The value of an idea lies in the using of it, so give us a call! (919)306-5665
The value of an idea lies in the using of it, so give us a call! (919)306-5665
People enter the landlord business for many different reasons. Maybe you’re an “accidental landlord” who decided to rent out your former residence, or you gained a property through an inheritance. Or, maybe you diligently researched properties for sale and chose to purchase one (or more) as an extra source of income. Regardless of how or why you entered the business, being a landlord can be a profitable endeavor — or a costly one if you stumble into some common pitfalls.
Here are 10 of the most common mistakes landlords make and how to avoid them.
The three most important words in real estate investing continue to be location, location, location. This is two-fold: First, it means making sure your rental is in a desirable area so you can attract more potential tenants. Just because the price is right doesn’t mean that the location is. Get to know the neighborhood, including access to transportation, grocery stores, area features and businesses. Second, understanding your location means learning about the dynamics of the local market, researching area taxes and determining what you can charge for rent — all of which are key to estimating the return on investment for your property.
Before you start looking for tenants, you need to understand fair housing and discrimination laws; otherwise, you risk getting into legal trouble. Fair housing laws are federal statutes that ensure equal access to housing for everyone. It is illegal to discriminate against anyone on the basis of race, color, religion, national origin, sex, familial status or disability. Many local and state governments have additional protections that you’ll want to become familiar with. A general rule of thumb is to focus on the property and amenities in your advertising and conversations — not on a group of people, who you think the ideal renter would be or features geared toward a specific group. The bottom line is to treat and communicate with every applicant and renter in the same way.
While advertising a rental property may not be as sexy as advertising a hot new car, there are many similarities. Just like the best product ads, you’ll want to feature high-quality photos of your rental — and the more, the better. It’s worth the expense to have professional photos taken during the spring and summer months so your property looks its best. You’ll also want a clearly written, accurate and error-free description of the property and amenities. Consider posting your property for free on Zillow Rental Manager to reach as wide of an audience as possible.
While speed is important in filling your vacancy, you still want to choose a highly qualified renter. Create a documented process and criteria for finding, screening and securing a tenant. Make each potential renter fill out an application and verify everything from employment to past addresses (and get landlord references while you’re at it). You’ll want to perform a tenant background check and run a tenant credit report. Confirm that renters have paid the rent on time and have not caused problems for their previous landlords or employers.
A lease serves as a binding, legal agreement between you and the tenant. As such, you’ll want to make sure it thoroughly addresses the rules, policies, and conflict resolution procedures for living on your property, and clearly defines tenant and landlord responsibilities. Remember to put everything down in writing: A handshake or verbal agreement won’t hold up in court. You can find many generic leases online, but you’ll want to review the lease requirements specific to your state or municipality and incorporate them into your rental agreement. Have it examined by a legal professional to ensure that the terms protect your interests and comply with local and state regulations.
Securing a tenant for your property is a huge milestone. But, your work is not done. As a landlord, it’s your job to meet your terms of the lease agreement: Check in with your tenants, keep tabs on the condition of the property, complete regular preventative maintenance and seasonal maintenance, and respond quickly to requests. Make sure your property is a healthy and safe place to live, and that you keep up on your taxes and financial reporting. Neglecting your residents and your property can result in higher turnover, more vacancies, lower cash flow or even lawsuits.
Be prepared for the possibility that your property won’t always be occupied. If you aren’t able to fill a vacancy right away, do you have enough cash set aside to pay for the mortgage, utilities and other maintenance costs? Maintaining a rental property comes with unforeseen expenses, such as damages and unexpected repairs, and the bills still need to be paid. Complete a cash flow analysis and establish a budget so you’ll be able to cover these potential costs, then track your expenses to ensure you’re staying in the black.
If you live in the area, are handy around the house and have the time to quickly respond to requests, you can keep up with some of the general maintenance and management of your property. However, if you have several properties or are juggling an investment on top of a full-time job, you may be better off enlisting the services of a professional property manager. Also, depending on your experience and the condition of the rental after a tenant leaves, you might want to hire a contractor to make significant improvements or repairs.
For many landlords, managing even one investment property can be a full-time job. Between securing a tenant and keeping up the books, you should understand that any investment property is a big time commitment. No matter how much you love what you do, make sure to take time for yourself and create a list of people you can rely on for backup. Having a network of people who can help in a pinch is important for the maintenance and safety of your property.
However you got into landlording, your rental property is a business — and you need to treat it that way. Consider setting up a Limited Liability Company (LLC) for ownership. This can help protect you personally from legal actions or claims. In addition, consider using accounting software or a spreadsheet to keep close track of your income, expenses and ultimately your return on investment. Document all of your procedures and communications with applicants and tenants, and make sure to stick to your procedures. When you’re renting a property, you will hear a lot of different stories, and some of them may be sad. There are many opportunities to help your community, but you want to make sure any action you take makes good business sense.
Successful landlords leverage skills from many different areas: customer service, marketing, accounting and home repair, among others. Reduce the risks that come with being a landlord by educating yourself and networking with other experienced landlords and related professionals. Join local or national landlord associations to keep up with changing rules and regulations, and share your experiences, so you can avoid the most common landlord mistakes.
The lack of affordable housing across the country has gained increasing attention in recent months. A report released earlier this year by the personal finance website SmartAsset found that in 12 of the top 15 US cities, rents had increased from 2015 to 2016. In some places, rent prices skyrocketed; San Francisco, Seattle and Miami all had increases of over 7 percent. In Los Angeles, average rental rates went up 17 percent.
Activists and renters nationwide are agitating around these issues on Thursday, September 22, to draw attention to what they are calling a “National Renter State of Emergency.” Over 50 protests, marches and other activities are occurring in more than 45 cities for the “Renters Day of Action,” with tenants coming together to put forward a list of national and local demands.
Organized by the housing coalition Homes for All, the national campaign is seeking a broad list of changes, including a national rent freeze, a freeze on all unjust evictions, and community control over land and housing. The campaign’s demands also include the right of tenants to organize and bargain collectively without fear of discrimination, retaliation or eviction.
For some local actions, evictions are the main focus. Antonio Gutierrez, an organizer with the Chicago’s Autonomous Tenants Union, said his group planned their protest at Daley Plaza, where all the city’s eviction cases are heard. In 2012, Chicago had more than 32,000 evictions in the city. (This statistic is from four years ago becauseit can be hard to track eviction numbers; the federal government has not recorded these numbers in past years and court records are incomplete and hard to navigate). “The process itself is very rapid and it’s always siding with the landlord or the landlady,” Gutierrez said. Tenants have very little opportunity to advocate for themselves. Housing advocates have also noted that cases in eviction court are not being properly recorded, making it nearly impossible to make an appeal.
Who Faces Eviction?
In Chicago, as with other cities, Gutierrez finds that women and their children are disproportionately affected by rising eviction rates. “We definitely see a pattern of single mothers and women with their kids being the target of these evictions,” he said. “We see a lot of kind of discriminatory policies that are happening, in terms of new companies coming into neighborhoods that are populated mostly by people of color, evicting them, and then getting new tenants that are of a different class, and sometimes racial background.”
Matthew Desmond, a sociologist whose recent book, Evicted: Poverty and Profit in the American City, helped bring national attention to the housing crisis, had similar findings. In a 2015 report, Desmond notes that low-income women, in particular Black women, are at high risk of eviction. In Milwaukee, one in five Black women reported being evicted at some point, compared to one in 15 white women, or one in 12 Latina women, according to Desmond’s research.
Eviction doesn’t just impact one’s housing, it destabilizes communities and families, often forcing kids to leave their schools. Desmond found that “workers who involuntarily lost their housing were roughly 20 percent more likely to subsequently lose their jobs.” The study also ties eviction to mental health problems and future difficulty with finding alternate housing and/or employment, as being evicted through the court system leaves a tenant with that judgment on their record.
Knowing Your Rights
Felicia Alston-Singleton, a tenant advocate in Newark, New Jersey, got involved with her work as an organizer after successfully fighting her own eviction with the city’s housing authority. Several years ago, she said the housing authority fixed a problem with backed-up sewage in her unit.
“They fixed it but then my walls started turning green,” she said. “So I stopped paying rent.” She went to court every month for seven months until finally a decision was made in her favor. They dismissed her case and gave her back her rent money.
Alston-Singleton educated herself along the way, oftentimes Googling information she didn’t know. “It was very inspiring… to know that I did have rights,” she said. “So I said, ‘If I can do this for myself, let’s do it for my complex’ … And then other people started calling me.”
For the “Renters Day of Action,” Alston-Singleton is taking part in Newark’s 36-hour demonstration outside of City Hall. She plans to be at City Hall for the duration of the event. Activists and renters are calling on city officials to pass a rent control ordinance and to implement existing protections, like maintaining the city’s affordable housing. Alston-Singleton said the city has been tearing down subsidized housing and replacing it with luxury units. “They are making it unaffordable,” she said.
Indeed, last week the developer Dranoff Properties closed on $116 million in financing to build a high-rise luxury apartment building in downtown Newark.According to The Wall Street Journal, apartments in the building “are expected to rent at $2,000 a month for a one-bedroom and $4,500 a month for a three-bedroom.”
Anthony Romano, a national organizing director with Homes for All’s Right to the City Alliance, noted that one of the campaign’s goals for the September 22 action is getting people familiarized with their rights as tenants. “We needed to unite and have a day where we can really lift up our collective voice,” Romano said, “and to lift up our solutions.”
Gentrification Threatens Tenants
In some cities, gentrification is the most pressing issue tenants are facing. Tenant organizers in Minneapolis are leading people on a tour of the city’s light rail today, pointing out recent areas of gentrification. These activists are part of Defend Glendale, a group working to defend Glendale Townhomes Public Housing, which is under threat of demolition. Ladan Yusuf, who lives in Glendale, said the housing units are in the middle of an affluent neighborhood and property value has gone up since the light rail went in nearby. “We found out through the grapevine,” she said, that the city wanted to demolish Glendale. “We’re fighting to keep our homes.”
She is one of 30 tenant leaders from the housing complex, where she says most residents are people of color and about 60 percent are immigrants. “We are seeing huge amounts of displacement right now,” Yusuf said. A lot of families are finding it hard to find affordable housing in the city.
“Gentrification is really happening here and Betsy Hodges isn’t doing anything about it,” Yusuf said of Minneapolis’ mayor. “A lot of working-class families feel that she is not on our side.”
Growing Population of Renters
Romano pointed out that the number of people affected by rent increases is growing as fewer people are owning homes. “It’s an economic reality,” Romano said. “People just don’t have the money to buy homes.” He believes landlords and the real estate lobby are taking advantage of the increased number of renters by jacking up the cost of rent.
“We don’t lightly use the term ‘state of emergency’,” Romano said. “‘State of emergency’ is used because of the sheer quantity of people suffering and the severity of that suffering.” A 2016 Harvard study found that the number of renters who are “cost burdened” rose by 3.6 million from 2008 to 2014, to a total of 21.3 million households. The Department of Housing and Urban Development considers a family to be cost burdened if they pay more than 30 percent of their income for housing. To put this in perspective, the number of people who rent has increased by 9 million between 2005 and 2015, an earlier Harvard study noted, making it “the largest 10-year gain on record.” In the same period, renters who are severely rent burdened, meaning they pay more than 50 percent of their income for housing, went from 2.1 million to a record 11.4 million.
The organizers of the September 22 actions know that spreading the word about these issues and about tenants’ rights is an important first step and the Renters Day of Action is intended to broaden awareness while bringing impacted people together. “When you are going through something and you meet someone else going through it, you don’t feel so alone,” Alston-Singleton said. “Then you’re ready to fight.”
In April, the U.S. Department of Housing and Urban Development (HUD) made the job of a property manager a little bit harder. In past blogs, I’ve talked about the possibility of conducting criminal background checks on potential applicants. It turns out that it’s not quite as simple as that.
HUD recently released new guidelines for the use of criminal background checks for property managers, with HUD attorneys presenting the following conclusion: “Selective use of criminal history as a pretext for unequal treatment of individuals based on race, national origin, or other protected characteristics violates the (Fair Housing) Act).”
So what does this mean for the property manager? Many properties have adopted a zero tolerance policy for criminals, refusing to rent to anyone with a felony conviction. But according to HUD, that policy can result in a possible fair housing violation, as it likely will impact protected groups, resulting in a charge of discrimination. The guide is based on disparate impact, a legal doctrine adopted by HUD which states that a policy may be deemed discriminatory if it has a disproportionate adverse impact against any protected group currently protected under fair housing laws. In other words, even if you apply a set policy across the board to all tenants, that policy could still be considered discriminatory.
Instead, HUD is recommending something that it has cautioned against in the past; analyzing a complete application, taking into consideration the nature and severity of the crime, and the amount of time that has passed since the criminal conviction. The only exception to guidance that property managers can make is for felons who have been convicted of manufacturing or distributing a controlled substance.
Like any Fair Housing law, property managers cannot choose what applicants receive a criminal background check, so any policy would have to be implemented across the board, with a criminal background check given to all potential renters, which can be fairly costly, yet even then, the burden will fall on the property manager to prove that their rejection of the applicant is not discriminatory.
This interpretation makes it particularly difficult for property managers trying to turn properties with high crime rates around. And property managers, aware of their responsibility to provide a safe environment for their tenants, are caught in the middle.
Still in its infancy, it’s unclear what the impact of this guidance will have on property managers nationwide. The wording in the guide in somewhat ambiguous, and it’s likely that the industry won’t know the direct implications until a lawsuit is filed.
Source: Criminal Background Checks
General rules to follow for an efficient and fire hazard free dryer:
1. Clean the lint trap screen after each dryer cycle.
2. Wash the lint trap screen after 20-30 loads. Let it air dry before replacing.
3. Use a vacuum hose to suck out any remaining lint inside the dryer where the lint trap is stored.
Although few outside the profession may understand what we do and how we do it, the basic facts remain unchanged: Property Managers play a critical role in a landlord’s success. As the rental market grows increasingly tumultuous, property managers toil quietly and efficiently behind the scenes to come up with solutions to problems that the average landlord doesn’t understand or even know he has.