t want to make when purchasing Detroit rental properties is being undercapitalized. Many new investors make the mistake of overextending themselves when it comes to acquiring their first properties and this leaves them with inadequate or little to no cash reserves that they could turn to for surviving vacancies.
Instead of making the mistake of being undercapitalized when you purchase your first rental property, you must do a comparable analysis of other rental properties in the area to find out what you can rent your property for and then make every effort to save at least three months worth of mortgage payments so that you can afford to pay the mortgage on the property if it becomes vacant for any length of time.
You should also have savings socked away for making preemptive repairs like replacing the roof, dealing with plumbing issues, or rewiring the property if needed.
Another mistake that you don’t want to make as a Detroit property owner is the mistake of being a soft touch with your tenants.
What is a soft-touch? This is someone who accepts the excuses of their tenants when they cannot afford to pay their rent on time and offers them extensions or additional payment dates to pay their rent instead of demanding that rent be paid on time.
The best way to avoid becoming a soft touch with your tenants is to establish firm guidelines for your rental properties right away including when the rent is due and what rules you expect your tenants to follow when they live in your rental property.
Another important way that you can avoid becoming a soft touch with your tenants is to make sure that you take each potential tenant through a firm vetting process by doing a credit check, background check and personal reference check on them before you approve them to live in your rental property.
Taking the time to personally verify each tenant will save you that heartache and hassle of choosing someone who will not respect your rental property and could potentially be more of a hassle for you than what they’re worth.
We’ve already listed several mistakes that you do not want to make as a landlord but if you take anything away from this article, one of the biggest mistakes that you don’t want to make is the mistake of going without a lease.
When you rent your property without a lease, you’re basically opening yourself up to potential damages to your rental property because, you haven’t laid any groundwork for what your tenant can or cannot do at your rental property. Don’t be surprised if your tenant decides to rebuild their motorcycles engine in the living room to your rental property, smoke cigarettes inside the rental or grow marijuana because without a lease anything is possible.
If you currently don’t have a lease, this is another reason to consider hiring a Detroit property management company because, with a property manager serving you, you can count on having a well-written lease that protects your best interests as a landlord and ensures that your tenants have to follow the highest standards for your rental property possible.
Over the years, we’ve seen many investors in the Detroit area get involved with investing in Detroit rental properties on a recreational basis, sadly those investors who didn’t treat their rental properties as a business are no longer invested in real estate.
To avoid making getting burned out within a few years, you should view your rental properties as a business NOW and do everything that you can to protect yourself from potential liability and risk. This means that instead of managing rental properties in your own name, you should potentially start a limited liability company (LLC), hire bookkeeper, and other personnel (even part-time) to help you manage your portfolio of investment properties as a real business.
We’ve already stated above the reasons why you should choose a property management company immediately after purchasing your first rental property because hiring manager will save you the time, money and hassle of managing those Detroit rental properties yourself.
Yes, hiring a property management company is vital to the success of any property portfolio but, you also do you not want to make the mistake of hiring a cheap or “cut-rate” property manager because cheap managers always mean poor services and in the end you want to have absolute confidence in the services that your property manager has to offer especially if you plan on taking a vacation or want to live out of state.
During the process of owning Detroit rental properties you’re going to find out that documentation is everything and besides having your tenants sign rental applications and doing background checks on them, you also want to have plenty of written documentation regarding the condition of your rental property when your tenants move in and move out.
Besides this documentation, you should also take pictures and video of the condition of your rental property because, pictures and video don’t lie, and having digital media to back up the condition of your rental property may ultimately help you in court if you have to take more of your tenants deposit to fix the rental property after they move out.
Thanks to the internet, you can easily backup pictures, video and other documentation regarding the condition of your rental property to a wide variety of cloud storage options so that this media can be safe and easily accessible when you need it, especially at a moment’s notice
When you finally purchase your first Detroit rental properties another common temptation that you may face as an owner is the temptation to hire unlicensed contractors.
An unlicensed contractor may seem like someone who can be a”Godsend” when you are crunched for cash but the reality is that hiring someone without a license in the state of Michigan can present serious long-term complications. Why? If something happens while they’re working on your rental property the reality is that if they don’t maintain Workers Compensation Insurance and one or more of their employees are injured, you could be held liable for any injuries that the workers sustain.
To avoid the problem of hiring an unlicensed contractor, always make sure that you fully research contractors online and verify that they are licensed, bonded, and insured before hiring because this will save you the time and hassle of hiring an individual or company that you may ultimately regret hiring later on.
We’ve mentioned many common mistakes that landlords make but, another huge mistake that you don’t want to make when purchasing Detroit rental properties is not having landlord Insurance.
Landlord insurance covers your rental property from any damages related to nature so it’s important to make sure that you have this form of insurance before you rent out your property because homeowners insurance will not cover damages that your property sustains when it’s rented out.
As a landlord, it’s important for you to remember that you cannot ask a potential tenant discriminatory questions especially when it concerns their age, race, gender or their children because, renters are protected by the 1968 Fair Housing Act.
Even though you may think that you can ask any question to a renter that you like, even small or routine questions, you have to remember that in today’s world even small questions can get you in hot water so it’s always important when interviewing prospective tenants to choose your questions carefully and if possible keep your questions scripted so that you always ask each tenant the same thing so that you can avoid any accusations of discrimination.
Last of all, but most important, another big mistake that you don’t want to make as a landlord after purchasing Detroit rental properties is to not screen your tenants before approving them to live in your properties.
You should always make the habit of screening tenants every single time by conducting a background check, employment check, and reference check on those tenants because you want to be able to make sure that you can back up what they wrote on their rental application before approving them as tenants.
Another huge reason to run background checks on every potential tenant is that in the past, many landlords have been held liable for failing conduct background checks on their tenants so having a thorough background check on each tenant is effective for not only protecting your other tenants and members of the community, it’s effective at protecting your best interests as a landlord as well.
Ready to get property management for your Detroit rental properties? If so contact us today by calling (734) 744-5080 or connect with us online strategypropertymanagement.com.