Mistakes to Avoid
Hiring a real estate sales agent to manage your property.
Even though an agent may be qualified to sell you a home, they don’t specialize in property management. Many agents don’t know the specific legal policies that could cost you thousands of dollars when a problem arises.
Not having the proper insurance.
Having insurance with the correct coverage is necessary. It is important that you understand what you’re purchasing and what is covered in your insurance policy. Having the correct coverage can prevent you from losing money and protects your investment. It is in your best interest to speak to a Texas insurance professional that will understand your needs as a landlord in the state of Texas. Below is a list describing coverage options that you should include on every investment policy.
- Property Manager Listed as Additional Insured – This is required per your management agreement.
- 100% Replacement Cost – Minimum coverage of $70-$75 per square foot in Texas is recommended in order to ensure your same property is rebuilt completely in the event of a total loss.
- Landlords Liability Protection – Basic policies only cover up to $100,000 of liability per property. This may barely be enough to pay legal fees, much less to indemnify for actual damages. Coverage of at least $300,000 - $500,000 is required
- Accidental & Sudden Discharge of Water or Steam – This is coverage for pipe breaks, water heater bursts, and other common plumbing issues which are regularly left off basic policies.
- Dwelling vs. Homeowner Policy – If you have a homeowner’s policy on your investment property , you need to switch to a dwelling policy immediately. Your current policy has a provision in it that excludes coverage if you do not occupy the home.
- Vacancy Clause – Most dwelling policies exclude coverage for any property left vacant for 30 days or longer. If you r home is vacant, you need to be temporarily switched to vacant home policy in order to be eligible for a claims payout.
- Loss of Rents – If your property is significantly damged due to a covered claim, your tenant will move out and most likely not pay rent. With this endorsement, the insurance policy pays you rent while the home is being repaired/rebuilt.
Not updating your mailing address with the Bexar Appraisal District.
When you buy a new rental property or move from a property and convert it into a rental property you need to update your mailing address with the Bexar County Appraisal District and remove any exemptions that you have that you are no longer or are not eligible for. Also, many times, we have Deeds or other legal or important documents being mailed directly to the rental property. Some tenants do bring the documents, but most do not. By keeping your mailing address current with the Bexar County Appraisal District, you can save yourself lots of frustration and or money.
Not updating you mailing address with the Home Owners Association.
Unfortunately, filling out our HOA addendum is not enough. Many HOA's will not recognize our HOA addendum even though it was signed by the owner of the property simply because of the way the HOA rules and laws are setup. Most HOAs will only talk to or deal directly with the owner of the property.
Not charging fair rents.
Vacancies, turnovers and lease terminations are your biggest expense. Charging fair rent, treating your tenant with respect and responding as quickly as possible to their needs. It is a lot less costly in the long run to take care of the little problems rather than wait until they become big problems.
Failure to re-invest in your assets.
Most successful investors have well maintained property. Be sure to re-invest some of you cash flow back into clearing any outstanding maintenance problems there might be on the property. This increases the value of your asset and increases your equity which builds your net worth.
Not thinking twice before you refuse to settle a dispute with a tenant.
It is almost always better to settle a dispute with a tenant (even if it's not exactly the best deal for you) than to fight it out in court. The landlord-tenant laws are usually extremely unfair to landlords. In addition, tenants often have access to free "legal aid" lawyers who will fight you with tax-and-charity dollars almost indefinitely with all the laws on their side. In the end, it may cost you thousands. It's not worth it just to win a point of pride. Usually, the only time it is really important to fight to the end is to get rid of a non-paying tenant. Even then, a settlement where you pay them to leave may be cheaper than paying even more attorney fees to fight to the bitter end.