5 Mistakes New Landlords Make

Here are five common mistakes new landlords make—and how to avoid them.

1. Failing to Thoroughly Screen Tenants

It seems so obvious that it’s hardly worth stating, but finding a good tenant is a critical part of the success of any rental property venture. The problem is that many bad tenants can look just like good tenants at first glance.

The wrong tenant can cause significant problems for a landlord. Missed or late rent payments can play havoc with your finances. A careless or sloppy tenant can cause massive damage to your property, wasting your time and money on repairs before you can rent to the next tenant.

A thorough screening process can help you end these problems before they start, by weeding out potentially troublesome tenants. Your screening should include:

• An application, which should ask for current and former employers, current income level, contact information for previous landlords, financial and banking information, and information about the prospective tenants’ personal lives and habits (smoking, pets, etc.).
• A credit check, including credit history and current debt.
• A background check, with particular attention to criminal records and evictions.
• Talking with the previous landlords. If a tenant has been problematic in the past, his former landlord will most likely be glad to share that information with you.
• Talking with the tenant’s employer. Verify his current employment status. Alternately, you can ask the tenant for his most recent paystub.
• An interview with the tenant. 

2. Not Having a Lease

Some landlords don’t bother with leases; they just size up a potential tenant, shake hands, take a deposit, and hand over the keys. And while oral agreements can be legally binding, there is also some truth to the old saying, “A verbal contract isn’t worth the paper it’s written on.” With a written and signed lease or month-to-month rental agreement, you are protected with solid proof of what you and the tenant agreed to—which makes your case stronger, should you find yourself having to take your tenant to court.

Important information to include in the lease includes:

• Names of all tenants
• Amount of rent
• Term of the agreement (month-to-month rental agreement or year-long lease)
• Security Deposits and fees
• Maintenance responsibilities
• Whether pets are allowed or not.

3. Not Budgeting for Repairs

Any dwelling will experience wear and tear—and a rental tenant can be harder on a property than an owner might. As a landlord, you need to be prepared to make prompt and complete repairs whenever they are needed. At minimum, this will keep your tenants happy and likely to renew their leases; at worst, if you don't, you could leave yourself open to legal trouble.

A common mistake is underestimating the amount you might need for maintenance in a given year. A general rule of thumb is to set aside 1 percent of the total value of the property each year. So if the property is worth $150,000, you would set aside $1,500 each year. If possible, make sure you have these funds on hand at all times, before the year starts, so you don’t need to keep your tenants waiting for repairs.

4. Failing to Understand Fair Housing Laws

Even if you’re not a landlord, you’re probably generally aware of the concept of fair housing laws -- the idea that you should not discriminate when renting a property. But the devil, as they say, is in the details—and if you’re going to be a landlord in Maryland, you need to be keenly aware of the specifics of the state’s housing discrimination laws. The state code of Maryland states that housing should be provided “regardless of race, color, religion, sex, familial status, national origin, marital status, sexual orientation, gender identity, or disability.” You will also need to be in compliance with the federal Fair Housing Act.

Keep in mind that while discrimination based on some factors is illegal, as a landlord you still have every right to screen your potential tenants based on legitimate concerns, some of which you can find in the advice on screening tenants, above.

5. Failing to Disclose Important Information to Tenants

State law demands that you make certain information available to your tenants, such as the name, address, and phone number of the landlord or of the person authorized to accept notice or service of process on the landlord’s behalf. Maryland also has strict rules about notifying tenants about potential lead paint hazards. You can search state code for specifics, or get help from an attorney well-versed in Maryland landlord-tenant law.