To begin with, most renters in Katy — which is now one of the hottest suburbs in the larger Houston region — do so by circumstance. An employee gets transferred for work, a homeowner dies and leaves a home to someone else (and that person chooses to rent it instead of selling), etc. In short, it’s not uncommon for people to become landlords by default.
It’s a natural impulse to keep a former home rented — after all, Katy has some excellent schools, a solid population growth trend and a location that puts you within commuting distance to several of the largest employers in the country. However, just because you’re buying a rental property in an attractive neighborhood does not guarantee that the investment will be profitable. Success is largely dependent upon how well the property is managed.
In general, there are five mistakes made by new Katy landlords. Here are those mistakes along with the key elements that separate a rental property from being a successful money-generating source versus a financial drain:
1. Priced Incorrectly Since Day One
Most new landlords incorrectly price their rentals based on what they believe they are worth and not based on comparable properties currently available for rent. If your property is priced $100–$150 per month too high, you may experience weeks longer than necessary without tenants. As stated earlier, the loss of revenue due to unoccupied space can exceed the additional monthly income generated through increased rents. With respect to pricing accuracy, Katy’s rental market responds rapidly once a property is priced correctly — therefore, pricing accuracy represents one of the most valuable decisions a landlord makes prior to posting a property for rent.
Zillow provides information about changing rental prices in various Texas suburban markets with increasing inventory levels and consumer interest; however, this demonstrates why landlords should rely solely on recent comp listings, rather than past listings or their neighbors’ rental rates that are two or three years older.
2. Screen All Applicants Equally
Many new landlords conduct extensive screenings for their first applicants and subsequently relax the level of scrutiny they apply to future applicants, particularly when they feel pressure to rent a property quickly to mitigate lost revenue during extended vacancies. Inconsistency creates problems. Regardless of whether you plan to use the services of a professional property management company or choose to manage your rental properties yourself, a consistent application review process that includes evaluating each applicant’s credit score, income, previous rental history and criminal record must occur. The consistency is important in preventing poor tenant selection and ensuring compliance with fair-housing laws.
3. Understanding Your True Costs of Self-Management
Managing a rental property located in close proximity to your own residence is feasible and time-consuming. Managing a rental property remotely or juggling your full-time job while actively managing your rental properties is far more challenging. Tenant issues cannot be delayed until it’s convenient for you. Leases need to be negotiated proactively in order to prevent unexpected vacancy.
Landlords commonly underestimate the urgency associated with performing routine tasks related to maintaining and servicing rental properties.
At this point, many owners seek help from professional property managers, not because they aren’t capable of performing the work themselves in theory — but primarily because the value associated with their personal time outweighs the benefit of hiring someone to do the work for them. A professional property management company specializing in Katy will bring to bear many resources an individual owner cannot easily replicate including: established relationships with vendors in the area; familiarity with local rent comparisons; systems that focus on reducing days of vacancy; etc. One example of this type of firm operating in Katy is Denova Living, which offers a unique model of management focused on delivering high-quality service at lower volumes than other companies.
4. Maintenance: Reactive vs. Proactive
While there is a clear distinction between an owner waiting for an item to fail and one that performs regular inspections to find and correct minor issues before they escalate into large repair bills. For instance, a slow drip from an under-sink pipe could potentially be repaired for less than $200 if discovered early; but it would cost significantly more ($4,000) if allowed to remain unrepaired for six months. Routine inspections are part of virtually every proactive maintenance program developed by professional management firms. These inspections are nearly impossible to maintain consistently by owners who manage their own rentals unless they reside near the property.
5. Create a Good Lease
Using a generic lease template downloaded from the Internet is probably one of the most common errors made by new landlords. Rental laws and regulations vary state-by-state, and Texas-specific landlord-tenant laws have specific rules regarding security deposit refunds, notice requirements for termination of tenancy, and minimum habitable conditions required to be met by residential dwellings. Using a generic lease template could result in significant exposure to potential litigation for owners who violate these laws. A proper lease template should provide clarity with respect to responsibility for repairs/maintenance — as confusion regarding this issue is perhaps one of the most common causes of conflicts between landlords/owners and tenants.
6. Know When to Ask for Help
Not every owner of rental properties needs professional management — particularly if they are only responsible for a single property adjacent to their primary residence, and they have sufficient time and inclination to manage it. However, as soon as you add another property either across town or across state lines, or you simply have no free time left in your schedule to address 9 PM maintenance calls — the comparison begins to tip away from using your own time effectively and toward hiring professionals to assist you.
Ultimately, the question each owner needs to consider isn’t “am I able technically” but “wouldn’t I save time (or money) by using a professional management company?” For many owners in Katy’s competitive marketplace — the answer is yes.
Wrapping Up
If you want to succeed as a rental property owner in Katy’s hot rental market — you’ll need to treat your rental property like a business. That means creating accurate pricing estimates, screening applicants fairly consistently and providing proactive maintenance support as needed. Owners that struggle are typically not those that do not have quality properties — they are simply those that grossly underestimate how much discipline it requires to successfully manage their rental properties themselves. No matter whether it’s done through a third party or yourself — the standard remains the same: rental properties are only as effective as their management allows them to be.
