Rental properties can generate income for their owners, often supplementing a job or contributing to an investment portfolio. With having tenants come expenses, legal obligations and potential barriers to a successful rental venture. These tips for rental property owners offer ways to enhance the flow of rental income and avoid legal and financial traps.
Marketing the Rental
Property managers stay abreast of the area rental market. This involves knowing the amount of rent commanded by comparable properties, the demand for rental housing and the availability of units. For instance, where demand among tenants exceeds the supply of units, the landlord typically can set a higher rate. A higher supply of properties for rent gives the tenant a better chance at a lower rate. Lower inflows of rent can prove problematic for owners saddled with mortgage payments.
Aside from rent, selling points for seekers of tenants include the property location. Parents place importance on the quality of neighborhood or area schools. Tenants in college may ponder convenient access to campus, restaurants, and stores without the need for a car. Accurate photographs of the rental property’s condition and curb appeal can attract prospective tenants.
Background Checks on Potential Renters
For owning rental property to prove worthwhile, tenants must pay consistently on time, keep the property in good condition and refrain from disturbing or nuisance behavior.
These tips for rental property owners can help spot problematic tenants. Background checks include pulling credit reports on applicants, obtaining references from applicants’ prior landlords and checking public records especially on whether the applicant has been previously evicted or sued. From a credit report, the rental property owner can see the applicant’s payment history and level of outstanding debt. A financially-strapped tenant may have difficulty making the rental payment.
Rental applications should inform prospective tenants that a credit report will be obtained and may be considered. The forms also should have spaces for applicants to list prior landlords who can be contacted as references.
Landlords and property managers should take great care in conducting criminal background checks of applicants. Rejection of applicants should not be based solely on arrest records, since the mere fact of an arrest does not prove that the applicant committed a crime or is a threat to the property or fellow residents. Even turning away applicants convicted of crime might raise claims of discrimination. This can be so if using convictions primarily or disproportionately impacts a particular racial or ethnic group, even if the landlord or property manager holds no intent to discriminate.
Use a Written Lease
In most places, an oral lease will suffice. However, putting the parties’ rights and obligations in writing can remove many unnecessary disputes.
The agreement should say when the lease begins and ends, or if the tenant is renting on a month-to-month or other periodic basis. The length of the lease determines when the landlord must give notice of its termination. Other typical subjects include the amount and due date of rent, who is permitted to live in the rental, manner of payment (cash, check or credit/debit card), responsibilities for maintenance, repairs and reporting problems; rules on the conduct of tenants and where to send notices to the landlord or tenant.
Furnishing the Rental
Leaving it to tenants to furnish the rentals with chairs, tables, sofas, beds, and dressers offers more flexibility, especially for tenants, and saves the rental owner maintenance and replacement costs. Landlords as a rule of thumb provide major appliances such as refrigerators and stoves.
Replacement costs also factor into decisions such as whether to use blinds or shades. Depending on the material, especially if vinyl, mini-blinds can be replaced with relatively little expense. Blinds may suffice for college students or young adults or where you frequently get new tenants. Older tenants, those who intend extended stays and professionals might prefer shades or wood or faux-wood blinds. These tips for rental property owners could mean increased eye appeal for tenants without significant spending.
Repairs for Many Reasons
The law requires rental property owners to provide tenants a livable place. Property managers need to respond promptly to tenant reports of plumbing problems, roof leaks, compromised floors and the loss of hot water or heat. For the failure of landlords to provide habitable premises, tenants can obtain court-granted rent abatement or refunds.
Cleaning carpets, floors and other areas of the rental and manicuring the lawn when tenants change to afford a good impression for new tenants.
Following these tips for rental property owners in maintaining a good condition also yields tax advantages. Tax deductions are available for expenses to conduct repairs, which tax law defines to include fixing the plumbing, gutters and downspouts and broken windows, as well as repainting the interior and exterior of the unit. For items such replacing roofs, windows and doors; installing security systems, siding and insulation and landscaping, these are improvements. These enhancements must be deducted via depreciation over a certain number of years.
Landlord Insurance — For the Property and Liability
Rental property owners should have landlord insurance. Single-family homeowners, in particular, might mistakenly conclude that homeowners’ insurance covers damages arising from renting out that home.
Landlord insurance addresses the risks of vandalism, natural disasters, fires and other incidents that damage the rental. For instance, the insurance pays for holes in walls left by careless or malicious renters. The rental property owner can also obtain insurance to cover furnishings provided by the owner, loss of income if an incident renders the unit uninhabitable and losses and legal fees resulting from tenant default.
Be sure the landlord insurance covers liability arising out of injuries to tenants or those who visit the property. Unsafe conditions, such as a loose handrail, broken steps or defective wiring that triggers a fire, can foster lawsuits and claims for damages.
These tips for rental property owners reflect the legal and tax issues, marketing approaches and risks involved in the rental housing market. To follow these suggestions, the rental property owner must consider whether the financial resources and time are enough and whether help may be needed to accomplish them.