Buying a first rental property is a major accomplishment for any new investor. With the demand for good rental housing continuing to rise in many areas of the country, investing in residential real estate can be an excellent strategy for building lasting wealth.

But just buying a good rental house is not enough. In addition to purchasing properties that are affordable to buy, renovate, and maintain, new investors must also manage them well in order to prevent vacancies and keep the monthly rental payments coming in. If you are a new residential real estate investor who hopes to build a profitable investment portfolio, avoiding the following mistakes should be your first goal. 

Failing to adequately screen each tenant

New landlords typically have a limited number of rental units and must depend on the income from those to continue growing their portfolio. Because of this, it is crucial for a new investor to lease to great tenants who have a verifiable history of paying their rent on time and abiding by all terms of their lease agreements. Landlords who do not proactively screen prospective tenants for these qualities can find themselves saddled with non-paying or destructive tenant. In addition to verifying rental history and income when working with prospective tenants, new landlords must also verify references and ensure that there is no record of destructive or criminal behavior that could be problematic later.  

Failing to follow all applicable housing laws

The Federal Fair Housing Act helps to protect tenants from discrimination in housing. In addition to complying with this act, landlords must also know and comply with any state or local housing laws that exist. Failure to comply can result in a wide range of punishments, including hefty monetary penalties. 

Failing to utilize a properly worded lease agreement

Landlords who allow tenants to move into a property without a properly written, legally binding lease can find themselves dealing with expensive eviction processes, unexpected vacancies, and expensive cleaning and renovation bills.

Simply having and utilizing a proper lease agreement is a good way for landlords, especially those who are new to the business, to protect their investment. An excellent way to institute the use of a proper lease document is to partner with a professional property management company. 

In addition to assisting with utilizing and enforcing a lease agreement, a good property manager can also screen tenants, handle the collection and disbursement of rental monies, field maintenance calls, and help new landlords stay in compliance with all applicable housing laws. For more information, contact companies like MacPherson's  Property Management.

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