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Top 3 Income Property Landlord Mistakes that Increase Risk

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When it comes to income property, if you want to pursue a long term investment strategy you will almost certainly need to become a landlord.  I have touched upon this topic in the past so if you are a regular reader then you are probably already aware of the general pros and cons of being a landlord.  But this post is a little different in that the goal is to drill down into specific pitfalls that will likely increase your business liability risk, not to mention reduce your monthly cash flow.

The first mistake to avoid is failing to properly screen new tenants.  You must make it a habit to thoroughly screen any tenants that you are considering bringing onboard.  This screening process covers things like credit worthiness, past rental or eviction history, income and employment verification, etc.  Failure to screen new tenants is akin to rolling the dice; you might get lucky but you might also lose.  Since screening tools are easily available, there is simply no excuse for rolling the dice in this manner.

The second common mistake is using incomplete or inadequate landlord forms or tenancy agreements.  For example, your leases must spell out the lease term, rental amount, rental due dates, late fees, tenant and landlord responsibilities, etc.  Failure to include these specifics often results in disagreements either during or at the end of the tenancy.  The bottom line is that your lease is a legal contract, and thus you should include as many specifics as possible so as to not leave anything open to interpretation. 

The third major mistake I see is not bothering to learn state landlord tenant laws.  These regulations cover things such as how much rent you can charge, how often and by how much you can raise the rent, how to manage security deposits, how to address tenant problems, steps to evict a tenant, etc.  The bottom line here is that you must know the rules in order to play the game.

In the final analysis, if you can avoid these 3 landlord mistakes, you will greatly reduce your potential liability risk, increase your profits, and generally have a smoother and more enjoyable property management experience.  Good luck!

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