How Accidental Landlords Can Avoid Two Common Mistakes

by David Crown

Ownership of property might seem like something that can only happen through careful planning, but as a property manager in Los Angeles, I get calls all the time from folks who’ve become landlords through unplanned scenarios. Maybe a family member has passed away and willed them a property. Maybe they wanted to sell their home but couldn’t fetch the right price for it, so they had to rent it out until the market improved. Just today, we got a call from an owner whose property had been declared a historic landmark, so he couldn’t remodel it to sell at the price he had hoped. Regardless, what they share in common is that they’ve come into possession of rental property without having studied or prepared for becoming a landlord.     

It’s possible for a new rental owner to find a natural knack for management and decide to devote their time to managing their own properties. But for the uninitiated, this article will lay out the two most common mistakes accidental landlords make managing their own property — and how to avoid them.

Mistake No. 1: Choosing Bad Tenants

You could own a breathtaking property and maintain it with perfect efficiency, and it wouldn’t be worth a dime to you if you couldn’t get it rented by good tenants. Not just any tenants, but ones who pay rent on time and don’t lie about damages to the property or sue the owners/managers with false claims. New owners and landlords are often all too willing to rent their property to people whose credentials (credit, work history, criminal history, etc.) they haven’t thoroughly verified. Looking into tenant’s history is of the utmost importance, so don’t just call their most recent landlord — call two or three of the landlords they’ve rented from. After all, the most recent one might speak positively about the tenant only because they want him to become your problem, not theirs.

Taking on bad tenants can get you dragged to court for no good reason, and end up costing you dearly on legal fees even if you win the case. Verification of tenant records should never be skipped over in favor of guesswork. Remember: your rental property is only as good as its renters.

Mistake No. 2: Legal Missteps

I decided as a much younger man (to my parents’ chagrin) that law school was not for me, but it’s my responsibility as the CEO of a property management company to be familiar with the laws — local, state and federal — regarding rental properties and tenant-landlord relationships. Fair Housing regulations differ from state to state, and you should absolutely know those in the state you own/manage property in. Now, getting taken to court can cost quite a bit. Even if you win the case, you face the cost of having to defend yourself (which calls back to No. 1 — don’t take on a tenant who will put you through this), but it’ll cost a lot more if you’ve actually made the illegal mistake the tenant claims you did. I highly recommend hitting the books a bit to brush up on the laws in your state regarding landlord/tenant relationships. The U.S. Department of Housing and Urban Development is a great place to start.

If you’ve recently fallen into the role of rental owner, you’ve likely already found yourself responsible for a vast variety of decisions regarding your property, but perhaps the two most important are the way you choose your tenants and the thoroughness with which you learn Fair Housing law. Avoiding the pitfalls involved in these two areas of being a landlord can save you innumerable headaches, and give you the foundation you need to move forward profitably with your property.

David Crown is the C.E.O. of Los Angeles Property Management Group, and has over twenty-five years of experience managing all types of income properties. Having managed properties in 16 states, Mr. Crown has been asked to serve as an expert witness in property management matters, and currently serves on the Forbes Real Estate Council. He can be reached directly at (323)-616-1438.