First-Time Landlords: The 7 Mistakes That Can Cost You Thousands

Updated: Aug 27

Did you know nearly 50% of first-time landlords lose money in their first year because of avoidable mistakes?

What looks like a promising way to build wealth often turns into a financial headache when new landlords rush in without a clear plan. Between legal risks, tenant issues, and hidden costs, your rental property can quickly drain your bank account instead of padding it.

That’s why this article breaks down the seven most common mistakes first-time landlords make—and how to avoid them. Whether you’re renting out your old home or stepping into real estate investing for the first time, these insights will save you thousands and help you run your rental like a business.

Mistake #1: Skipping Proper Tenant Screening

Why It Costs You Thousands: A bad tenant can mean unpaid rent, property damage, or costly evictions. Rushing to fill a vacancy often backfires. How to Avoid It: Always run credit, background, and rental history checks. Require proof of income (3x rent is a common standard). A vacant property for one month is cheaper than an eviction.

Mistake #2: Underestimating Maintenance Costs

Why It Costs You Thousands: New landlords often assume rent is pure profit. Then come the surprise repairs—HVAC failures, plumbing leaks, roof fixes. How to Avoid It: Budget at least 1% of the property’s value per year for repairs and maintenance. Set aside a reserve fund so unexpected costs don’t derail your cash flow.

Mistake #3: Ignoring Local Landlord Laws

Why It Costs You Thousands: Renting without understanding tenant rights, fair housing rules, or eviction laws can lead to lawsuits, fines, or court losses. How to Avoid It: Research state and city landlord-tenant laws before signing a lease. Join local landlord associations or hire a property manager to stay compliant.

Mistake #4: Setting Rent Without Market Research

Why It Costs You Thousands: Overpricing leads to long vacancies; underpricing leaves money on the table every month. How to Avoid It: Study local rental comps on Zillow, Apartments.com, and MLS listings. Check both active and rented units to find the true market rate.

Mistake #5: Using Weak or Generic Lease Agreements

Why It Costs You Thousands: A handshake deal or generic lease leaves loopholes for disputes—late rent, unclear rules, or property damage. How to Avoid It: Use state-specific lease templates reviewed by an attorney. Include clauses for late fees, repairs, maintenance, and renewal terms. The lease is your shield.

Mistake #6: Neglecting Insurance and Liability Protection

Why It Costs You Thousands: Regular homeowner’s insurance doesn’t cover rental situations. A single accident or lawsuit can wipe out your profits. How to Avoid It: Get landlord insurance (covers loss of rent, liability, and property damage) and consider an umbrella policy for added protection.

Mistake #7: Treating the Property Like a Hobby, Not a Business

Why It Costs You Thousands: No bookkeeping, mixing personal and rental finances, and emotional decision-making all eat away at returns. How to Avoid It: Separate rental income and expenses with a dedicated bank account. Use property management software or spreadsheets. Treat your rental like the long-term business it is.

Final Thoughts: Protect Your Profits From Day One

Being a landlord can absolutely build wealth—but only if you avoid the rookie mistakes that sink so many first-timers.

Here’s a quick recap of the 7 pitfalls to avoid:

Skipping tenant screening
Underestimating maintenance costs
Ignoring landlord laws
Setting rent without research
Weak lease agreements
Skipping proper insurance
Treating it like a hobby, not a business

Your Challenge: Pick one of these strategies and apply it to your rental property this week. Maybe it’s reviewing your lease, checking your insurance coverage, or running comps on your rent. One small step can save you thousands.

Share in the comments which strategy you’ll put into action—or which mistake you’ve already learned the hard way. Your story might save another first-time landlord from making the same costly error.