Investing in rental properties can be an enriching experience that sets the stage for long-term financial prosperity. However, to ensure a robust return on such an investment, you’ll need to make property management one of your foremost priorities. Unfortunately, due to lack of experience or outright negligence, many first-time rental property owners make a variety of management mistakes – many of which inhibit their ability to turn a profit. So, if you’ve recently invested in your first rental property or will soon be doing so, make an effort to avoid the following management blunders.

Failing to Screen Prospective Renters 

Without tenants who are willing and able to keep up with rent, you’re liable to have a hard time profiting from a rental property. Additionally, depending on the location, evicting someone for non-payment of rent can take a very long time and prove tremendously frustrating. As such, it’s in your best interest to avoid taking on unreliable tenants in the first place. And while there’s no surefire way to tell which prospective renters aren’t going to work out, a robust screening process can dramatically reduce your odds of getting stuck with bad tenants.

While meeting with prospective tenants in person or speaking with them over the phone can be a great way to get acquainted, it’s important to avoid equating likeability with reliability. After all, making a good impression doesn’t mean someone is going to be a problem-free tenant. With this in mind, make a point of screening every potential tenant who submits a rental application.

With each applicant’s permission, look into their credit history, criminal history and income situation. When it comes to credit history, applicants with abysmal credit scores and mountains of outstanding debt aren’t always the safest bets. Furthermore, with regard to criminal history, it’s important to take the nature of the offense(s) into account. For example, if an applicant has been convicted of crimes that could prove harmful to other tenants or the property itself, it may be best to move on to other applicants.

Unsurprisingly, income is among the most important things to consider when screening rental applicants. In the absence of regular income, a tenant may have trouble staying current with rent. Although many landlords require applicants to have monthly salaries that are at least thrice the cost of rent, it’s sometimes okay to exercise flexibility in this area. For example, if an applicant makes less than thrice the cost of monthly rent but has a good credit score, favorable references or a reliable cosigner, there’s a good chance you won’t regret taking them on.

Failing to Contact References

For good measure, you should request that all applicants provide references – preferably employers and former landlords. Furthermore, no matter how trustworthy an applicant seems, make sure to contact their references. Some people list references under the assumption that landlords will never follow up – and they’re often right. Making a few quick phone calls stands to save you a considerable amount of time, money and hassle down the line.     

Failing to Budget for Emergencies 

If you’ve ever wondered, “Is real estate a liquid investment?,” the answer is largely “It depends.” In the case of rental properties, real estate is best viewed as a continued investment. The more you put into a rental, the more you’re likely to get out of it. With this in mind, proper maintenance and upkeep should be among every rental property owner’s top priorities. 

In addition to working with dependable maintenance personnel, this entails budgeting for emergencies. No matter how new or well-maintained a property is, it’s practically a given that you’re going to be faced with the occasional maintenance emergency, and failing to have the proper funds in place will make it very difficult to address these emergencies in a timely manner. So, regardless of how confident you are in a property’s resiliency, take care to set aside a portion of your monthly income aside for unforeseen maintenance issues.

A rental property is more than a one-and-done investment. If you intend to use a rental as a source of passive income, there are a number of tasks you’ll need to attend to. From taking point on maintenance issues to addressing tenant grievances to vetting potential renters, many property owners have their work cut out for them. Furthermore, making such an investment unprepared is liable to result in a litany of costly mistakes. Rental property investors looking to increase their odds of success should steer clear of the mistakes outlined above.