If you’re thinking about investing in rental property, particularly as demand for rentals is increasing and housing prices are at the low point in many markets, there is a lot you’ll need to learn. Some aspects of landlording can only be learned through experience, but others are important to understand from the very beginning, to ensure you’re in compliance with property and tenant regulations.
Even if you’ve been a landlord in the past, you’ll need to brush up on new laws. For example, in many states, certain disclosures are required to protect tenant health. You may be required to reveal exposure to floods, mold or radon. Some states require indoor air tests or other environmental testing. Federal laws require landlords to disclose lead-based paint hazards in buildings built prior to 1978. You may be required to provide smoke detectors, carbon monoxide detectors, or both.
The federal Fair Housing Act prohibits discrimination in renting property based on a person’s race, color, religion, national origin, gender, marital status or disability. Landlords may not prohibit children in rental property, unless it is a senior-only community.
Landlords are required to provide safe and habitable units for tenants, according to local and state housing and health codes. All utilities must be operational. Necessary repairs must be made promptly. Lighting, locks and grounds should be maintained to prevent crime and injuries. Landlords cannot force tenants to move by turning off heat, lights, or water, by changing locks or removing the tenant’s property. Check local statutes for the guidelines and proper process for evicting tenants.
In many states, security deposits are strictly regulated, including the amount that may be charged, where the funds are kept (such as in a separate bank account from rents or in an interest-earning account) and how they are disbursed to former tenants. You may also be limited as to what the security deposit can cover. Some states allow deposits to cover unpaid rent, while others limit their use to just damages. Landlords may be required to refund a security deposit in a certain number of days.
The proper handling of a tenant’s property is another potentially sticky area. When a tenant leaves property behind, you may be required to prepare an inventory and have a law enforcement officer sign off on it. Depending on where you live, a landlord may be prohibited from moving a tenant’s property off the premises; or they may be allowed to dispose of it after a set period of time. Check your local laws to ensure compliance.
Becoming a landlord can be a profitable venture. Just be sure you’re in compliance with local, state and federal laws, or you may have legal fees that can wipe out your potential gain.