Owning rental property in Albuquerque is great. If you’re already investing here, we don’t have to tell you that. Rents have peaked but are still higher than we’ve seen over the last few years, and there’s a high demand for quality rental homes in this market.
While investing here is a great idea, we can also tell you that it’s easier than ever to make a mistake.
This is true even if you’re an experienced investor or a landlord who has been around the block once or twice. Mistakes happen. We all make them. The problem, of course, is that those mistakes can be costly.
As professional property managers in Albuquerque, we often step in to help owners and landlords when they’ve made a mistake that seems impossible to recover from. We have seen a range of common errors that can easily be avoided with a little foresight and planning and a lot of experience and partnership.
Because we hate to see real estate investors and landlords make mistakes that have been made before, we’re exploring some of the most common rental property mistakes that are made. We’re also providing some actionable advice and strategies on how to avoid them.
Let’s Start with the Law
Fair Housing Missteps and Legal Fumbles
The law can be tricky, especially when we’re talking about specifics such as eviction procedures, security deposits, lease agreements, and fair housing.
Fair housing is an especially easy place to make a mistake, and there is no good way to resolve a fair housing mistake. The penalties are steep. The damage to your reputation can be serious. The best way to deal with these is to avoid them.
New Mexico is hardly California or Oregon. We’re a fairly landlord-friendly state, and landlords do not have to worry about tripping over strict rent control laws. The landlord and tenant laws are fairly straightforward and while they are easy to follow, they’re also always changing.
Plus, federal laws need your attention. The Fair Credit Reporting Act will have something to say about the paperwork you send after denying a tenant. The Americans with Disabilities Act will have some direction on how you handle accommodations in your building for people with disabilities. There are service animals and support animals to consider.
Even the slightest and most unintentional mistake can have serious consequences.
You need to understand the habitability standards, security deposit timelines, and the disclosures required in your lease agreement. There are protected classes that need attention when you’re marketing a vacant property and screening tenants. You need a consistent and documented screening process so you can demonstrate that each applicant is treated fairly and objectively.
If you want to avoid legal mistakes, stay up to date on all the state, local, and federal laws. If you’re not, you could easily violate a regulation and find yourself in legal trouble.
Establish standard rental criteria. Create a move-in and move-out checklist that helps you document property conditions before keeping part of a security deposit. Work with your local Albuquerque property managers to ensure you’re using a lease agreement that’s both legally compliant and legally enforceable in New Mexico.
Pricing Your Albuquerque Rental Property Too High or Too Low
Oh, pricing.
It can be a headache.
And instead of a headache, it should be an opportunity.
The right price encourages steady and consistent cash flow. It sets you up for consistent increases, ensuring that your property value rises and your return on investment (ROI) does, too.
A lot of owners will price their rental home based on what they think they need to earn. That’s a mistake. Some owners will underprice their properties because they’re feeling a sense of desperation when it comes to finding a tenant. Also a mistake.
You’ll find it’s actually pretty easy to price your property incorrectly if you don’t have access to good market data. Most landlords fail to understand that your home’s rental value will depend largely on the strength of the Albuquerque rental market and the competing properties you find there.
Here’s the damage the wrong price can do:
| Leave you with a longer vacancy. If you price your property too high, you’ll be left waiting for someone who is willing to pay that price. You could lose weeks and even months of rental income. | Leave you trying to catch up to market rents. If you price your property too low, you’re not only leaving money on the table now, you’re crushing your income potential for the future. | Leave you considering an underqualified tenant. When your property isn’t priced correctly, the only tenants willing to rent it will likely be those who were denied homes elsewhere. |
To price your rental accurately, competitively, and profitably, make sure you know what the market demands and accepts.
- Take a look at what homes similar to yours are renting for in your neighborhood.
- Compare your property to those homes. If you’re offering more space or modern upgrades, you can probably price your property higher.
- Get good data from a property manager who actively collects analytics on the local market.
Don’t make the mistake of pricing your property incorrectly. This is a tough one to fix.
Incomplete Tenant Screening
One of the most critical parts of renting out a home in Albuquerque is choosing the right tenant.
|
GOOD TENANT |
BAD TENANT |
| Pays rent on time | Pays rent late or not at all |
| Takes care of the property | Neglects to report maintenance |
| Follows the terms of the lease agreement | Ignores the rules and regulations |
| Communicates openly and transparently | Does not answer calls or messages |
| Renews the lease agreement | May need to be evicted |
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
- Evaluate income to make sure it’s enough
- Consider the applicant’s rental history.
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.
Lease Agreement Mistakes and Inconsistent Lease Enforcement
Not having a lease agreement is a big mistake.
Verbal agreements may seem convenient at first, but they lack legal protection and clarity. Without a detailed and binding lease agreement, misunderstandings between you and your tenant can arise. Using the wrong lease is also a huge problem. Don’t just pull any template off the internet that looks good. Your lease agreement must be both compliant with the laws of New Mexico and legally enforceable here.
- Use a professionally drafted lease that outlines terms, rules, and expectations clearly.
- Include clauses for maintenance responsibilities, notice periods, and rent payment terms.
- Regularly review your lease to ensure it complies with local laws and regulations.
Once you have a lease, enforce it.
Your lease agreement is a written contract between you and your tenants. You have to enforce it and hold both yourself and your residents accountable to what’s included in that contract.
If rent isn’t paid on time and your lease includes late fees, make sure you charge those late fees. If smoking is prohibited and you notice the entire property smells like smoke, address that with your tenant during your next inspection. When you don’t allow pets but there are dogs running around the yard, you need to enforce your no-pet policy.
Tenants will appreciate knowing what’s expected, and they’ll also need to know you take the lease agreement seriously. Don’t make the mistake of not communicating, sharing your expectations, or enforcing the lease.
Missed Maintenance Needs
It’s a mistake not to invest in preventative services and routine repairs. Emergencies obviously require immediate action. When a tenant calls because the kitchen is on fire, you need to take action right away to keep the property habitable.
You want to be just as responsive when there’s a routine repair request. This will protect your property’s condition and it will also keep your residents satisfied and increase your retention rates.
While we’re on the topic of maintenance and the mistakes that can be made when you’re not attentive to protecting the condition of your investment, let’s talk about the people you hire to work on your property.
Choosing the right vendors, contractors, and service professionals is critical. Some of the mistakes we cringe to see include:
- Working with unlicensed and uninsured vendors. This is a huge mistake and an unnecessary risk. Don’t hire anyone off Craigslist or in the parking lot of your local Lowe’s. Work with professionals who have a stake in doing good work. Imagine what will happen if an unlicensed worker falls off a ladder and breaks a bone. Guess who will be responsible for those medical bills and likely the defendant in a lawsuit?
- Avoid those tempting cheap fixes. This is your investment property we’re talking about. Be willing to invest in solid, well-crafted repairs.
- Owners who try to do the work themselves or worse – allow tenants to take care of repairs. This is a recipe for disaster.
How to avoid these mistakes? By working with professional vendors and contractors who are licensed, insured, and bonded. We strongly believe that this has to be non-negotiable business practice when you’re renting out a Albuquerque property. Don’t make the mistake of seeking out the cheapest possible workers or using sub-standard materials when you’re attending to routine maintenance.
If you’re not sure where to find the right vendors, get a referral from an Albuquerque property manager. One of the benefits of working with us is that we have a dedicated team of vendors, contractors, and service professionals who give us their immediate attention and their best rates.
Not Allowing Pets is a Major Mistake that We’re Always Barking About
Why are you hating on the pets?
Alright, we’re sure you don’t actually hate animals.
But seriously, why aren’t you allowing pets?
We know why. Pets can be messy. They can scratch up the floor. They can leave behind odors, fur, dander, and even fleas. We get it if you’re more likely to avoid the potential mess and liability that can come with pets.
But here’s the thing. Avoiding pets can be a potentially expensive mistake. Why? Because it’s bad business. You need to at least consider them, especially if you want to keep vacancy to a minimum and earn more money with your rental.
Look at the stats. More than half of the tenants in Albuquerque have some kind of a pet. The reality is – if you say no pets in any rental, you are eliminating over half of the potential tenant pool. That means longer vacancies.
Here’s how to avoid the potential risks that come with allowing pets if you’re nervous about it. The answer is a pet policy.
Elements of a Strong Pet Policy
| Restrictions
You can place restrictions on breeds, sizes, ages, and numbers. Just because you are willing to consider some pets does not mean you have to allow all pets. |
Pet Fees and/or Pet Rent
Why not earn more money? Tenants are willing to pay for the privilege of moving in with their furry family members. Charge a pet fee or a pet rent for each dog or cat. |
| Pet Screening
Screen pets as carefully as you screen tenants. Ask for vet records that show vaccines. Talk to former landlords about whether the pets behaved. |
Inspections
You can inspect the property during the lease term to make sure the pet is not causing any damage. Most tenants will be okay with this. |
It’s a Mistake to Resist Improvements and Upgrades
Spending money on your investment property isn’t always something that property owners want to do. However, it’s an important part of keeping your investment updated and modern and attractive to good tenants.
You have to be willing to make improvements, especially during turnovers.
Residents want homes that are freshly painted. They want clean floors and easy-to-maintain landscaping. Today, tenants are looking for a bit of smart home technology and a lot of energy efficiency. If you’re not making updates, you’re probably losing a lot of good tenants to competing properties that are recently renovated.
There’s no need to completely rehab the kitchen or add a loft. Make small, cost-effective improvements that will be noticeable. You’ll be able to increase your rent and keep good tenants interested. Think:
- Tile backslash in the kitchen.
- LED light bulbs.
- A digital keypad.
- Hard surface floors instead of carpet.
All of these things make a big difference. It’s a costly mistake not to make renovations and improvements during turnovers.
Overlooking Vacancy Costs
Vacancy is unpleasant and expensive and seriously stressful.
Prolonged vacancies are often underestimated money drains. While waiting for the “perfect” tenant, property owners lose income and cover ongoing expenses like mortgage payments and utilities. You rarely see it coming, but when you’re planning on your potential earnings, it’s easy to forget that your property won’t always be occupied.
Here’s how to avoid those long and uncomfortable vacancies:
- Keep your property in rentable condition at all times.
- Strategically market to reach more potential tenants promptly.
- Work with a property management company that can minimize vacancy periods by leveraging their connections.
Don’t forget that the best way to avoid vacancy is to keep your current tenants in place. Focus on tenant retention.
Not Having an Investment Plan
You have to understand what you want. Whether you’re renting out one property or growing a portfolio, you have to establish a set of goals so you know how to make the right decisions. What type of property do you want to invest in? How long will you keep it?
It’s essential to remain flexible when you’re renting out a home, but you also need some consistency, which will come from a solid set of investment goals.
It’s a mistake to simply move through the investment and rental process without knowing why. Be strategic. Be intentional.
Trying to DIY Every Single Thing
Invest in Albuquerque Property Management Instead
As Albuquerque property managers, we believe the biggest mistake you can make is trying to do everything yourself. If you really want to succeed as a landlord or a real estate investor without worrying about the mistakes that are waiting to be made, you need to work with an Albuquerque property management partner. You can benefit from your property management partner’s advice on what to do and what not to do.
The right property manager helps you avoid costly and common mistakes.
Have your own set of mistakes that you have made once or twice? We’d love to hear about them. We’d also love to help you solve any lingering problems that may be mystifying you. Contact us at Blue Door Realty. We provide residential management support as well as HOA management in Albuquerque.
