Would You Make These Landlord Mistakes?
|Don't let this be your next tenant!|
"The tenant left us with garbage and tons of clothes throughout the house, holes in the walls, carpets destroyed and a large potbellied pig left in the backyard that was very hungry and chased after me."
No one wants to be the author of a post like that (from this MSN.com article). With that in mind, here's a list of common landlord mistakes to avoid:
1. Going with your "gut."
Many experienced landlords will tell you that regardless of how well you hit it off with a prospective tenant, you should always run not only a credit check but also a full background check on that person.
One landlord talks about nearly renting to two "very polite, nice-looking young men" who she found out through a criminal background check both had a history of domestic violence convictions. You should also verify employment history and previous rental history. People who have a track record of paying bills late are likely to do so again.
2. Not inspecting the property regularly.
Do inspections semi-annually or annually to see if the tenants are damaging the property, intentionally or unintentionally. This allows you to make corrections and keep up with maintenance items such as replacing smoke alarm batteries and checking for plumbing leaks.
3. Unintentionally discriminating.
Many landlords who would never discriminate against anyone on purpose are shocked to find out that they could land themselves in trouble for advertising a property as a "great family home," or "walking distance to St. James Cathedral."
The Fair Housing Act makes it illegal for landlords to discriminate based on race, color, religion, sex, handicap, familial status, or national origin. This means that the words "family home" could be seen as discouraging single tenants from applying, "walking distance" could imply preference towards able-bodied people, and the mention of a religious landmark could appear to discourage prospective tenants of another or no religion.
It's extremely important to familiarize yourself with local laws where your rental property is located, because those sometimes contain additional restrictions. For a list of states and cities that have laws protecting potential tenants from discrimination based on sexual orientation or transgendered status, click here. Try to avoid asking even conversational questions about any protected status so that no one can accuse you later of using that information to turn down a prospective tenant.
4. Letting tenants move in before funds clear.
It's much harder to get rid of tenants after they've moved in, and professional swindlers know this. Be very cautious about prospective renters who are in a big hurry, and never allow tenants to move in before the rent and deposit checks have cleared - regardless of how touching a story they have!
5. Not conducting a pre-move-in inspection.
Always do a pre-move-in inspection so that you can document any damages after the tenant moves out. Put everything in writing using a standardized form such as this inspection checklist by Landlord.com.
6. Letting tenants do their own repairs.
If a tenant is handy with tools, it might be tempting to let that person do repairs in exchange for a break on rent, but clear it with a good attorney first. You run the risk of unintentionally hiring them from a legal standpoint, in which case if they get injured "on the job" they could sue you.
Consider getting a home warranty instead. A warranty covers repairs to major mechanical systems in your home and typically costs around $350 to $400 per year. The perk for landlords is that they receive round-the-clock repair coverage for a set fee that is usually around $50 per visit. (Just be sure to read the fine print closely so that you know exactly what is not covered by the warranty.)
7. Not responding to service requests right away.
This is the number one reason that good tenants move out. They expect to be able to reach you or a property management company by phone, not just email, so if answering calls becomes an issue, consider hiring a call-handling service. Again, this is where a home warranty can take some pressure off of your shoulders.
8. Not requiring renter's insurance.
Stipulate in the lease that tenants must take out renter's insurance to cover their possessions and liability in case of a disaster such as a fire.
9. Not telling your insurance company the home is rented.
You risk losing all or nearly all of your coverage if you don't notify your insurance company that the insured home is being rented. This is the last thing you want to find out after a tenant has damaged your property! Your insurance policy should also protect you against lawsuits brought by tenants.
10. Accepting partial rent payments.
Accepting partial payment for rent is not always a mistake, but check with an attorney first - especially if you have already started eviction proceedings. Laws vary by state, and you could unwittingly set a legal precedent for a lower rent and/or a new lease term.
11. Renting to family and friends.
Cousin Elsie might appear to be the ideal tenant, but always set expectations before you rent to family and friends. Tell them up front that you plan to provide the same professional level of service any other tenant would get, and that they need to treat you the same way they would any other landlord.
Defining your landlord-tenant relationship as a professional one from the start avoids the awkwardness of having to shift from casual to professional if problems arise later on.
|30-year mortgage rates December 2006 to December 2011. (Bankrate.com.)|
The bottom line:
With interest rates at their lowest levels in history and home prices down more than 50 percent in some states, it's an exciting time to be looking at rental property investment. Yes, you'll always be able to find cautionary tales about being a landlord, but using the tips above and relying on expert advice will go a long way towards making your experience one of the success stories.
Do you have questions about investing in rental property, or do you know someone who might? Just call me, or click "Reply" to this email. I'm here to help you and those you know with any real estate need!
(What the lawyers make us say: The information in this newsletter is deemed reliable but not guaranteed. Please always consult a qualified expert before making decisions based on this content. Nothing in this article is meant to be taken as expert legal, financial, or medical advice.)