We are always encouraging real estate investors to buy and rent out property in Colorado Springs. It’s a stable and growing rental market, and there are a lot of opportunities here to either begin a real estate investment journey or continue growing a portfolio of profitable properties.
That doesn’t mean there aren’t challenges. There’s always a bit of risk involved in any investment, and we’ve found that it’s increasingly easy to make a mistake, even if you’re an experienced investor. Those mistakes, unfortunately, can be costly. We’ve seen a range of common errors that can easily be avoided with a little foresight and planning.
Because we hate to see people make mistakes that have been made before, we’re exploring the top 10 mistakes Colorado Springs property owners make when they’re renting out a home. We’re also providing some good tips and strategies on how to avoid them.
1. Lack of Thorough Tenant Screening
One of the most critical parts of renting out a home in Colorado Springs is choosing the right tenant. You need to get a resident in place who is dependable, financially able to pay rent, and willing to follow the lease terms and take care of your property. Failing to thoroughly screen potential tenants can lead to a long list of problems, from late rent payments to property damage. You don’t want to find yourself in court, trying to evict a bad tenant.
The mistake is usually in rushing through the screening process or in looking at the wrong things. You need to do more than run a basic credit report. It’s essential to check national eviction databases, conduct a criminal background check, and look at the applicant’s rental history. You also want to make sure you’re not making any fair housing mistakes or violating any anti-discrimination laws.
Avoid the most common tenant screening mistakes by having a good application in place. Conduct background checks that are thorough. Always run credit, criminal, and employment checks. Verify references and speak with previous landlords and employers to get a complete picture of the applicant.
2. Ignoring Maintenance Issues
There are so many mistakes that can be made with maintenance, from ignoring preventative services to hiring the wrong vendors and contractors. The worst mistake you can make as a rental property owner, however, is delaying or ignoring maintenance needs. If a tenant makes a repair request and you don’t act on it right away, you will find yourself dealing with more significant problems down the line, including higher maintenance costs and potentially leaving your tenants dissatisfied and unlikely to renew their lease agreements.
Be responsive. Avoid maintenance mistakes by conducting regular inspections. When you schedule periodic property inspections, you have a better chance of catching issues early. You want to make prompt repairs, too. Address those maintenance requests as soon as they arise. It’s also important to maintain good records. Keep detailed records of all maintenance activities.
Allowing deferred maintenance puts your property condition at risk and it also frustrates your renters.
3. Inadequate Lease Agreements
A poorly constructed lease agreement can leave you vulnerable to disputes and legal issues. Make sure your lease agreement is clear and consistent. Enforce your lease agreement across the board, and talk to tenants about your expectations before they move in.
Make sure you’re using a comprehensive lease template that’s specific to Colorado. Ensure your lease covers all essential elements, including:
- Rent collection policies and payment terms
- Maintenance responsibilities and the process for requesting repairs
- Rules for tenant conduct.
Have an attorney or a Colorado Springs property manager review your lease to ensure it complies with local laws.
4. Setting Incorrect Rental Rates
This is a big mistake and we see it quite frequently. You need to have a rental price that’s accurate, competitive, and profitable. How do you balance all of those things into one rental value? By studying the market and accessing accurate and reliable data that tells you what homes similar to yours are renting for.
Setting the wrong rental rate can either lead to prolonged vacancies or undervaluing your property. Conduct market research and analyze rental rates of comparable properties in your area. Regularly review and adjust your rental rates based on market conditions. Make increases at lease renewal time that are reasonable and unlikely to chase your good tenants away.
5. Poor Communication with Tenants
A good relationship with your tenants is essential if you want to have a positive and profitable rental experience. As you know, all good relationships begin with effective communication. Make sure you’re available, accessible, and responsive when it comes to how you communicate with your tenants. This is an important part of maintaining a good landlord-tenant relationship and ensuring smooth property management.
Establish communication expectations at the beginning of the lease term. Always provide multiple ways for tenants to contact you. Respond promptly. Address tenant queries and concerns quickly to build trust and rapport.
Don’t lose good tenants to bad communication. You want to build trust and provide a good rental experience. That requires active, transparent, and direct communication.
6. Overlooking Legal Requirements
Don’t ignore the laws.
Failing to comply with local, state, and federal housing laws is not only a huge mistake, but it can also result in severe penalties. Don’t put yourself at risk for violating an important law. Fair housing, habitability standards, eviction procedures, and security deposit returns are all governed by state and federal laws. You need to know how to follow the law and not infringe upon any of your tenant’s rights. If you’re not sure you can stay up to date on the laws you need to know, work with a property manager who can keep you compliant and out of legal hot water.
Avoid legal missteps by:
- Staying Informed. Regularly update yourself on relevant laws and regulations.
- Consulting Experts. Seek advice from legal and property management professionals.
- Implementing Compliance Procedures. Establish procedures to ensure your property management practices are always compliant.
Legal mistakes are easy to make and difficult to bounce back from. They can damage your reputation as well as your bottom line. Let’s do everything we can to prevent falling out of favor with the landlord/tenant laws.
7. Inadequate Insurance Coverage
Investors in real estate understand how important it is to protect their assets. That starts with good insurance. If you’re not in possession of the right policies, or if you’re underestimating the amount of insurance that you need, there may be problems when it’s time to file a claim.
Assess your needs now, and revisit your insurance policies every year. Ensure you have sufficient coverage for liability, property damage, and loss of rental income. Consult with an agent who specializes in rental properties. One common mistake we see with landlords who are now renting out a home they once lived in is that they neglect to convert their homeowner’s policy to a landlord policy. It’s also a mistake not to require renter’s insurance from your tenants.
Be thorough when it comes to insuring your property.
8. Neglecting Curb Appeal
First impressions matter, and neglecting your property’s curb appeal can deter potential tenants. It’s a mistake not to think of your curb appeal as a major marketing tool. Keep up with landscaping. Whether you have a large yard or a small courtyard, you’ll want to maintain the lawn, gardens, and exterior areas. Keep everything outside of your rental property clean and well-maintained. Update exterior features like lighting and paint to keep the property looking fresh and attractive.
This will attract and retain good tenants, and improve your rental and property values.
9. Poor Financial Management
How are you tracking your income and expenses? Mismanaging your rental income and expenses can jeopardize your investment. Make sure you have a process in place that’s clear, detailed, and consistent. You want an accurate look at where you stand financially with your real estate investments.
There has to be more than an Excel spreadsheet involved. Take a look at some of the technology that’s available to help you manage your finances when it comes to investment properties. Keep detailed records and create a budget that accounts for expected and unexpected costs.
10. Not Utilizing Professional Colorado Springs Property Management Services
This, really, is the biggest mistake we can tell you about.
Managing rental properties can be time-consuming and complex. Many property owners underestimate the benefits of hiring a professional property management company. You are getting so much value and so much expertise when you work with a property manager. You’re also able to leverage technology, resources, and networks to the advantage of your investments.
Work with a property manager so you can avoid mistakes, earn more, and spend less.
Avoiding these common mistakes can significantly enhance your experience as a property owner in Colorado Springs. By implementing these tips, you’ll be better equipped to manage your properties efficiently, maintain good tenant relationships, and maximize your investment returns.
If you’re looking for expert assistance with Colorado Springs property management, consider working with us. We’d love to talk with you. Contact our team at Muldoon Associates.
