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Never Again! Rental Property Mistakes I Hope You Won't Make the First Time
Some lessons only have to be learned once—if you're paying attention.
On Monday, I shared two stories about mistakes that taught me to stop looking at the numbers first and start looking at the property itself. Those weren't the only expensive lessons I've learned. In fact, it's a little disappointing to me that the most valuable advice I can offer usually comes from pain, frustration, and costly mistakes. Then again, if my losses can help you avoid making the same ones, maybe they weren't wasted after all.
When I first got into house flipping, business was good. I had cash, excellent credit, and confidence. Naturally, I decided to start buying rental properties. My strategy was simple: buy wherever the numbers worked best. Unfortunately, the numbers worked best in terrible neighborhoods. It didn't take long to discover that the tenants I wanted didn't want to live there. Families with stable jobs and long-term plans were looking elsewhere. The people who rented my houses often did so because they had no better options, and the moment they found one, they were gone. High turnover became a way of life. Looking back, I don't remember ever having a tenant who stayed ten years in a neighborhood where the schools were rated two out of ten. Today, I start with the neighborhood and let the numbers come second.
My second mistake was more personal. Before real estate, I had spent fifteen years in ministry and had worked in organizations where people were generally trustworthy. We were taught to look for the best in everyone, to see their potential rather than their failures. That's a wonderful way to approach life, but it's a dangerous way to screen tenants. My kind heart and naïve worldview cost me tens of thousands of dollars. I accepted stories instead of verifying facts. I collected security deposits that were too small. I delayed filing evictions because I wanted to give people one more chance. I even accepted a partial rent payment once, which only delayed the inevitable. I rarely pursued judgments after someone moved out because I assumed there was little chance of collecting anyway. Eventually I learned that being firm doesn't mean being unkind. You can treat people with dignity while still protecting your business. In fact, good property management requires both.
Another lesson came from the renovation side of the business. Expensive rehabs rarely produce proportionately higher rental income. That doesn't mean your properties should be neglected. I have no interest in being a slumlord. But granite countertops, premium appliances, luxury flooring, and designer finishes usually don't produce enough additional rent to justify their cost. Rental properties should be clean, attractive, safe, and durable. Durability is the word I keep coming back to because even excellent tenants won't treat your property exactly the way you would.
I also learned to pay close attention to the legal environment before buying a rental. Some states, counties, and cities make it extraordinarily difficult to remove a non-paying tenant. If the courts consistently favor tenants and the eviction process drags on for months, I simply look somewhere else. I'm not going to change the laws, and I'm certainly not interested in spending months paying the mortgage while someone else lives in my house for free. There are too many good opportunities in places where the rules are more balanced.
I'll close with something a mentor told me years ago that I've never forgotten. He looked me straight in the eye and said, "Roger, you're not in this business to fix broken people. You can't anyway. You're not Jesus. And if you try, you'll be crucified too."
That advice sounded harsh the first time I heard it, but I eventually understood what he meant. Providing safe, well-maintained housing is a worthwhile business. Treating people fairly is always the right thing to do. Extending grace when you can is admirable. But confusing compassion with good business judgment helps no one. If you lose the property because you refused to make difficult decisions, you won't be in a position to help the next family that needs a good place to live.
I still believe in looking for the best in people. I just don't let that keep me from seeing reality. Those are two different things, and learning the difference made me a much better landlord.
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The Quicker
My biggest rental property mistakes weren't about buying the wrong houses—they were about buying in the wrong neighborhoods, trusting too easily, overspending on renovations, and ignoring landlord-friendly laws. Be kind to your tenants, but don't let compassion replace sound business judgment.
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Resources
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