Renting a home with guarantees to have a good return, security, and peace of mind is something that many owners want. To avoid bad experiences in renting a home, it is important to analyze the tenant’s information beforehand before making a decision. In this post, I report on the ten most frequent mistakes that a landlord should avoid to enjoy a peaceful and secure rental of their home.
1. Not Setting the Right Price for Monthly Rent
Calculating the right price of monthly rent is very important. If you ask for more than you should, it may take a long time to rent it or never rent it at all, on the contrary, if you ask for less than you should, you do not get the desired return. To set the right price, you must find a balance between what you want to earn and what the market demands.
The rental value can fluctuate every year and you should pay attention to the price of properties with similar characteristics in the same area. This information is essential to negotiate in an advantageous situation and not miss out on interesting offers. This task is not entirely simple and it is advisable to ask for advice from a real estate professional who knows well the characteristics of the area, supply, and demand.
2. Not selecting the tenant well
Finding the ideal tenant is tricky, but it’s not mission impossible.
The advantages of finding a good tenant are several:
- Be careful with housing
- Punctuality in payments
- Comply with the conditions of the rental agreement
- Conflicts are avoided
To choose a good tenant, it is essential to study the following aspects:
Economic solvency
A tenant’s ability to pay can be demonstrated by their monthly income and job stability. In this regard, it is useful to have the documentation relating to the latest payslips and the employment contract. The rental income shouldn’t exceed 30% of the net monthly salary. In case of doubt about the financial capacity, the tenant may be asked for a guarantee as an additional guarantee. The guarantee can be personal if it is covered by a family member or bank if a bank is responsible for making the payments.
Check references for previous rentals
You should always ask for a copy of your ID card to verify the identity of the tenant who intends to be the holder of the rental contract. It is useful to check the solvency provided by the Delinquent Tenants File (FIM) and ask for references from the owners of other properties that you have previously rented.
Be wary of the perfect tenant
You should always be wary of the supposed perfect tenant, the clue is that they are usually people who exaggerate the information they provide. There are real experts in making good first impressions who then stop paying the monthly rent.
The future tenant’s documentation must be scrupulously checked before a decision is made. To make the right choice of tenant, it is an advantage to have the advice of a good real estate professional who offers guarantees to avoid future problems. These procedures are easier if they are done by a real estate agent, the tenant is usually reluctant to provide personal information to an individual.
3. Not Using a Lease Subject to the Law
It is very common for homeowners to use a model contract downloaded from the many that swarm the internet. The vast majority do not comply with the Urban Law opposed by the government, and some even contain abusive clauses that can become a problem for the owner. In this sense, it is not the first time that a judge has ruled in favor of a tenant in a situation of legal defencelessness.
On the other hand, the contract must reflect all aspects of the rental so that there are no misunderstandings in the future. If the property is not empty, it is very important to make an inventory of the furniture, appliances, and appliances, in addition, it must be signed by the owner and tenant.
4. Failure to submit the rental agreement to arbitration
You should always consider the possibility that the tenant and landlord may not agree on a rent issue and a conflict may arise. For this reason, it is advisable to submit the rental contract to arbitration, it is an alternative to the judicial route regulated by law. In the event of a disagreement, the parties voluntarily submit to arbitration without having to pay the costs of hiring a lawyer and a solicitor. To do this, the tenant and the landlord sign an addendum to the contract indicating that, in the event of a conflict, they submit to the decision of an impartial third party to resolve it.
The main advantage of applying arbitration is that the response is faster and more effective in resolving a problem than if you go to court. However, submission to arbitration is not recommended in the case of eviction due to non-payment of rent, the best option being the judicial route.
5. Not taking out renters insurance
To cover possible unforeseen events with the tenant, it is advisable to take out rental insurance that covers non-payment and damages. The tenant may become unemployed and cannot afford to pay the monthly rent, in which case the insurance covers this unforeseen event. This type of insurance usually covers the payment of rental income for up to a maximum of one year.
On the other hand, if there are damages or breakdowns in the home, the insurance is responsible for resolving these incidents. The cost of these insurances is usually around 3% to 5% of the annual income of the property that is rented.
6. Do not change ownership of supplies
It is common for landlords to pay utility bills and then charge them to the tenant. However, the tenant needs to change the ownership of the utilities so that they are solely responsible for paying the bills paid directly into their bank account. If this is not done, it may happen that, if there is any non-payment, the supply company will claim from the owner, as the owner, the payment of the outstanding amounts.
7. Not having the energy efficiency certificate
Since 2013, it has been mandatory by law to rent a home with its corresponding energy efficiency certificate issued. This certificate is issued by an approved technician who evaluates the energy characteristics of the home and is valid for 10 years. Some owners prefer to ignore this procedure to save the costs of issuing the certificate, others are unaware that the certificate must be given to the tenant. The landlord must give a copy of the energy certificate to the tenant, if they fail to do so, they are exposed to a serious infringement that carries a financial penalty.
8. Failure to deposit the deposit with the competent body
The tenant may be asked to pay a deposit to cover possible damages or unfulfilled payment obligations. The Community of Madrid is responsible for collecting the mandatory deposit for the tenant, the amount corresponds to one month’s rent. The landlord is responsible for depositing the deposit and requesting its return at the end of the rental contract. Failure to deposit the deposit is a financial penalty, in addition, the tenant must deduct the rent in the income tax return.
9. Not delivering the apartment in good condition
To avoid tenant complaints, the apartment must be delivered in good living and clean condition. The law doesn’t say anything about it, but it’s best to start on the day of handing over the keys. The owner must make sure that the electricity, gas, and water installations are working perfectly and that the payment of the bills is up to date.
10. Not taking good care of the tenant
Tenants deserve to be taken care of properly and the landlord should respond to their complaints and requests in a friendly manner. It’s a good landlord because it’s the best way to avoid conflicts, and in the long run, it’s worth having a happy tenant. Renting is a profitable business and you want to retain a tenant who is rigorous in monthly rent payments and is not problematic.
It is not worth arguing for a repair or always denying any reasonable request, if you have a serious, careful, and solvent tenant.
Conclusions
The most comfortable and safest way to rent a home is to seek the advice of a professional in the real estate sector to take care of everything. A good professional advises throughout the process and looks for the ideal tenant so that the procedures are streamlined and the profitability of the rental is obtained as soon as possible.
The real estate advisor can take care of the day-to-day rental with an additional service that resolves any incidents or breakdowns that arise in the property and attends to the tenant’s claims. Most landlords prefer not to worry about the tasks involved in managing a rental and enjoy their time.
If you need to sell or rent your house in Islamabad, contact us we will be happy to assist you.
