NEW YORK (Zillow.com) -- Investing in a rental property is a great way to generate income, but it’s not always easy. Renting out your property also involves managing it, and mistakes along the way can end up costing you more money. Although there’s no guaranteed way to weed out bad tenants in your screening process, you can definitely safeguard against future headaches by avoiding these common mistakes owners make when they rent out their homes.
Not having correct documentation
Even if your state allows for an oral lease agreement, having a signed lease is just the smart thing to do. Make sure your lease agreements cover all your bases. Often, standard forms you find online won’t be specific to your property. Topics such as property management, late payment fees, or pet policies can and should be covered in a separate, signed document you draw up yourself. Providing a document with specific stipulations will help you deal with troublesome tenants in cases where they break the lease.
Discriminating against prospective tenants
Protect yourself from legal trouble by being familiar with fair housing laws. Make sure your listings aren’t targeting or excluding specific groups. When you meet with a tenant for a showing, asking questions about disability, marriage, or familial status could also suggest discriminatory intent. If you turn down a renter’s application, use a credit or background check to support your decision.
Neglecting to buy correct insurance
Renting out your property exposes you to a higher risk for accidents, and homeowners insurance may not offer complete coverage if your home is being rented out full time. Protect yourself from damages, accidents, and financial losses on your rental property by purchasing landlord insurance coverage. You can also require renters to buy renters insurance to protect their own belongings, since landlords insurance does not cover the renter’s possessions.
Failing to disclose important information
If you’re aware of mold, lead, or asbestos on your property and don’t notify your tenants, you could be breaking your state’s laws. Be aware of the disclosures you’re required to give renters and make sure you comply with them.
Being lax about screening
It’s smart to be picky about who you allow to live in your property. Finding a tenant who pays the rent on time and will be a responsible renter will make your job a lot easier. Requiring a credit check and completing a thorough background check before you approve a renter will help you single out good renters.