Being a landlord in San Francisco is not an easy feat. After all, you’re running a business and want to turn a profit. That said, many new landlords don’t take their jobs as seriously as they should. Worse yet, they don’t educate themselves on how to be successful.
Learning from the mistakes of others is one of the best ways to push ahead of the competition right from the start. That’s why today we’re sharing with you the most common – and costly – mistakes new landlords in San Francisco make.
Top Mistakes New San Francisco Landlords Make
1. Investing in the Wrong Property
Investing in the wrong rental property is the first mistake new landlords tend to make. The whole point of buying a rental property is to make money. But if you don’t do your research and make sure the rental is going to be profitable, turning a profit isn’t going to happen.
Of course, finding the perfect rental property probably won’t happen. However, you should be aware that these things are most likely to land you a raw deal:
- An unexperienced investor or real estate agent
- Having too much emotional attachment to any one property
- Not understanding the current housing market
- Failing to check nearby rent rates of comparable properties
- Opting to not have a property inspection
- Not researching the area for crime rates, schools, amenities, and more
- Not sticking to your original budget and overpaying for a property
2. Choosing the Wrong Upgrades
It’s okay to buy a rental property that needs a little TLC. However, knowing which upgrades will give you the highest ROI is important if you want to save money.
- Bathroom: people spend an average of 9.6 hours on personal care activities, many of which occur in the bathroom. Your prospective tenants will want to see how modern, functional, and beautiful your property’s bathrooms are.
- Kitchen: a newly remodeled kitchen has the potential to generate an 87% ROI. This makes it one of the best rooms to upgrade in a rental property.
- Flooring: new floors in your rental property can help make a lasting impression on those wanting to lease from you. The best thing about upgrading the flooring in your rental is that there is a floor type to meet every budget.
Other great upgrades to consider include a washer and dryer, extra storage solutions in the bedrooms, and even custom outdoor living areas so your tenants can entertain family and friends.
Don’t make the mistake of investing in costly upgrades that add little value to your property. If you do, you’ll never recoup the cost of those renovations with a monthly rent check.
3. Inconsistent Tenant Screening
The only way to make money as a landlord in San Francisco is to collect rent from your tenants each month. This is why placing high-quality tenants in your property is crucial.
Inconsistent tenant screening can lead to many problems. For example, you might find yourself in a landlord-tenant dispute if you discriminate against a potential tenant. Not to mention, you could end up placing a tenant in your property that can’t pay the rent or doesn’t take care of your property. Any of these scenarios will hurt your chances of turning a profit for the year.
To prevent this from happening, you should implement a routine tenant screening process. This means checking things such as employment, income, criminal records, and references before agreeing to place a tenant in your property.
4. Not Having a Written Lease Agreement
It can be extremely difficult to enforce a verbal lease agreement. In addition, it can be tough to verify the lease terms as each party is likely to remember them differently. Because of this, it’s important new landlords never accept a verbal lease agreement.
A signed lease agreement outlines the responsibilities of both the landlord and tenant. For example, it gives landlords or their property managers an easy way to enforce the rules. It also helps tenants know exactly when to pay rent, which rules to follow, and what happens when they don’t fulfill their obligations.
In order to avoid a costly court dispute, always have everything in writing, including the lease agreement.
5. Failing to Enforce the Lease Agreement
It’s not enough to have a written lease agreement in place. If you don’t enforce the rules, your tenants will take advantage of you and you’ll lose money.
If there’s a lease provision that states there’s a penalty for a late rent payment, enforce it every single time. If there are no pets allowed in your rental property, don’t allow your tenants to sneak in a new puppy.
Being a landlord is not always easy. If you find it hard to administer the rules outlined in your lease agreement, you might consider hiring an experienced property management company near you to do it for you.
6. Overpricing Your Rental
It’s easy to get excited at the thought of making a lot of money whether you’re a new landlord or an experienced one. However, one of the easiest ways to make sure you don’t place a tenant in your property is to set a rent rate that’s too high.
Of course, undervaluing your San Francisco rental property will hurt your annual profit. But if you charge too much for rent, no one is going to want to lease from you. People looking to rent a home know what the competition looks like. If you overprice your rental property, you run the risk of having an extended vacancy and generating no money.
7. Not Requiring Renter’s Insurance
Another common mistake new landlords in San Francisco make is not requiring renter’s insurance. Homeowner’s insurance definitely covers the structure of your rental property. However, it’s good to know that renter’s insurance covers your tenants’ personal belongings and any damage they cause due to negligence. It also covers medical costs that result from any injuries that occur at your property.
If you want to avoid higher insurance premiums and prevent a lengthy insurance dispute, it’s best to require your tenants to have renter’s insurance.
8. Forgetting About Vacancies
Vacancies are something that all landlords have to face at some point. And unfortunately, rental property vacancies can wreak havoc on your bottom line.
It’s good for all new San Francisco landlords to remember that unoccupied rentals come with the job. To prepare for this fact, it’s also a good idea for all landlords to have an emergency fund to help cover the costs of owning a rental property while it’s not being leased. After all, whether you have tenants or not, you’ll be responsible for things such as:
- HOA fees
- Insurance premiums
- Cost of placing a new tenant
9. Not Factoring in Maintenance and Repairs
All San Francisco landlords are responsible for maintenance and repairs in their rental properties. And not all landlords want this responsibility. It takes a lot of time and effort, not to mention money, to maintain a rental property and make routine repairs.
That said, if you want to secure long-term tenants, you’ll have to make maintenance and repairs a priority. You’ll also have to factor in the maintenance costs that come with being a landlord. This means either saving up a sizable emergency fund before investing in a rental property or putting aside a portion of the monthly rent you collect each month.
Lastly, if you really want to avoid spending too much money, you’ll have to do one of two things:
- Build up a trustworthy network of affordable contractors and handymen to help with maintenance and repairs
- Hire a property management company to handle things like maintenance and repairs for you
10. Not Using a Reliable Property Manager
There are so many property management companies around it can be hard to find the one that’s best for you. However, choosing the wrong property manager can cause you to lose a lot of money.
In order to maintain a high ROI on your rental property, it’s important to research the property management company before hiring them.
For example, Sharevest Property Management has over 36 years of experience in the real estate industry and knows what it takes to manage a rental property effectively. From property inspections to rent collection, and aggressive marketing to 24/7 emergency maintenance and repair services, Sharevest has what it takes to place high-quality tenants in your property and save you money too.
Are you in need of San Francisco property management? If so, contact us at Sharevest Property Management today and see how we can help you manage your rental property and boost your bottom line.
As a full-service property management company in the San Francisco area, we have the expertise and ability to help you succeed as a landlord. When you trust us to handle your rental property, we’ll manage your tenants, maintain your property, and stay-up-to-date with all landlord-tenant laws so you don’t have to. But best of all, we’ll ensure you generate the most revenue possible so you can enjoy the benefits of owning a San Francisco rental property without having to do any of the work.