E-Renter News

Starting out Strong Will Pay Off

If you’re new to the landlord business, you’ve probably done a whole lot of research about pricing, cash flow, and ROI. You know that being a landlord requires one to be tough, but fair, and to know a great deal about federal, local and state laws regarding renting and leasing to the public.

Here is some advice about owning rental property that you may not have heard, but that experienced landlords have already learned.

• Don’t underestimate the power of a good lease agreement. Consult an attorney to have yours reviewed if you’re in doubt about yours.
  
  
• Do not fail to conduct thorough tenant background screening on every applicant—including credit, criminal, and background—and you’ll avoid a wide range of problems.
  
  
• Remind yourself, daily if necessary, that this is a business. Most landlords are not renting to help people, but rather to make a profit.
  
  
• Anything tenants do that cuts into your profit needs to be dealt with immediately. This includes not paying rent on time. More than any other issue, allowing tenants to pay late leads to bigger problems.

• Get everything in writing. Start with a good application and background check disclosure. Follow up with an iron-clad lease, a move-in checklist signed by your tenant, and all subsequent communications between you and your tenant. Keep copies of everything in the tenant’s file.

• Let the tenant know that you are bound by the terms of the rental agreement, and that you have to apply them fairly to everyone. Repeat this often so they know you are serious about the landlord/tenant relationship.
  
  
• While it’s not practical for everyone, many landlords are in favor of hands-on property management. That way, you can control things better and keep an eye on your property.

Tips for Clear Communication

Good landlords know it’s important to keep the lines of communication open between themselves and their tenants. Not only can it make the relationship easier, clear and frequent communication can keep your good tenants from moving away—and even help protect you in case of any litigation.

Here are some tips for communicating with your tenants:

• Listen respectfully to everything your tenant says. Remember that everyone wants to feel understood and respected.
• Put yourself in the other person’s shoes. What is going on in their lives? Are they having difficulty with health, family, or their job? Thinking ahead about how your tenant will receive your news, complaint, or notice will help you frame what you say and how you say it.
• Think in terms of solutions, not problems. Present the issue clearly, but be ready with a suggestion of how to prevent it in the future.
• Stick to the facts. Do not allow emotions to take over. If you stay calm, ignore emotional outbursts, and repeat the facts of the situation, you can help diffuse anger or frustration.
• Don’t do all the talking. Encourage your tenant to express their views, their reason for their behavior, or their side of an issue. Listen actively, by making eye contact, nodding, and saying “Yes,” and “I understand.”
• Reflect back what you just heard. You can ensure your tenant feels heard by repeating what they say, using language like:
  • It sounds like you feel. . . is that correct?
  • Are you saying. . .
  • You seem to want. . . is that true?
• Ask open-ended, not yes-or-no questions, to help everyone come to a solution:
  • What would you like to see happen?
  • Would you be willing to. . .?
  • How can we accomplish that?
  • What do you see as the problem?

The Pros and Cons of College Rentals

If you own rental property in a college town, it’s up to you whether or not you choose to lease to students. Knowing what to expect can be very helpful!

Here are some considerations if you own or are thinking about purchasing rental property in a college town.

The Pros:

• You have a captive audience. Students have to live somewhere, and most of them will be around for four years, giving you a large pool of applicants to choose from.
  
• Student housing is often in short supply. Depending on your location, there could be great demand for your property.
  
• Not all students are poor. Many parents foot the entire bill for their kids’ college, including housing. If your tenants’ parents have deep pockets, the rent should be paid on time every month. Put the parents on the lease as co-signers.
• Not all students are partiers. Many actually like quiet. If you’d rather rent to the studious types, you can—just do your due diligence and screen carefully.

The Cons:

• Many students are messy. It doesn’t matter if they’re boys or girls—mature or not. Younger people often put cleaning their apartments or homes at the bottom of their to-do lists, especially if they are busy with school, work, and studying.
  
• Students often have parties. However, you do not have to allow loud parties on your property.
  
• Students might not care for your property as well as older people and families would. But you might be surprised. Some landlords report fewer problems with damaged property from students than from other categories of tenants.
  
• Students might not inform you of plumbing, electrical, or other structural issues immediately. Keep the lines of communication open, inspect your property often, and never assume your younger tenants will take the initiative to inform you of problems.
  
• Summer means vacancies. Assume ten months of rent when considering your profit/loss, and if you can rent over the summer, it’s a bonus.

Renting to students is not much different from other tenants— your tenants will treat you and your property exactly as you allow them to. Proper screening, move-in / move-out procedures, and complete documentation are musts. And remember to always let your tenants know the rules, along with the consequences for breaking them, right up front. It’s up to you to set the expectations from the very beginning.

Staying Organized will Pay Off

Good record keeping can ensure that every visit to your accountant will be a much more pleasant experience. But more importantly, documenting each step in the landlord/tenant relationship can protect you in a claim against a tenant, or verify your position in case of a legal dispute filed by a tenant.

Set up your tenant file system so you can access all information quickly. You will probably have two sets of records: paper and digital. Written records should be kept in fireproof, locking cabinets, and include:

• Tenant’s rental application
• Signed lease or rental agreement
• Verification forms
• Lead-based paint disclosure form
• Credit, Background ,Criminal Records Reports
• Receipt for security deposit and/or rent
• Move-in/move-out checklists
• Photos of unit taken at move-in
• Entry notices
• Addenda to lease or rental agreement
• Maintenance requests
• Tenant Correspondence

Your digital tenant files will include all email correspondence. You can also scan documents and save them on your hard drive or back up disks in case of loss of paper files.

The most important thing to remember is to gather all the information required for each tenant. Don’t fall into the habit of overlooking important details—you never know when you’ll need that proof of notification, or a document signed by your tenant to prove your case!

How to Target Your Efforts

It makes sense that, as a landlord, you want the best tenants you can possibly find. But that’s not an easy task. Targeting your efforts will go a long way to placing the best tenants in your rental unit.

First, write a compelling ad. Attract attention with terms like “amazing,” or “quiet,” or “upscale.” Promote your rental unit’s most desirable features. Mention the neighborhood, school district, and any unique features, such as hardwood floors, a fireplace, decks, or patios—these are all must-haves for your ad. Be creative!

Your ad should state the rent, plus the number of bedrooms and bathrooms, any parking information, and whether the unit is on a bus line, part of a complex, duplex, or single family residence. Do you accept pets? Say so in your ad! More and more landlords are allowing their tenants to have pets in their homes. Whether you do or not, state it in the ad. Each of these details will help narrow the pool of prospects down.

Make sure you indicate there will be a credit check and background screening as part of the application process. This will help eliminate those applicants who know they won’t pass the background screening.

Once you have your ad written, then what? It depends on the location of your rental and the demographics of the tenants you want to attract. If there is a neighborhood grocery store or coffee shop, place a flier with the ad information on their bulletin board.

You can submit your ad to Craigslist.com, or your local newspaper’s online edition—or both. You can have it printed in the paper, as well. Many landlords enjoy the ease of using Craigslist, for the option of having interested parties contact you through the site’s secure email or your phone. Responding to online advertising indicates your prospective tenants have internet access. This is desirable for many landlords.

Signs on the property often work really well, since many people drive through neighborhoods they like in search of “for rent” signs. Be sure they look nice, are easily read from the street, and make it easy to contact you.

The right advertisement can help you attract just the tenants you really want!

More Cities Across U.S. Cracking Down

Several cities around the U.S. are instituting inspection programs for rental housing. Cracking down on code violations is driving the passage of a new ordinance in Eureka, CA. The task force set up to create the ordinance says it’s needed to deter crime and blight caused by substandard housing conditions. But landlords are fighting the new law, concerned that it punishes law-abiding property owners along with those who don’t follow all the rules.

Gresham, OR has had a mandatory rental housing inspection program for two years; its intent is to crack down on code violations and livability issues. Pasco, WA charges property owners $30 per year per apartment building and $3 per unit for a rental housing license. The license is not issued unless the units are certified up to code every two years. Because property owners may hire an architect, engineer, or housing inspector on their own, the law has stood up against legal battles over privacy.

The city of Seattle, WA is considering modifying a current complaint-based program or adopting a system of mandatory rental inspections. A spokesperson for the Rental Housing Association of Puget Sound says neither landlords nor tenants are in favor of inspections, on the basis of privacy.

As city councils from Maine to Hawaii struggle with keeping renters safe, properties occupied, and property values from declining, the possibility increases that mandatory property inspections will become more prevalent.

An Overview for Landlords and Property Managers

As a Landlord or Property Manager, you are subject to a variety of federal, state, and local laws. You must comply with every single one—or risk expensive fines.

One federal law covering rental property is the Fair Housing Act. This law prohibits landlords and property managers from discriminating against any potential or current tenants on the basis of their race, skin color, religion, gender, family status, and national origin. It also prohibits discrimination because of an individual’s disabilities.

This means you must give everyone an equal chance at leasing your property. Certainly, you are entitled to qualify potential tenants based on income, credit and criminal history, job history, and previous rental experience. But beware: you must apply the same qualifying rules to every applicant. Failure to do so could lead a disapproved individual to claim discrimination.

Under the Fair Housing Act, landlords must allow persons with disabilities to make reasonable access-related modifications to private and common use spaces. New multifamily housing with four or more units must be designed and built to allow access for the disabled.

The Fair Housing Act also provides protection to disabled individuals who require service animals. If you have a “no pets” policy, keep in mind that you cannot enforce it on a tenant who has a proven need for a service animal. Whether it is a guide dog for a visually disabled person, or a therapy cat for a mentally disabled individual—you must accommodate the animal. Service animals are not defined as “pets,” so they do not fall under a “no pets” rule.

The Good News: Construction Spending Up in June

According to the Department of Commerce, construction spending increased in June 2009, albeit only by 0.3%. Still, analysts were surprised, having predicted it would fall 0.5%. Despite the increase, construction spending was down 10.2% from June of 2008.

The good news is that gains were seen in both residential and non-residential sectors—which has only happened three times in the past twelve months. And, June’s increase was the second in three months. Some of the increase can be traced to the federal government’s economic stimulus program.

Economists called the numbers an indication that the housing sector may be recovering from its long downward slide.

For the first six months of 2009, construction spending amounting to $455 billion, which is 11.4% below the same period in 2008.

The Bad News: Consumers Not Spending Yet

So while the June construction numbers are helping some economists breathe a little easier, what’s the outlook for the rest of the year? Economic forecasters don’t know what to expect, since the biggest driving force in economic recovery—consumers—are difficult to predict.

Consumers are saving more in response to recession fears—and experts say it will take several years for them to totally dig out from under the weight of job losses. There are still 14.7 million workers without jobs in the U.S., according to the Bureau of Labor Statistics. The more money Americans save, the less they spend—and since consumer spending accounts for 70% of American economic activity, any slowdown in spending is serious.

The big question: are Americans going to remain thrifty, or will they tire of doing without and begin spending again when confidence—and jobs—return? A recent report shows consumers will not return to spending any time soon. Consumer confidence declined in July, based on a sample of 5,000 households, which indicates that consumers are pessimistic about their income and spending expectations.

So while we have a mixed bag of economic news today, at least it wasn’t all bad!

Source: U.S. Dept. of Commerce, The Wall Street Journal