Owning a rental property can be a great way to generate a steady income, build long-term wealth, and achieve financial security. 

Like any business, however, real estate investing presents a particular set of challenges — especially for those who haven’t yet experienced the highs and lows of being a landlord. Finding the right tenants, collecting rent, and maintaining properties isn’t for the faint of heart. It’s one reason why many bring in the hired guns…a property manager.

Unfortunately, many new rental property owners struggle through the early stages. This often has less to do with a lack of potential than with common, yet avoidable, mistakes. Most people new to the rental property ownership ranks simply don’t know what they don’t know. That can lead to some bad situations that cost them money and sleep.

The good news? With proper preparation and smart decision-making, these errors can be prevented. 

Here are four common mistakes first-time rental property owners make — and how to avoid them before they jeopardize your investment.

1. Underestimating Expenses and Overestimating Profit

One of the biggest mistakes new landlords make is thinking that rent minus mortgage payments equals profit. In reality, investment property ownership entails many ongoing expenses: maintenance, insurance, vacancies, property taxes, repairs, and more. 

Failing to budget properly for these items will most certainly lead to financial burdens of the albatross variety. It could turn the dream of owning rental units into a nightmare.

Many novice investors learn soon enough that one major repair can wipe out several months of profit. A furnace breakdown or leaky roof, for instance, can lead to a four- or five-figure repair bill. New landlords should make a budget that covers monthly operating costs, maintenance reserves, and even emergency funds.

A rental property should be an income generator, not a cause of stress. People are stressed out enough as it is. Responsible budgeting will increase the odds of succeeding as an investment property owner.

2. Not Screening Tenants Sufficiently

Another common mistake landlords make is handing the keys to applicants without performing proper due diligence beforehand. First-time landlords often accept the first applicant who has cash in hand, at any cost, to avoid losing a month’s rental income.

But all it’ll take is one unreliable tenant to turn your life upside down — and halt the stream of passive monthly rental income. Late payments, property damage, eviction proceedings, and complaints from neighbors can happen if you have bad tenants.

Hiring a property manager is a wise investment. The right one will properly screen applicants by considering factors like credit scores, employment history, and more. 

It’s always a good idea to hire a company that’s relatively close to your property. Owning a rental property in The Woodlands means you’ll get a higher level of service by hiring a property management firm in The Woodlands, Texas. 

3. Attempting to Do Everything Independently

Trying to go it alone is another mistake many newbies make. Rental property management is time-consuming, particularly if you own multiple investment properties.

You can save yourself a lot of trouble by hiring a property manager to handle tenant relations, maintain the property, and handle other landlord duties you need help with.

You don’t have to do it all. Outsource or hire help, and you’ll have a life and lower your stress.

4. Not Doing Maintenance Until Something Breaks

New landlords often put off maintenance for various reasons. From trying to save money to not believing the matter is serious, many first-time rental property owners drag their feet on maintenance until there’s a serious problem.

A small leak can turn into water damage, a dirty HVAC system can lead to expensive breakdowns, and worn caulking can result in mold or structural damage.

Tenants also take notice when maintenance is neglected — and unhappy tenants seldom renew leases. Turnover is expensive, especially when it becomes frequent.

The solution is to commit to regular maintenance — something that’ll be easier if you enlist the services of a property manager who can do the heavy lifting for you.

Owning a rental property can be exciting. That excitement, however, may be short-lived if you make any of these four mistakes. While you don’t have to hire a property management firm, doing so can help you steer clear of costly missteps.

A rental property isn’t just a purchase — it’s a business. Operate it like one, make smart decisions, and invest in preventing problems before they spiral out of control. You can, with the right mindset and strategy, avoid newbie errors that derail your real estate dreams.