8 Rental Myths New Landlords Should Know
Becoming a landlord for the first time can be an exciting experience. However, several misconceptions may become apparent at the worst time. It’s best ...
Becoming a landlord for the first time can be an exciting experience. However, several misconceptions may become apparent at the worst time. It’s best to go into this with eyes wide open, so in this guide, we’ll bust eight common rental myths that all new landlords should know.
1. The Rental Property Will Generate Passive Income
This is likely the main reason you put up a rental ad. And while revenue agencies consider rentals a form of passive income for taxpayers who don’t work in real estate, there’s more to being a landlord than simply collecting rent payments.
From advertising and showing the property to screening tenants, understanding the local laws, being on call for unexpected repairs, even chasing late payments and dealing with evictions, being a landlord takes a lot of work. At the end of the day, you may discover that you are still trading your time and labor for income, which can hardly be considered as “passive.”
2. A Good Credit Score Means a Qualified Tenant
A good credit score will help you determine whether your tenant will be able to pay rent on time. However, this is just the tip of the iceberg when screening your tenants. Running a credit report on the tenant will help you pick up on any late payments, loans and debts. On top of this, asking for references and setting up an interview will help you get a better feel for the tenant compared to simply assessing their financial status.
3. Rent Increases Can Be Applied Anytime
To some extent, this is true, but there are some legal considerations to keep in mind. In the case of a lease agreement, you can only increase the rent at the end of the agreement unless you include a clause regarding rent increases. For month-to-month rental contracts, you will need to provide your tenant with a written notice, typically 30 days in advance.
4. Entering the Rental Property Is Possible at All Times
Although the rental is your property, tenants have a right to privacy. Some regions have laws in place that require you to provide them with a notice of 24 to 48 hours. You will need to provide a notice if you need to come in for repairs or maintenance or even show the place to potential buyers or new tenants. The only exception is an emergency situation, such as a fire breaking out, flooding or a gas leak.
5. Tenants Who Are Behind on Rent Can Be Evicted
Late or no rent payments are the most common reason for tenant eviction. As unpleasant as this situation is, you can’t just kick the tenant out. The first step you need to take is checking out your local eviction laws. Most regions will require at least a formal notice asking the tenant to either make the payment by a certain date or move out. Best case scenario, you will be able to smooth things out with your tenant. However, if things get complicated, you will need to file the eviction with your local court.
6. Repairs and Maintenance Are the Landlord’s Responsibility
Depending on the case, this is both true and false. As a rule of thumb, any damage to the property caused by tenants is not your responsibility to fix. However, fixing any plumbing, heating or electrical issues falls in your court. Therefore, it’s essential to know the maintenance tasks that are not the landlord’s responsibility and make sure that your tenants are also aware of them. Similarly, if there are specific tasks you want to delegate to your tenants, make sure that they are clearly outlined in the lease agreement.
7. The Security Deposit Will Cover Wear and Tear
Wear and tear is a normal phenomenon, and you can expect it even from the best-behaved tenants. Therefore, you cannot use their security deposit to cover any expenses associated with it. As a landlord, you will need to familiarize yourself with the differences between tenant damage and normal wear and tear to avoid any disagreements when it comes to returning the deposit.
8. Non-Qualified Tenants Are Better than No Tenants
If your rental listing has been up for a long time, or if you’re dealing with slim pickings in terms of tenants, you may be tempted to lower your standards. However, this is not a risk worth taking. A vacant property may cost you money, but the costs associated with an eviction can be twice as high. You will be better off spending a bit more to promote your rental or even enlist the services of a realtor or a property management agent to help you find the right tenant.