Saturday's show was the third in a three part series on Rental property and we were talking about Useful information for Landlords.
With so many foreclosures and short sales, many have found themselves in a good position to enter into the Income Producing Property Business of owning and managing rental property. The trouble is that this can be a money-losing instead of money making situation if not managed correctly and that is why we were addressing that subject.
With so many homes on the market not selling and changes due to the economy, many people have become landlords as a last resort when they aren't able to sell their homes and need to relocate or scale down as part of their adjustment to this new situation.
If you are managing your own property and choosing your tenants, it is very important to know what your rules are before you begin.
Before beginning with the tips, I invited listeners to join me and other industry professionals in the Open House with Dena live chat room on facebook. For more information on loggin on to the chat room, go to www.openhousewithdena.com
Tips for Landlords
The following are some of the things that I feel are most important for people who are really new at being landlords, and I have included Simple suggestions to help the management of your property run smoothly.
First and Foremost, It is essential to have a plan for screening tennants. How you do this is important but equally important is knowing how you will do it before you start.
Don't rent to anyone before following through on your screening plan. Haphazard screening and tenant selection too often results in problems -- a tenant who pays the rent late or not at all, trashes your place, or lets undesirable friends move in.
What's the best way for landlords to screen tenants? Use a written rental application to properly screen your tenants. Have an application and Screening Process that you always use, and follow your own rules.
Landlords should ask all prospective tenants to fill out a written rental application that includes employment, income, and credit history, Social Security and driver's license numbers, past evictions or bankruptcies, and references. Check credit, income, and references. Today you can easily run a credit check for a minimal fee. .........call the tenant's references, especially former landlords. You should also verify an applicant's employment, income, and bank account information. Be consistent in your screening.
Join a GROUP: Join a Group like The Lakeway Area Landlords Association. for more information about this local organization, go to www.openhousewithdena.com.
There are laws, FAIR HOUSING: To avoid trouble with fair housing laws, be sure to be consistent and fair in your screening. For instance, make it your policy to require credit reports from all applicants. If you are going to check credit reports, you will need to be prepared to do this for everyone in order to be fair and compliant with the law. Federal and state antidiscrimination laws limit what you can say and do in the tenant selection process. When choosing tenants, keep in mind the following best practices.
Make decisions based on business reasons alone. You are legally free to choose among prospective tenants as long as your decisions are based on legitimate business criteria. Don't make choices based on personal reasons. You are entitled to reject applicants with bad credit histories, income that you reasonably regard as insufficient to pay the rent, or past behavior -- such as property damage or consistent late rent payments -- that makes someone a bad risk. It goes without saying that you may legally refuse to rent to someone who can't come up with the security deposit or meet some other condition of the tenancy.
Understand fair housing rules. Fair housing laws specify clearly illegal reasons to refuse to rent to a tenant. The Federal Fair Housing Acts (42 U.S. Code §§3601-3619, 3631) prohibit discrimination on the basis of race, religion, national origin, gender, age, familial status, physical or mental disability (including recovering alcoholics and people with a past drug addiction). Many states and cities also prohibit discrimination based on marital status or sexual orientation.
BE CONSISTENT and LAWFUL, AND YOU WILL BE COMPLIANT
GET IT IN WRITING
Use a Lease or Rental Agreement. There are reasons why a handshake shouldn't seal the deal between landlords and tenants. Renting your property without a clear rental agreement or lease is an invitation for trouble.
Some landlords don't use written agreements -- they just have a conversation with the tenant, taken the tenant's check, and let the tenant move in. While oral promises can be legally binding, it can be difficult if not impossible to prove them to a judge. Don't take a chance -- use a legal, complete rental agreement or lease. Here are some other important reasons to use a written agreement.
A landlord who provides no written lease often finds that the result is confusion. With no clear agreement written down, every small disagreement -- whether it's over repairs, the fee for a late rent check, or deductions made from a departing tenant's security deposit -- has the potential to escalate into a nasty legal battle, or at least an irritation.
A rental agreement establishes a tenancy for a short period of time, usually one month. A month-to-month rental agreement is automatically renewed each month unless you or your tenant gives the other the proper amount of notice (typically 30 days) and terminates the agreement. You may increase the rent, change other terms of the tenancy, or terminate the lease on relatively short notice (usually 30 days) -- unless local rent control ordinances specify otherwise.
A lease agreement obligates both the owner and the tenant for a designated period of time, often a year. Thhe rent is set, and you can't change other terms until the lease runs out. At the end of the lease term, you can either decline to renew it or negotiate to sign a new lease or rental agreement.
Many landlords prefer month-to-month agreements, particularly in tight rental markets where new tenants can be easily found and rents are trending upwards. The flip side is that month-to-month tenancies result in higher tenant turnover, and more effort to keep rental properties full.
Either way, include the following in your agreement:
Names of all tenants, Limits on occupancy. How many people are allowed to occupy in the property, The Term of the lease,The monthly Rental amount including acceptable payment methods (such as personal check only), whether late fees will be due if rent is not paid on time, the amount of the fee, and whether there's any grace period, and any charges if a rent check bounces, Information about Deposits and fees: Where deposits will be held, and any fees to be charged, Repairs and maintenance. Who is responsible for what, Clear Rules about Owner/ Manager Entry to rental property. How will owner access property if necessary and how much notice can be expected, Restrictions on tenant illegal activity. Reasons owner may ask tennat to leave before end of term, Pets. Yes or no and what are the specifics.
Make timely repairs.
Stay on top of maintenance and repair needs and make repairs when requested. If the property is not kept in good repair, you'll alienate good tenants, and tenants may gain the right to withhold rent, repair the problem and deduct the cost from the rent, sue for injuries caused by defective conditions, and/or move out without needing to give notice.
Disclose environmental hazards.
If there's a hazard such as lead or mold on the property, tell your tenants. Landlords are increasingly being held liable for tenant health problems resulting from exposure to environmental toxins in the rental premises. LEAD BASED PAINT BEFORE 1979
HIRE HELP
If you can't or don't want to handle this, hire a manager.
MAINTAIN INSURANCE Purchase enough liability and other property insurance. A well designed insurance program can protect you from lawsuits by tenants for injuries or discrimination and from losses to your rental property caused by everything from fire and storms to burglary and vandalism.
RESOLVE DISPUTES
Try to resolve disputes with your tenants without lawyers and lawsuits. If you have a conflict with a tenant over rent, repairs, your access to the rental unit, noise, or some other issue that doesn't immediately warrant an eviction, meet with the tenant to see if the problem can be resolved informally. If that doesn't work, consider mediation by a neutral third party, often available at little or no cost from a publicly funded program.
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