Common Owner Mistakes
Hiring a Real Estate Agent to Manage Your Properties
Although an agent may be perfectly qualified to sell you a home, they certainly do not specialize in property management and investments. Many agents simply do not have the time to educate themselves on specific legal policies that could cost owners thousands of dollars. Many agents do not have the systems or the team in place to successfully manage your property.
Hiring Leasing Agents to lease your property.
Simply put, companies and agents who only do leasing have no incentive to lease to the best candidate. The only incentive is for them to lease to the first prospect they see. Without managing the property, they face no consequences or repercussions for placing a bad tenant in your property. The bad tenant becomes your nightmare!
Insufficient Insurance Issues
Your investing focus should not be so much focused on cash flow sometimes as much as it is focused on limiting any major risk. Your property needs to be properly insured. Investment insurance is an entirely different world compared to homeowners insurance so you should work with a professional at all times. It is imperative you discuss your insurance options with a Missouri licensed insurance professional that understands property investment.
List of Essential Coverage
- Property Manager listed as Additional Insured
If you do not have this protection, you are violating the contractual agreement between you and your property management company. This protection is provided for FREE with many reputable insurance carriers. - 100% Replacement Cost
Minimum coverage of $100 per square foot in Missouri is recommended in order to ensure your property is completely rebuilt in the event of total loss. - Landlord Liability Protection (AKA General Liability)
- Accidental and Sudden Discharge of Water or Steam
Coverage for pipe bursts and other common plumbing issues are typically not covered by your basic policy. The most common issue is the toilet supply line bursts and no one is home for a couple of days. This causes massive amounts of damage and is not coveredon a normal policy. - Dwelling VS. Homeowners Policy
If you have a homeowner’s policy on your investment property you need to switch it to dwelling policy. Your current policy has a provision that excludes coverage if you are not occupying the home. - Vacancy Clause
Most dwelling policies exclude coverage for any property left vacant for 30 days or longer. If there is a claim on the home and the insurance company finds out it was vacant for 30 days, they will not pay out on the claim unless this clause is in the policy. - Vandalism and Mischievous Misfit (VMM)
Most dwelling policies exclude this coverage. If the property is vandalized by your resident, this clause will pay out. - Loss of Rents
If your property is significantly damaged due to a covered claim, your tenant will move out and not pay rent. This clause pays yourrent while the home is being repaired.
Being Friends With Your Residents
Although we advise you to be cordial, we recommend that you do not become friends with your residents. Landlords who become friends with their residents tend to give them preferential treatment when the Rent is late and late fees aren’t charged, or the eviction isn’t filed when it is supposed to. This can be possibly taken as discrimination if another tenant finds out you are favoring one of your tenants and not the other. This is a major violation of Fair Housing Laws. If other residents find out you are not treating them the same you will be looking at a fair housing lawsuit.
Not Charging Fair Rents
By shooting for the moon when pricing your rental, you will quickly realize that vacancy is your biggest cost. By trying to charge
Taking the “Principal” Road During a Dispute
We always recommend
Not Treating Your Investment Like a Business
Your property is a business and it should support itself. Any property that does not