This cry for help came in from one of my clients via a voice mail message. Owning a rental property provides great tax breaks and potentially good financial returns, but also exposes the individual to major legal liabilities. This client did not know it, but he was in a lot of trouble and needed to take a quick lesson in Landlord 101. My 25 years as an investor, landlord and a professional Realtor, allowed me to put together the following list of 7 golden rules for my new investor-client to study.
* Educate yourself about your duties, responsibilities and liabilities of a landlord. It is a business in which ignorance is NOT a defensible argument. If you have to go to court to either collect your rents, evict somebody, or even worse; being sued by one of your tenants, you better know your job very well and be prepared, it could cost you the entire investment property and more, if you are not.
* Join a group of "Apartment Owners Associations." Become a subscriber and get involved in their discussions. This group provides professional guidance and will help you and support you in making your business of providing housing for others more profitable, easier to deal with and more enjoyable. They will have real time alerts on new laws and local proposals that can affect the business of apartment owners.
* Choose your tenants carefully! Be fair and color blind when interviewing potential tenants. There are strict rules about discrimination of any kind. Your own personal beliefs should not dictate who you rent to. Develop a consistent and clear procedure to always use when choosing your tenants. Tests are regularly conducted by the Fair Housing authorities and the penalties are severe.
* Maintain your rental properties! Landlords who do not spend money in maintenance or repairs, will invariably spend much more money defending their actions or lack off in court when a tenant gets injured or harmed because of lack of maintenance. The value of a rental property is based on income and overall physical condition. A clean, safe and well maintained property will always provide high rental values with less rental turnover.
* Do not get personal, seek legal advise when dealing with trouble tenants. There is a set of steps that must be followed exactly when enforcing lease or rental agreements. The correct forms must be used, the timing must be absolute, and even the wording on the document must be specific and appropriate for each situation. If it is not done right, the entire process must start all over again. Let the professionals handle these situations.
* Know thy Limits...! Even if you consider yourself a "handyman," and know how to swing a hammer or use a power tool, know when to call the professionals. Can you really tackle a plumbing or an electrical problem? Hiring the right professional could shield you not only from personal injuries to yourself or your tenants but from legal liability. The key here is to do it right; do not think "expenses" think instead "tax reductions."
* Put together a team to help you run your business. Do not wait until you need an attorney to look for one. Begin by asking other landlords in the area if they know someone locally. If possible, get to meet them, find out what their fees are, their work schedules, where are they located etc. Do this for everybody. You will need a good plumber, electrician, roofer, flooring specialist and painter.
If you do your homework, you will know exactly who to call when an emergency arises. Taking care of tenants problems right away is a good solid block in which to build a strong relationship with the most valuable partner you will have in your rental business: YOUR Tenant.
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