Top Mistakes Owners Make
The owner records the property using their personal address.
Nothing is more disturbing than a pissed off tenant pounding on your door during super. In case you are not aware of the internet, all properties in Las Vegas are public record and the address of record can be found by the least intelligent tenant in like 2 minutes. Lawyers can find owners even faster. They will find out where they live, what they own, where they work and nearly all their assets within 5 minutes after a tenant “slips and falls.” Really smart owners put their assets in an LLC and then bury that LLC inside a trust that has no reference to their name and then they have all that associated with a UPS office near where they work. If you don’t have the resources now to do the LLC / Trust exercise, you should at least record the property at a UPS office (not a Post Office). Every year, one of our owners gets harassed by a tenant because of this mistake. One of our owners had a nervous breakdown from all the tenant abuse and they didn’t even live in Las Vegas. Don’t be that owner who has nightmares.
The owner waits until the property is pristine before advertising.
There is no benefit to hiding a property until it looks like the Taj Mahal. By waiting around, owners lose at least a half of month’s of rent. Renters search on price, bedrooms and location. They don’t search on flooring type or the color of the master bedroom. An owner won’t lose a good tenant just because they are still painting the bathroom. Timing is everything and waiting costs them money. Really smart owners have old photos that can be used to advertise their property. No one is going to remember the shade of the hallway.
The owner wants over market rent because they think they will get a better tenant.
They think that a tenant who pays more rent will be classier and pay rent on time. Wrong. There is no correlation between price and tenant quality. We have just as many problems with bling bling tenants. This strategy actually backfires because the owner gets fewer applicants. The only ones willing to pay over market are the ones who were rejected by the cheaper properties. Fewer applicants means owner’s fewer candidates to choose from. This translates into a longer tenant placement period which eats up all the extra rent they were trying to get.
The owner puts earrings on a pig.
Putting granite countertops in a unit that makes $400 a month is a huge waste of money. Renters focus on price, number of bedrooms and neighborhood. A $3000 countertop will add about $20 to rent. The math doesn’t work. To add insult to injury, most renters destroy all those upgrades anyway. Owners who make their properties clean and functional make more money in the long run. The only time a property should be upgraded is when it’s about to be sold to a primary buyer. Used appliances are good enough. That $1000 refrigerator won’t get you anymore rent than a used one.
The owner doesn’t respond to urgent calls.
Owners who go on a cruise in August drive us to drinking. If that $5000 air conditioner goes out, we need to know what you want us to do immediately. Awesome owners will send a simple email before they go off the grid “I’m going to be in Kenya for 2 weeks. If something crazy happens, call my sister at ______. If we call or text you, it’s because we have a major problem. 95% of our correspondence with owners is not urgent and handled via email.
The owner doesn’t repair a roof or HVAC in a timely fashion.
Tenants have the right to withhold rent if a property becomes un inhabitable. Judges rightly rule in favor of a tenant if the AC goes down for more than a week. Owners who do not have the resources to maintain a property are given notice.
The owner doesn’t put their asset in a trust or LLC.
Thinking they were vampires, they were certain they would never get sick or die. They knew that they should protect their asset but just kept putting off that effort because of the time and money that it takes. One year turns into the next and it never gets done. They eventually die and that asset gets eaten by tweakers while their properties linger in probate. Las Vegas is littered with abandoned properties because the owners never got around to protecting them. Do you ever wonder why those boarded up abandoned buildings seem to sit there forever? 95% of them are the remnants of assets that were not properly held. Don’t let your investment you worked so hard for become bulldozed off the foundation.
Mistakes Owners Make With Managing Their Own Property
The owner skips the screening process.
It takes more than intuition to pick the right applicant. There are tenants who have been dodging rent so long they have become experts at snowing a potential property owner. A sure sign that a tenant is laying down smoke is when they launch into a long country western song. Rental history, income history and credit history are key factors in determining the quality of the tenant. HOWEVER, that’s not the only thing. We at Limestone have 5 other key indicators for quality tenants.
Owners ignore maintenance issues and tenant complaints.
Owners who ignore signs that something is wrong run into much bigger problems later. First of all, as human beings, we all want to be heard and understood. Owners who disrespect tenants and ignore issues cause more psychological damage that leads to property damage. Leaking water and faulty electrical components can do serious damage to a property.
The owner rented to a friend or family member.
Nothing makes Thanksgiving more awkward than when someone has to evict a family member. Every 3 months or so, we have the honor of tossing some family member on the street. It’s not pretty. If you really want to help a friend or family member, give them some money for a security deposit or a couple months rent at someone else’s place. Your commitment is defined and you can just write it off to goodwill.
Exception: The only exception that we found that works is an elderly relative on a fixed income.
The owner purchases a vacation home thinking that it’s a good investment.
Vacation homes rarely turn a profit. They are expensive to begin with and generally come with super high HOA fees. The owners often shoot themselves in the foot by letting friends and family stay for free. They could have just purchased a decent home with a long term tenant and then stayed at the Bellagio for a month with all that rental income. Similar to boats and aeroplanes, it’s better to rent a vacation home than it is to own one.
The owner listens to the tenant country western songs.
Time and again we get owners who call us after the tenant has not paid 3 months rent. They listened to the tenant’s country western songs and felt sorry for them. Sympathy cost them a lot of money and believed that managing properties was cake. There is more to managing properties than collecting rent. Getting the right tenant, keeping tenants feet to the fire and managing drama requires skill and experience. Most owners lose more money by managing the properties themselves.
The owner sold their property because they didn’t want to deal with tenants.
They thought that the 8% or so that it cost to professionally manage a property was too much. They decided to spend that profit on something that doesn’t earn them money any longer. Every year, we get an owner who sells a property at a huge discount because they failed to hire someone else to deal with the drama. All those savings on managing it themselves went down with the fire sale.
They partner up with someone else.
Thinking that 2 heads are better than one, both partners try to drive the bus. Inevitably, the bus ends up in the ditch. There is a reason why there should be only one steering wheel on a bus. Even if the partners manage to keep the bus from going into the ditch, one of them eventually gets sick or dies. Getting off the bus becomes the hard part because they will not be able to agree as to when the bus should stop. Las Vegas is littered with burned out buses. I know this because we buy them and put them back on the road. An alternative solution is for one partner to finance the other with a simple principle / interest note. One person is on title and drives the bus. The other person is a passenger. The driver decides when and where the bus will stop. The only exception to this rule is a married couple. Married couples have already determined who is qualified to drive.