Category Archives: Ready to Rent: Tips & Tricks

Laws Every Landlord Should Know

Understanding both your rights as landlord and your tenants’ rights as paying occupants of your rental property is key to your success as a property manager. Before signing a lease and filling your property with tenants, you should make sure you understand the particulars of the following:

Federal Laws
The major federal laws affecting landlords are the Fair Housing Act and the Fair Credit Reporting Act.

The Fair Housing Act prohibits discrimination on the basis of race, color, national origin, religion, sex, familial status or handicap. Discrimination includes everything from denying a lease to setting higher rents for certain tenants, requiring additional deposits, providing different services, or falsely indicating that housing is unavailable. The Fair Housing Act also extends to advertising, prohibiting landlords from marketing their properties as exclusively available to a select group of people.

The Fair Credit Reporting Act governs the use of consumer credit information. Under this act, you must get a potential tenant’s permission to run a credit report, provide information on the credit agency you use, and inform him or her if information in the credit report causes you to deny tenancy.

State Laws
At the state level, laws typically govern practical matters, such as what rights and responsibilities tenants and landlords have, what terms and conditions can be set as part of a lease, how a lease may be terminated, and how evictions must be conducted.

In some states, there may be legal requirements that limit the size of the security deposit, or mandate that it be held by a neutral third party until the lease term ends. The conditions under which the landlord can use the security deposit are typically specified. In Michigan, for example, the owner must return the deposit at the end of the lease term unless the tenant left the property damaged beyond reasonable wear and tear or owes rent or utility payments.

Liability for Repairs
Tenants in almost every state have the right to a “fit and habitable” dwelling, which generally means the landlord must maintain the structure of the building and its electrical, heating and plumbing systems. Any major repairs tend to be the landlord’s responsibility, and failure to support appropriate living conditions may leave the owner or manager vulnerable or liable. States may include other specific factors as well, such as air conditioning repairs being mandatory for owners of units in Arizona.

The exception occurs when the tenants are responsible for damaging the building or system in question. If renters are irresponsible or actively destructive, then the landlord does not generally have to pay for repairs. At times, it can be difficult to determine exactly why something is breaking down, which is why it is so important to ensure that the status of vital systems is clear when tenants move in.

Beyond these core concerns, state and local building codes vary. As a general rule, anything that threatens safety may be the landlord’s obligation, but cosmetic repairs are not required.

Privacy and Access Rights
Typically, owners and managers can only enter the rental property in an emergency, to show it to prospective tenants, or to make needed repairs, unless invited. In some states, the rule concerning repairs also allows them to enter when assessing whether repairs are necessary.

Access is allowed in some states when the renter is absent for an extended period, generally at least a week. Except for emergencies, landlords typically cannot enter without tenants’ permission unless they give advance notice, generally at least 24 hours beforehand.

Terminating rental agreements and evictions
Landlords typically must begin terminating a lease by providing written notice, and can generally do so only if the renter has violated the law or the lease agreement. As long as the agreement itself is legal, violations such as failure to pay the rent or keeping a pet despite a no-pets clause are generally grounds for termination. Depending on the circumstances and the state’s laws, a notice of termination may simply inform the tenant they have a limited time to move out or present them a deadline to remedy lease violations, such as paying owed rent. Some states give landlords a choice whether or not to give tenants a second chance, while others may require it.

If tenants, once notified, fail to fix the problem or depart as directed, then an eviction can begin. Evictions cannot be performed in retaliation for an action of the tenant’s, generally, and failure to follow proper notification procedures or otherwise comply with the law could result in an eviction attempt failing. Landlords are not permitted to change locks or deactivate utilities in order to force tenants out.

If the property’s lease is monthly, then some states allow the landlord to terminate the agreement without a particular cause, typically requiring 30 or 60 days advance notice. Otherwise, it is generally only allowed if the terms and conditions have been violated.

| May 18, 2012 More

What are the risks of renting my house out?

Risks of renting your houseRenting your house out can be a fun and profitable venture. But just like any business endeavor, becoming a landlord carries some risks. You’re entrusting a major asset—your home—to people who you likely don’t know well, and who are not nearly as invested in its maintenance as you are. This is one major reason many new landlords, or real estate investors who are not planning to make a career out of managing their own rental properties, choose to hire professional property managers.

Here are some of the risks that a professional management company can help you mitigate:

Disruptive tenants
Aside from damaging the property, tenants can cause difficulties by paying late, refusing to pay, or violating the terms of their lease agreement. As with damage, this may be caused by an accident or one-time oversight, or be part of a pattern of behavior in which people attempt to avoid paying what they owe.

They could bring in a pet after agreeing not to, fail to mow the lawn and perform similar maintenance tasks, run up the water or electricity bills by leaving lights or faucets on or even just annoy the neighbors with loud music. How much of a problem a disruptive tenant is can vary widely. Tenant default may be the most serious risk, since it means a drain on the owner’s financial resources to pay the mortgage, property taxes and other expenses.

When trying to rent any property, there is a risk that it will be vacant for a prolonged period. Each day it sits empty is a day that a home is not bringing any revenue to the owner, and the cost of upkeep may actually be higher than while it is occupied by a good tenant. The owner or rental manager will have to personally see to it the home remains clean and looks appealing or else the odds of attracting a resident will go down over time. These tasks include caring for grass and clearing walkways, along with all duties that residents would generally be expected to perform.

If a vacancy lasts a bit long, it may not be a problem. If this occurs repeatedly or tenants are extremely hard to find, however, the expense and time maintaining a property may become problematic the longer it lasts.

There are serious liability risks associated with renting a property. Any risks to tenants or employees that occur on the property due to inadequate maintenance or dangerous property conditions leave the owner vulnerable to legal action. There is also the risk of fraud by tenants or prospective tenants, and of allegations against the landlord. Owners may also be accused of discrimination against employees or current or prospective tenants, which makes it important to have consistent, preferably written policies that demonstrate fairness.

One potential benefit is that insurance providers may consider the risk of theft and vandalism lower in an occupied rental than a vacant home, so coverage for some risks may be cheaper.

Rental profitability
The rental prices tenants are willing to pay will depend on market conditions and the state of the home, and they will fluctuate. If the area becomes more desirable, housing grows scarce or the property is particularly well-kept and appealing, then rents may be go up. Market changes can be unpredictable, however, and there is always a risk that rents will drop, making the home less profitable. Setting rents too high can drive away tenants, while setting them too low cuts profits, making it a difficult task.

| April 6, 2012 More

7 Things to Do Before Renting Your House

While renting your house out may seem as easy as posting an ad on Craigslist, we recommend that you set aside some time to prepare for you new business venture before you leap into the world of finding and managing tenants. Here are seven essential steps that every new landlord should take:

1. Get an Insurance Policy

Purchasing landlord insurance (also known as rental property insurance) is one of the most important steps to take before renting your home. In addition to the things covered in a typical homeowner’s policy, landlord insurance will protect you from major damage done by tenants, as well as from legal actions they may take against you. Be aware, though, that rental property insurance will not cover your tenant’s personal property—they’ll need to purchase rental insurance to cover their belongings.

2. Enlist an Accountant

Assuming you’re not an accountant or deeply familiar with rental tax laws, it would be wise to enlist an accountant to help you sort through the tax implications of renting your house. An accountant will help you  figure out what records you’ll need to keep in order to navigate Schedule E come tax time. He or she can also help you figure out how to minimize your tax bill by helping you choose the right depreciation strategy.

3. Have a Lawyer Review your Lease Agreement

A real estate lawyer can help ensure that your lease agreement does not contain any illegal provisions, while also protecting you from the financial harm that could result from tenants exploiting loopholes in your agreement. A good lease agreement will specify the ways tenants can and cannot use the property, how many people can occupy the rental, what insurance is required, who is responsible for paying utilities, and what will happen if the tenant doesn’t uphold his or her obligations.

4. Establish Criteria for a Tenant

Working with in Fair Housing Act guidelines, outline a set of criteria your rental applicants will need to meet, and put these down on paper to hand out to potential tenants when you show them the property. These criteria should include acceptable monthly income levels and credit scores and the number of tenants who may occupy the house. You should also lay out your smoking and pet policies.

5. Get Your Paperwork Ready

Beyond the lease agreement, there are a number of forms you’ll need to have on hand before renting your house out. These include rental applications, credit check authorization forms, any disclosures your state requires, move in checklists, move out forms, and various notices to tenants.

6. Get a Home Inspection

Having your home inspected by a professional will help you fix any critical maintenance issues before your tenants move in. This will help protect you from potential legal issues, while also saving you from having to answer multiple maintenance phone calls within the first few weeks of renting your property.  Having home inspections both before a tenant moves in and after he or she moves out will also provide third-party documentation of any damage caused by the tenant.

7. Clean, Paint, and Landscape

There’s no substitute for a through deep cleaning and a fresh coat of paint when it comes to brightening the interior of your rental home. While trendy upgrades may be optional, if you want to attract the most qualified tenants, this basic rental hygiene is required. Likewise, it’s important to make sure that the lawn and garden surrounding your rental house is neat and tidy before you post the “For Rent” sign.

| March 22, 2012 More