Posted by Teresa on March 1, 2013 under Landlord Tips, Legal | 
First of all, let it be known that we do tenant screening—not tax returns. Therefore, please do not construe this post as tax advice. Get that from a professional. The following is general information that landlords might find useful.
The housing bubble turned lots of homeowners into landlords, when they couldn’t sell their properties and instead had to rent them out to tenants. These new landlords may not realize what veteran rental property owners know: that one of the advantages of being in the business is the opportunity to offset income by deducting certain expenses from their tax returns.
When you own rental property, you can generally deduct the following:
- Mortgage interest
- Depreciation
- Taxes
- Insurance
- Maintenance and upkeep
- Utilities paid by you
- Upgrades to rental units
- Advertising expenses
- Professional fees (tax advisor, lawyer, bookkeeper)
- Website expenses
- Local travel (including meeting with tenants, checking on units, traveling to hardware stores for parts, etc.)
- Long distance travel related to rental properties
- Cleaning expenses
- Painting, carpet replacement and other repairs done between tenants
- Home office expenses
Rental property offers other benefits, as well. Remember, one day the mortgage will be paid off and the income can help with your retirement, too!
Find a good tax advisor and make sure you get all the deductions you’re entitled to. Make your rental property work hard for you, and don’t pay more in taxes than is required.
Posted by Teresa on February 27, 2013 under Housing Trends, Landlord Tips |
College expenses are climbing higher and higher. Not only are tuition and fees going up, but so are room and board. Parents and independent college students are looking for cheaper alternatives to campus housing.
And more investors are looking into this market, because college student housing can be a lucrative investment. When housing is hard to come by, vacancy is not usually a problem. Nor is getting market rents or above.
While renting to students has its downsides, the parents are often footing the bill, so the rent checks come in regularly from mom and dad. After all, they don’t want their kids coming home, so they’d better pay the rent, right?
Here are some tips for renting to students:
- Make sure you have an solid lease. Include details about noise restrictions, unauthorized roommates, damages and any other expectations you have for your tenants.
- Have each student who will be living in your rental property apply separately, put each on the lease and have their parents or guardians co-sign the lease.
- Screen each potential tenant. Tenant screening for younger college students might seem unnecessary, but most students have a credit history—and many have criminal histories. You nee to know who you are renting to.
- Let each tenant know that they are jointly and individually responsible for the entire rent payment. If one roommate can’t pay his or her share, it is up to the rest to cover it. Make it clear that you won’t accept partial rent payments.
- Enforce your rules whenever there is an incident. Young people often push limits to see how far they can go. When they see you mean business, they will—hopefully—act accordingly.
- Make sure your insurance policy covers renting to students. Many companies are starting to restrict coverage in certain towns.
Countless landlords successfully lease their properties to college students. And many of them actually enjoy it! Just keep an eye on your property and the lines of communication open.
Start your tenant relationship off right by knowing who you’re leasing to. Protect your rental property and assets with tenant background checks. Proper tenant screening will ensure you are leasing to the best possible tenants.
Posted by Teresa on February 22, 2013 under Landlord Tips, Lease and Rental Agreements |
Experienced landlords know: anything can happen in the rental business. Natural disasters strike, vandals damage property, fires break out and thieves are everywhere.
Of course, rental property owners carry insurance protection on their properties to protect themselves from liability and loss. Most policies cover damages and accidents that occur on the property, but not the tenants’ possessions.
Tenant’s insurance, or renter’s insurance, covers personal property in a rental home or apartment against fire, theft, water damage (but not flooding) and vandalism. It also protects tenants in the event that someone is injured in their unit.
It’s a good idea for tenants to buy an insurance policy, but can landlords require it? Absolutely! In fact, many do and for good reasons:
- Tenants with renter’s insurance will be less likely to try to sue the landlord in the event of a loss or injury, since they have their own coverage.
- Renter’s insurance can protect rental property from tenants’ misuse or negligence. For example, if a tenant floods the unit, his or her insurance will pay for the cleanup. Those without renter’s insurance could just move out and leave the mess for the landlord to deal with.
- Having tenants with their own insurance can help landlords avoid claims on their own policies.
- Renter’s insurance can protect tenants and landlords against claims in case of dog bites from tenants’ pets. The renter’s policy can cover the claim, so the injured party is less likely to sue the landlord.
- The peace of mind in knowing your tenants are covered in case of a fire or other disaster can be worth its weight in gold. Insurance proceeds can replace clothing, furniture and other necessities, as well as pay for living expenses in case tenants have to temporarily relocate.
If you do require renter’s insurance, make sure it is clearly explained in the lease agreement. It’s also a good idea to be named as a secondary insured, so you can be notified of lapses in coverage.
The cost of renter’s insurance is often less than $20 per month. If you have prospective tenants who balk at the insurance requirement, perhaps they are not qualified to live in your properties!
Posted by Teresa on February 19, 2013 under Landlord Paperwork and Forms, Landlord Tips |
Not raising the rent: most landlords raise the rent at regular intervals, to cover increases in maintenance costs and property taxes. Some do it annually, or whenever the lease is up for renewal. Others hesitate to raise the rent on good tenants who pay on time, for fear they will move out. But if your costs are increasing, you can’t keep rents steady—even for the best tenants. Besides, if new tenants move in and find out you’re charging them more than an existing tenant (and they will find out), they won’t be happy.
Treating tenants differently: To continue, it’s all about treating tenants equally. If Unit A pays $600 per month, so should Unit B. If there is a no smoking rule, it must be enforced with all tenants. Don’t respond quickly when “nice” tenants have a leaking faucet, but make “problem” tenants wait. Failure to be fair and equitable to all tenants could leave you vulnerable to a fair housing complaint. It’s also a lot easier to explain to tenants asking for exceptions that you have to apply the rules equally to everyone.
Failure to conduct tenant screening: Time and again, landlords go on their “gut feeling” about tenants. That’s a mistake in two ways: 1) Making decisions based on appearance, the type of car a tenant drives or other arbitrary qualifications sets you up for discrimination claims. 2) No matter how long you’ve trusted your gut feelings about prospective tenants, you could be dead wrong. Check employment, previous landlords, conduct tenant background screening, and run a credit check on every applicant.
Asking the wrong questions: Here’s another potentially harmful situation that’s easy for landlords to get into. If you ask a prospective tenant if they plan on having children, or a female tenant if she’s married, you could be breaking the law. Keep things strictly business and avoid asking tenants personal questions.
Being unclear on policies and expectations: Clarify each policy, including rent payments, security deposits, parking, pets, smoking, maintenance schedules, excessive noise, garbage pickup, common areas, etc. Explain how security deposits work, and let tenants know up front how you handle deductions when they move out.
Letting tenants pay rent late: For some reason, many landlords and tenants play a little game every month where the rent is due on the first, but there’s a grace period of a few days, so the tenant doesn’t pay until the grace period is over, but then when they miss that deadline, the landlord gives them a few more days… and so on and so on, every month. Don’t be that landlord. If rent is due on the first, make sure your tenants know it. Don’t allow partial rent payments, either. And when they’re late, follow through with whatever consequences are laid out in your lease. Make it easier for everyone by allowing online rent payment or automatic payments from the tenant’s checking account to yours.
Posted by Teresa on February 13, 2013 under Landlord Paperwork and Forms, Landlord Tips |
As the economic recovery slogs on, tenants continue to double- or triple-up in rental units. In many cases, landlords are not aware of roommate situations; in others, property managers approve one roommate, only to find out he moved out months ago and has been replaced by two others.
Tenants often think that once they sign a lease, they can have anyone they want move in to help pay the rent. For many reasons, this is a bad idea. First, landlords alone get to decide who lives in their properties. Second, tenants don’t always make the best choices in roommates. Third, it’s potentially dangerous to have unknown people living in your apartment building or single family rental house.
That’s why most landlords insist that everyone living in a unit must apply and be on the lease. The property owner may then conduct thorough tenant screening, check credit reports and verify employment and income.
Tenants may think it’s easier to just have a friend move in and hope the landlord doesn’t notice. But it’s actually better for tenants if the new roommate is vetted and approved. Who wants to find out a month or two into the new living arrangement that their roomie is actually unemployed, has poor credit or has a felony record?
Smart landlords will stipulate in the lease that no roommates are allowed without the permission of the owner, and that all residents of a unit must be on the lease. To facilitate good roommate relationships and establish legal responsibilities, you might want to provide tenants with a Roommate Agreement for all to sign and keep with the lease.
Roommate Agreements
- Include language that each tenant/roommate is liable for all terms of the lease or rental agreement. Have your attorney review it before providing to your tenants.
- Include things like the lease term, start date and lease renewal procedures.
- Have a place for each roommate’s name, Social Security Number, and emergency contact.
- List some roommate rules, stating which share of the rent and security deposit each is liable for, which rooms are designated shared and private, and how damages will be handled.
- State the procedure for paying utilities: who gathers the funds and pays the bills, when the bills are due and consequences for late payments.
- Cover parking, garbage and recycling, and other details.
- Determine how guests will be handled, where they may stay and for how long.
- Include guidelines for quiet hours, pets, cleaning, food and other details.
Putting agreements in black and white can go a long way to reducing tension and improving relationships between roommates. And helping your tenants have better roommate relationships can only be a good thing for you as a landlord or property manager.
Posted by Teresa on February 5, 2013 under Landlord Tips, Marketing for Landlords |
Have you changed the way you advertise your rentals? Or, are you still sticking to the simple, short description? Whether you advertise in print, on the bulletin board at the local Laundromat or online, you may be missing something: photos.
Your prospective tenants are a cross-section of the population at large, and as such, you can count on one thing—they’re visually focused. Think about it: everyone is filming everything they do, eat, drink, see, wear and buy. Photos of great-looking plates of food appear on Twitter and Facebook as soon as the server sets them on the table. Kids are taking pictures with mom’s and dad’s phones when they can barely speak. And every vocal or musical performance seems to be seen through the lens of a phone video camera than through the eyes of the beholders.
People like pictures. So, along with the basics: number of bedrooms and bathrooms, location, contact information and rent, you should definitely include as many photos as possible in your rental advertising.
Here are a few tips for taking photos of your rental property:
- Include outside shots: This will help prospective tenants find the property.
- Think about making rooms and closets look spacious. Stay in the corner and shoot from above.
- Keep the camera level by propping it on a box or counter whenever possible.
- Of course, the unit must be immaculate. Wait until the cleaners, painters and repair people have finished their work. You want it to look ready to move into.
- Pay attention to the light. Avoid taking photos during the brightest part of the day. Late afternoon or evening light is good.
- Be sure to take photos of any amenities, such as storage areas, swimming pools, laundry rooms or workout facilities.
- Place a large potted plant in the shot to add some interest. Make sure it’s healthy.
- If you have lovely grounds, nice landscaping, trees and flowers, be sure to include them in your photos.
- Don’t take photos of residents—especially children. You could be violating their privacy.
- Remember to avoid things that could be considered discriminatory. Don’t take photos of the nearby church or school, or you could be implying that you prefer churchgoers or families with children. However, it is perfectly okay to include a shot of the cozy coffeehouse down the street.
Even in a strong rental market, you need to be competitive in order to attract the best possible tenants. Write a strong ad and include photos, which is easy to do when you advertise online. And if you don’t know how to upload photos to a website, ask any young person in your family or neighborhood for help. Or, hire someone to handle it all for you.
Posted by Teresa on January 30, 2013 under Landlord Tips, Legal |
If you’re guessing that New York City or Los Angeles is the bedbug capital of America, guess again: it’s Chicago. And in response to this “honor,” the city’s aldermen are introducing legislation to address the problem of increasing infestations of bedbugs in city residences.
Unfortunately, the proposed law is targeted at landlords, and calls for fines of up to $1,000 a day if they don’t deal with bedbug infestations. As one property manager said, this type of one-sided legislation simply “opens the doors for tenant rights lawyers to take advantage—and only they win.”
Landlords with experience know that bedbugs are a shared responsibility. The pests can certainly cause tenants many sleepless nights and the misery of painful bites. And most landlords are willing to take the necessary and costly steps to get rid of bedbugs.
However, when tenants fail to do their part to fight bedbugs, it becomes an unfair burden to any landlord. Two ways tenants can help are inspecting their units frequently and being more vigilant against bringing bedbugs home after traveling.
According to the proposed ordinance, landlords would be required to hire pest management professionals “as many times as necessary to eliminate the bugs.” They would also be required to maintain records of their efforts. Current Chicago law requires landlords to treat bedbug infestations only when two or more units are affected, and doesn’t require any record keeping.
Landlords say that education and vigilance are much more effective against bedbugs than legislation.
Start your tenant relationship off right by knowing who you’re leasing to. Protect your rental property and assets with tenant background checks. Proper tenant screening will ensure you are leasing to the best possible tenants.
Posted by Teresa on January 3, 2013 under Landlord Tips |
If you’re a landlord, you know there are some drawbacks to the business, like tenants who don’t pay rent on time, problems with noise and tenants who don’t take proper care of your property. It’s true that at times, your phone rings late at night with tenants’ plumbing and heating emergencies. And it’s true that some tenants must be evicted, which can cost you a bundle of time and money.
All of these problems will probably occur to most landlords at some point. But what could make each of these tenant problems worse? If they were happening in the same building in which you live! Messy, noisy tenants are one thing, but when they live next door, it’s a bigger nightmare. Tenants who constantly pay rent late are even harder to be nice to when they live downstairs from you.
Having tenants for neighbors can be unpleasant, but for many landlords, it’s a way of life. When you own a multi-unit building and have to live somewhere, why not live in your own property?
Here are some pros and cons of being a live-in landlord:
Pros
- You can keep an eye on tenant behavior, and put a stop to things like criminal activity, a business running out of the unit, or actions that are in violation of the lease.
- If the property needs any exterior repairs, you’ll know immediately.
- Undesirable tenants may keep looking when they hear you live in the building.
- You’ll care more about the property and take better care of it.
- Your tenants are not far away when it’s time to collect rent—and they can’t hide from you.
- Communication might be easier when you see your tenants on a regular basis.
- You can take advantage of owner-occupied mortgages, insurance policies, etc.
- You can subsidize your own housing costs.
Cons
- Tenants might knock on your door at all hours to complain or report a problem.
- Noisy tenants will affect your peace and quiet.
- It’s harder to live next to a tenant with whom you have issues.
- If a tenant locks him or herself out, they’ll be knocking on your door.
- Shared areas might not be maintained to your liking.
- Not all expenses are tax deductible.*
Live-in landlord situations can be successful, if both parties work toward it. Be sure to keep the communication flowing, respect your tenants’ privacy and address little issues before they become big problems.
*Disclaimer:
The contents of this article are intended for general information purposes only, and should not be relied upon as a substitute for obtaining legal, investment or tax advice applicable to your situation.
Posted by Teresa on December 21, 2012 under Landlord Tips, Lease and Rental Agreements |
Our last post was about whether or not allowing tenants to do their own repairs is a good idea (we say, “not”). We’ve also heard about landlords who won’t allow tenants to perform their own repairs, but require them to be present while the repairs are being done.
Of course, a tenant with a leaking dishwasher would need to be notified of the day and time the plumber is coming by. But it’s not the tenant’s responsibility to stick around to let the plumber in and to lock up when he or she leaves.
That’s the landlord or property manager’s job. It’s generally understood that the landlord, building superintendent or property manager is the go-to person when maintenance and repair people need to work on rental units. Sure, it’s convenient if the tenant is at home and can be stick around while the repairs are being done. But think about the liability issues at stake here. Having strangers entering your rental units could potentially put your tenants and their families at risk of harm. You may have no reason to mistrust your contractors, but anything can happen.
Even if your plumber or electrician is the most upstanding person in the community, some people just want to make trouble. It’s possible that a disgruntled tenant could “invent” an issue – and you could have a lawsuit on your hands. Without a witness, it becomes a case of the tenant’s word against the contractor’s word.
It might be convenient to require a tenant to be at home when repairs are being made, but it could also lead to more trouble than you bargained for. It’s better to keep things professional, and handle contractor visits yourself or with the help of your property manager.
Posted by Teresa on December 19, 2012 under Landlord and Tenant FAQs, Landlord Tips |
In most states, it is the landlord’s responsibility to see that repairs are made within a reasonable time. But have you had tenants offer to make their own repairs? At first, it might seem like a reasonable idea. Your handy tenant offers to paint, repair the dishwasher or replace broken glass in your rental unit. In exchange, you offer a rent reduction. You experience fewer repair hassles and out-of-pocket expenses, and he or she saves some money. Everyone’s happy and nothing could go wrong, right?
As with most all-or-nothing statements, this one is definitely wrong. There are so many possible problems posed by allowing well-meaning tenants to perform repairs.
First of all, unless they do it for a living, even the handiest people don’t come close to the quality offered by a professional. And in many cases, they can cause more damage than they fix. One landlord reported that a simple dishwasher repair was performed incorrectly, resulting in a leak that went undetected for weeks, causing extensive damage to beams and subflooring.
Then, there is the issue of who pays for what. Does the tenant cover parts and labor, or will the landlord be expected to pick up the supplies and parts? If the tenant buys the paintbrushes, and gets a rent reduction, does the landlord then own the paintbrushes? Getting everything in writing might seem like a hassle for such a small job, but you can probably imagine how not doing so could make it much messier.
Finally, landlords must consider the potential for tenant injuries. Few tenants are licensed and insured on their own, so who is responsible for any injuries that occur? One landlord we know faced the potential for thousands of dollars in damages when her tenant replaced broken glass and was seriously injured in the process. The landlord’s liability policy did not cover the losses, since the tenant was not an employee. Eventually, the case was settled, but not without a great deal of time, worry and expense on the landlord’s part.
When you’re running a business, allowing non-professionals to perform work on your building is not the best approach. The potential for problems exists throughout the process, and the end result is rarely what you expected. The same applies to the business of landlording. Think twice before you allow a tenant to make repairs!
