Not every landlord or property management company requires tenants to hold renter’s insurance policies.  And according to some reports, the majority of tenants do not have renter’s insurance. What are the advantages to requiring tenant insurance? Are there any disadvantages?

First, the cost for renter’s policies is solely borne by the tenant, and is only $15-$20 per month, on average. So, while there are those tenants who cannot afford it, are they the best fit for your rental properties? An insurance requirement automatically screens out the potential tenants who have financial difficulties.

What’s in it for the tenant? Just as homeowners who have property insurance to protect against loss due to fire, injury or natural disaster, tenants with insurance enjoy a level of protection and peace of mind that is well worth the investment. In the event of a fire, for example, replacement property can easily be obtained, helping the tenant begin again with necessities like furniture and clothing. Some policies offer temporary housing coverage, so the tenant can stay in a hotel worry-free.

Now, let’s imagine that the fire in this example was caused by the tenant’s negligence. Without insurance, the tenant would be responsible for reimbursing the landlord’s insurance company for any damages caused by the fire—which could be tens of thousands of dollars. With renter’s insurance, the tenant and landlord are both covered.

What’s in it for the landlord? Certainly, landlords who require tenants to carry insurance will have fewer hassles in the event of a disaster. Tenant insurance also adds a layer of protection when a visitor is injured in a tenant’s unit, for example. That visitor will likely seek damages from the tenant’s policy, rather than the landlord’s. If an uninsured tenant’s negligence results in major damage (like a flood or fire) to a multi-unit building, the landlord would be liable for all damages to the structure as well as other tenant’s injuries or losses.

Rental property owners—there are many advantages of requiring tenants to hold renter’s insurance—with more than just minimum coverage. Think about the potential for large losses due to the tenant’s negligence, and have your insurance agent advise on the minimum. Just make sure to require the same for all tenants. Together, the owner’s and tenant’s policies offer both parties a broader range of protection.

More than 300,000 homes have received foreclosure notices in each of the last several months in the U.S., including plenty of rental properties whose owners cannot meet their loan obligations.

What happens to tenants when the home they are renting is foreclosed upon?

According to the Protecting Tenants at Foreclosure Act, whoever takes title to a property under foreclosure must protect the rights of tenants.  Tenants with a lease are allowed to stay to the end of the lease term, unless the property is sold to a buyer who intends to make the home a primary residence. In that case, the tenants must receive a 90-day termination notice. The same 90-day termination notice is required if there is no lease in place.

And how do you satisfy a tenant who demands proof that your property is safe from foreclosure?

Tenants who bring up foreclosure concerns may have been affected in the past, are worried about losing their security deposit, or have heard about rental properties being foreclosed upon. Landlords can reassure tenants that their property is safe from foreclosure, and inform them of their rights. Reassure tenants that their security deposit is safe, and let them know if it is held in a separate account, as is the law in many states.

However, your responsibility as a rental property owner most likely ends there, with no obligation to prove to your tenants that you pay your mortgage on time. Your financial records can remain private, no matter what a tenant may demand. To make tenants feel more comfortable, consider including language from the Protecting Tenants at Foreclosure Act in your lease.

Verifying a tenant’s employment history and income is a vital step to approving his or her application. The unfortunate economic situation makes it even more important; while many good people have lost their jobs through no fault of their own, your tenants still need to pass your litmus tests, including meeting minimum income requirements.

Here are five reasons to verify employment and income on potential tenants:

1. Because landlords and property managers must know that each tenant who signs a lease agreement can live up to its terms—including paying the security deposit and upfront fees, plus the rent in full each month. Whether the tenant will pay on time each month is certainly not guaranteed—but you need to know whether they even have the capability before you sign a lease.

2. Because even if the tenant has the upfront fees ready to hand over, you’ll want to know if their employment history is solid. Holding a job is no guarantee that a tenant will pay rent on time, but it helps!

3. Because verifying the source of a tenant’s income is a great way to prevent those engaging in illegal activities from becoming your problem. In other words, if a tenant has plenty of cash but no job, be suspicious. Same for obvious high spending with a low income. It is not discriminatory to ask a tenant to prove how much money they make. Remember: pay stubs are your friends.

4. Because tenants sometimes go to great lengths to pull a fast one on a landlord. Just because they say they’re working for Jones Construction Company doesn’t mean they do. Ask for proof. Call the supervisor—and make sure that when you do, you’re actually speaking to the supervisor, not a friend pretending to be one.

5. Because knowing that your new tenant is stable and can afford the rent is one less worry for you. And landlords and property managers need to reduce worries as much as possible!

While some landlords avoid bounced checks by requiring cash or money orders from tenants, most still accept checks—and the risk that goes with that. Studies show that while the number of online payment options grows, the number of checks being written is declining. Still, plenty of folks pay their bills—including rent—with checks.

What are your options when a tenant’s check is returned by your bank?

Depending on the state in which you do business, writing a bad check can range from a misdemeanor to a felony. And, bad checks can be treated by law enforcement as a serious matter—or as a nuisance. Follow these steps to avoid the need to involve your local police or sheriff’s department.

• The first thing most landlords do is to demand full payment from the tenant, including the amount of the check, plus a handling fee. Make sure this fee covers any bank charges for returned checks and your bookkeeping time.
• Check your state and local laws to determine if there is a limit to the amount you can collect as a returned check fee. Some states allow for penalties and interest; others limit landlords to a flat fee.
• Give your tenant a time limit to pay in full. Many landlords and property managers begin eviction proceedings if they have not collected the full amount due by the end of the time limit.
• It is perfectly reasonable to require payment in the form of a money order or certified check—and to require subsequent rent be paid in the same way.
• If you charge a late fee for late rent, remember your tenant will be responsible for that if they pay in full after the agreed-upon date. So add it to the total tab.
• When drawing up lease and rental agreements, be sure to include a provision that covers your policy on returned checks. Include the compensation language, time limits, and late fees, and your requirements for money orders and/or certified checks.

Their reasons for hiring a property management company are different for each property owner. In general, a property management company’s job is to keep your rental business trouble-free. That means they need to be knowledgeable about federal, state and local housing laws, how to best collect your rents, maintain your properties in proper working order, and ensure your tenants are keeping their end of the lease agreement.

Property management companies will also work to fill your vacancies, advertising the rental unit, interviewing and screening prospective tenants, and keeping up with all of the new tenant paperwork.

Property management companies are not free. And their fees and services can vary widely. Many landlords we know interview several companies to determine which is the best fit for their needs.

Here are some questions you might ask when interviewing property management firms:

• What does your standard service agreement include?
• What are your costs?
• How do you conduct repairs and maintenance? If the company has their own maintenance and landscaping staff, you can check out their quality before you sign anything. If they hire outsiders, inconsistencies could occur.
• What reporting can I expect? At minimum, a monthly report should be included. Some PM companies have online accounting systems that you can log into on your own to see what’s going on—just like online banking.
• What is your fee for filling a vacant unit? It’s usually either a flat fee or a percentage of the rent.
• How do you collect rent? You might prefer a company that does everything through electronic funds transfer—or you might need a service that can handle cash, money orders, or checks.
• When will I receive my money? Most PM companies will have your check or a direct deposit to you by the 10th of the month.
• Do you mark up subcontractors, materials, and supplies? You don’t want to be surprised by a bill that includes a $6.00 roll of paper towels—after you’ve already signed the contract.
• How do you handle emergencies? You might want an agreement that allows your PM company to spend up to $500 without needing your approval.
• How often will I hear from you? If you’re the type of landlord who only wants to hear from the property manager if the building is on fire, then you won’t want one who calls three times a week with questions and problems.
• What about evictions? Find out ahead of time if they offer eviction services and how much they charge.

Get a client list and call for references. Ask other landlords about unexpected expenses, unnecessary or unauthorized repair work performed, and mark ups on maintenance parts and services.

Meet the staff you’ll be dealing with to get a feel for communication styles and professional behavior.

Finally, check out the company’s insurance coverage and bonding status.

If you do hire a property management company, be absolutely sure before you sign any agreements--because you will probably be required to pay a few months of fees if you decide to cancel!

Mark O. is a landlord who just purchased a single family rental house on foreclosure. The neighbors have informed Mark that although the home has only 3 bedrooms and 1 bathroom, there are several cars parked at the house all the time, and seemingly a dozen adults living there.

Mark is concerned about the wear and tear on his property, with good reason. Here’s how he plans to handle this situation:

First, Mark is going to require a new lease agreement for the property. The lease will contain a clause about the number of people allowed to reside in the rental unit. His limit will be two adults per bedroom, or six adults total.

Next, Mark plans to require that each adult over the age of 18 who is living in the house complete his tenant application. Mark’s standard practice is to conduct background screening and credit checks on each potential tenant. Any potential tenant who does not meet Mark’s minimum requirements for income and credit worthiness will not be allowed to sign the lease—and will have to move out.

Mark knows that the Fair Housing Act prohibits discrimination against tenants based on family status (married, unmarried) or number of children. Therefore, he has no intention of not renting his new rental property to any adults with children who pass his application process. Mark is also familiar with his local zoning law on rental units, which says that no more than three unrelated persons may share a single dwelling unit.

Limiting your rental properties to properly screened tenants who have passed your application process is the best way to protect your investment and your liability. If non-tenant adults have moved in with your tenants, you are under no obligation to allow them to stay.

Depending on the state in which your property sits, you can probably collect back rent and damages from former tenants through wage garnishment.

Garnishment of wages is done through the courts, after a judgment is made against the debtor. The debtor’s employer is ordered to withhold a portion of his or her wages, and turn them over to the court, to be disbursed to the creditor.

The question most landlords ask is if the amount of money in question is worth the time, trouble and expense of the court proceedings required. The best way to determine this is to obtain an accounting of the fees involved: usually there are court costs, process server fees, filing fees, and attorney’s fees—unless no attorney is involved.

As with eviction proceedings, many landlords hire a landlord/tenant law specialist to file garnishment papers the first time, and then decide whether or not they can handle the process themselves. And that’s a personal decision, just like deciding what dollar amount makes the court action “worth it.” Every landlord is different in this respect. Once you determine the out-of-pocket costs, you can then make your decision.

Obtaining a judgment is one thing, but if the tenant has no means to pay it, you may never see the funds owed to you—and working hard to collect them could be a huge waste of your time. And it should go without saying that your former tenant needs to be employed in order for his or her wages to be garnished.

There are other factors to consider in making a decision to garnish a tenant’s wages:

• Do you have the tenant’s new address? If not, filing will be very difficult.
• Have they moved out of state? Again, filing becomes more complicated.
• Do they have other garnishments, such as for child support payments? Other garnishments must be satisfied first.
• Is the tenant’s income below the poverty line? If so, they are exempt.

If you decide to file for a Writ of Garnishment, you’ll need to gather all the tenant paperwork, including the lease application, the lease or rental agreement, proof of rent payment, proof of any notices to Pay or Quit, eviction papers, and notes from conversations and electronic communications.

The contents of this article are intended for general information purposes only, and should not be relied upon as a substitute for obtaining legal advice applicable to your situation.

Christopher is no newbie landlord. He has purchased and rehabbed several properties in his city, and is running his investment property business full time. His tenants are a mix of couples, families, and singles from every income tier and diverse backgrounds. He’s had his share of problem tenants, but the only real problems he’s had to face are late rent payments.

Until a few months ago. Christopher surprised a tenant—although completely unintentionally—and discovered signs of drug use in his property. Here’s what happened: while doing some routine maintenance at Apartment #1 of a duplex, he realized he needed to shut off the water main. Unfortunately, the main fed both living units. So Christopher knocked on the door of Apartment #2 to see if anyone was home, and to let them know the water would be off for a few minutes.

When his tenant opened the door, she appeared surprised at seeing Christopher; she quickly stepped out and closed the door behind her. While Christopher maintained his tenant’s privacy by not looking into the apartment, he couldn’t help but notice the odor wafting out the door and into his nostrils! It was definitely marijuana.

Christopher informed the tenant of the impending water shut off and left, feeling conflicted about how to handle the situation. But he soon made a decision.

If you were the landlord what would you do?

A. Nothing. Marijuana should be legal.
B. Nothing. If the tenant is not hurting anyone, it’s none of my business.
C. Have a talk with the tenant. Let her know that illegal drugs are not tolerated on my property and give her written warning that the next time it happens, I will start eviction proceedings.
D. Start eviction proceedings immediately. Illegal drug use harms all my tenants and the community and could make me liable for any related property damage or personal injury.

Christopher chose door D. Backed by a solid rental agreement that clearly states illegal drugs are not allowed on his property, Christopher did what he always did when it came to handling tenant issues: he enforced the terms of the lease, as agreed to by the tenant.

Christopher did not want to evict this tenant. He had no prior issues with her, and she paid her rent on time. But he strongly believes in treating all tenants equally and enforcing his lease and tenant rules fairly. He felt he had no choice other than to evict this lease-breaking tenant.

The outcome of this story? While evicting tenantsis never pleasant, Christopher discovered he did it just in time to prevent the occupants of Apartment #1 from moving away. Turns out they had noticed marijuana odors from the apartment next door for months and no longer wanted their kids subjected to it. When they discovered their neighbor had been evicted, they thanked Christopher for keeping of the duplex drug-free and enforcing the lease.

If you’re a seasoned landlord, you probably have done each of these no-nos at least once in your career. If you’re a newbie, consider yourself warned: these five errors are easy to make, and can cost you plenty.

1. Making decisions with your heart instead of your head. Yes, owning rental property is a people business—and when people are involved, some concern for their welfare is normal. Treating your tenants with respect is necessary—but allowing emotions to cloud good decisions is a mistake. Example: Christine’s new tenant had $1200 of the $1400 needed to move into her apartment. She told Christine she would pay her the rest as soon as she moved in, which Christine allowed her to do. Months later, Christine still hasn’t collected that $200, and has had difficulty collecting subsequent rents, too.

2. Allowing desperation, the economy, the rental market, and even the weather prevent you from following your established procedures. There is no doubt that unemployment remains high and most parts of the U.S. are experiencing renters' markets. In certain areas, it’s cold and snowing—and a bad time to be attempting to fill vacancies. Experienced landlords will tell you to stick it out. This business is cyclical, and now is no time to shed proven procedures like screening tenants and calling previous landlords before signing a lease with a new tenant. Desperation is not a position of strength.

3. Confusing appearance with tenant credit worthiness. A nice car, good clothes and expensive-looking jewelry have fooled many landlords into assuming a tenant applicant has solid credit and a great job. Conversely, a carless, sloppy dresser on a bike could be the best tenant you’ve ever had. The old adage applies: Do not judge a book by its cover.

4. Failing to review the lease thoroughly. It may seem like overkill, but taking the time to review every lease with every tenant—line by line—and obtaining initials on each page is just a smart way to do business. Example: Barry hands his lease to his tenants, asks them to review it and bring it back signed and dated. He often finds himself reiterating his rules and expectations over and over, and wonders why his tenants don't get it.

5. Not charging enough rent. There is a fine line between what the market will bear and what you need to bring in to make a profit. Before you purchase rental property is the time to figure out the numbers, taking into consideration the principle, interest, taxes, insurance, and expenses from landscape service to lawyers’ fees you’ll be paying out. What is the range of rent that will support the expenses, P&I and allow for a profit? Is the range within the market rent for the property? If you start low and the rental market falls, you could be in a losing situation. Renting property is a business and no one can go in the hole month after month.