Common Property Management Pitfalls to Avoid

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Filed under: Investment Property

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There are many benefits to owning investment real estate, but be aware of some of these common property management pitfalls before you decide to bring in tenants. Today, I talked to Gerren Parker with New Season Properties, and we discussed some of the details that you need to know.

Most of these pitfalls are unforeseen until you run into problems and don’t know how to handle the situation. For the best results, it is important to make sure that you have some representation. You might even consider the option to use a property management service. Here are a few things to keep in mind:

Screening Tenants

Put together strict criteria when screening potential tenants. From a Fair Housing standpoint, you need to stick to the rules and guidelines established by California law. The tenant screening should include:

• Income verification: Which needs to be 2 1/2 to 3 times the monthly rent payment. This information can come from bank statements, paycheck stubs, or any other documents that show income.
• Rental or Ownership History: What was the last tenancy like? We use the criteria of talking to the past two landlords. Always ask questions about the length of time that they lived there and the opinions of the landlord.
• Credit and Background Checks: These reports help you see if the potential tenant has liens, evictions, or judgments on their record. Be careful about the background check, because there are protected classes for people who have felony convictions. So, you can’t discriminate against people with a criminal background.

When it is time to find new tenants, discrimination is a huge issue that you need to be careful about. One simple example is a landlord might suggest that the tenant looks at the neighborhood to see if they like the area. But, this suggestion could be considered discrimination, so you shouldn’t say anything like that. You can suggest that the person looks at the house, but you can’t reference anything about the neighborhood in the conversation.

Be very careful and specific about the things that you say. Always keep the screening process the same for all tenants, so that there isn’t a risk of discrimination. It is essential that you go through the same process for every tenant that is considered.

Here at Franklin Loan Center, we know that property ownership is a great way to build wealth. We also see the importance of following the rules when finding tenants. Our goal is to help you stay informed about your real estate purchase. If you need more information, you are welcome to contact us anytime!

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