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6 mistakes to avoid as a landlord

21.09.2022

6 mistakes to avoid as a landlord

What are the main mistakes made by landlords renting out their apartment? Rendin’s CEO and co-founder Alain Aun gives an overview of what others in the same position should take into account.

The landlord values the rental property incorrectly

Fair pricing creates a prerequisite for finding a tenant quickly and keeps the gap of being without rental income as small as possible.

How to know if a rental apartment is priced wrong? ‘If the number of interested parties is non-existent within three days to a week after the advertisement, then this is the first sign that the price is too high,’ explains Alain Aun, CEO and co-founder of Rendin, which is a solution for renting (out) a home and concluding safe rental agreements. ‘The number of rental candidates does not need to reach cosmic heights, the important factor is the quality level of people (including exemplary financial behaviour and lack of payment defaults, stable income, choosing an affordable place to live), among whom a reliable tenant can be chosen.’

He gives an example of a specific recent case, where wasted time and energy cost the landlord 4000 euros. ‘The mentioned number is the lost rental income, since the landlord wasted five months to find a tenant for the unfairly priced apartment. This situation illustrates how sometimes it would be very, very useful to listen to external feedback and experts’ recommendations to adjust the initial rental price. It is not in anyone else’s interest but the landlord’s own,’ says Aun.

The company’s CEO adds that even if the landlord finds someone willing to pay a way-too-hefty price, it almost always ends up in financial loss.

The apartment is vacant

Every moment the rental space is empty means less income for the landlord. Therefore, the landlord’s priority should always be acting fast. There are, of course, exceptional situations, such as the repair works period.

Vacant property may also become a problem if something happens, even domestic problems such as broken pipes, leaks, or the like. Not knowing what happened at the right time can lead to even more damage.

Your rental is empty? Find a tenant with Rendin Digibroker.

Creativity in the rental agreement’s clauses

Aun points out that landlords are often tempted to include their own special clauses and requirements in the rental agreement. Generally, this is not done out of malice, but it is believed to somehow provide better protection against potential problems.

‘In reality, if these clauses are not in accordance with the Law of Obligations Act, which regulates tenancy relations, then they are void in the eyes of the law. Therefore, in case of problems with the tenant, they are of no use at all,’ explains Rendin’s CEO.

For example, it is common practice to include a clause in the agreement that the landlord may unilaterally terminate it with a one-month notice period. This is one of the biggest myths plaguing the Estonian rental market, which is actually invalid in the eyes of the law.

Ignoring tenant payment problems

Landlords are digging themselves a hole if they find out through a background check that the candidate has debts to other companies and turn a blind eye to this. ‘In this case, the agreement may be drawn up in another person’s name, who then becomes responsible for the rental apartment. Another solution is to ask for a larger deposit, which can legally be up to three times the rent,’ comments Alain Aun and adds that Rendin does not tolerate such practices, and people with payment problems are told ‘no’ for a reason.

A background check is the best first method to filter out potential tenants with a history of delinquent payments. In this way, it is possible to reduce the probability that the owner will come across a problem tenant.

‘In reality, the risks related to tenants are much more complex and there are more circumstances than just public payment problems. This is confirmed by our data models and experience – we perform over 3,000 background checks for tenants seeking a home,’ reveals the company’s CEO. ‘Therefore, if the landlord ignores the first warning, there is a very high probability that the rental relationship will end up in financial loss for them.’

The landlord does not voice their expectations

‘A certain part of the problems of tenancy relations is made up by the lack of communication between parties. Before signing any agreement, all kinds of expectations ought to be clearly discussed and, if necessary, agreed upon in the contract. Otherwise, it is – in light of later conflicts – unseemly behaviour and concealment of information,’ says Aun.

To illustrate his point, he describes a certain situation. An apartment is rented out and has been professionally cleaned before the handover. If the landlord expects to receive the rental home back in the same condition, then the tenant must be informed of such an expectation. Ideally, an invoice for the cleaning service should be added to the handover-acceptance deed and it should be agreed that at the end of the rental agreement, the tenant will order equivalent cleaning from the same company or compensate the landlord for the corresponding amount.

One’s property is neglected

The rental space remains the landlord’s property, and they themselves are responsible for its general operation, including maintenance of technical systems and maintenance resulting from the natural wear and tear of equipment.  

The landlord must take into account that objects inevitably depreciate, for example, interior decoration, appliances, and furniture. After a certain number of years, an update repair must be carried out, and some technical device or piece of furniture must be replaced.

It is not fair on the part of the landlord to ignore the needs of the rental property and instead require the tenant to repair or replace the washing machine when it has simply reached the end of its life. However, it is completely fair if the tenant independently changes lightbulbs or replaces an accidentally broken wall mirror.