How to Be a Landlord

ADVERTISEMENT

Barry Maher was renting out apartment units in California when one of his tenants called to complain that another renter was keeping a dog in the building, something that the lease the prohibited. Cats, however, were permitted in the complex, a loophole that the accused tenant clearly intended to manipulate.

“She said ‘oh, I would never have a dog. What I have is a special breed. It's a dog cat, a mix of a cat and a dog," Maher tells MainStreet. “It was so blatant and so crazy that I actually spent a moment thinking, ‘Is there really such a thing?’”

Obviously, being a landlord isn’t exactly a walk in the park. It may, however, be a responsibility that many property owners are considering. According to recent research, the rental business is booming. MPF Research, a Texas firm that analyzes the apartment industry, found that occupied apartments increased by 215,000 in major U.S. markets in the first half of 2010, the largest increase the firm has reported since it started tracking apartments in 1992.

Moreover, the rate of vacancy fell to 6.6% in June, down from 8.2% in December. That said, renting a property isn’t for everybody.

“Being a property owner is a business,” Alabama landlady Victoria Ashford points out.  "One of the biggest mistakes would-be landlords make is thinking it is a little side-gig that they can dabble in or take lightly.“

Robert Griswold, author of Property Management Kit for Dummies, agrees, and says that prospective landlords need to ask themselves if they have the time, skill sets and, most importantly, the patience to pull it off.

“You need to be of a certain temperament,” he explains. “You definitely need to have a backbone. Many people chose not to rent because they don’t want conflict in their lives. You need to ask yourself if you are ready for it.”

Those who have carefully considered becoming a landlord should pay careful attention to the following rules:

1. Don’t discriminate

Landlord-tenant laws differ from state-to-state, but federal law prohibits property owners everywhere from discriminating against who they rent to based on race, religion, gender, national origin, family status or handicap or disability.

“Archie Bunker would not be a good landlord,” Griswold quips. He adds that those who don’t feel they can be objective should consider using a realtor when renting out their properties. For a full explanation of the Fair Housing Act, check here.

2. Select your tenants carefully

Griswold maintains that tenant selection can make or break your experience as a landlord, so choose your renters wisely. To avoid violating the Fair Housing Act, he suggests having all applicants fill out a universal application that asks about a candidate’s financial qualifications.

“You are allowed to make selections based off of business factors,” he explains. After all, you want to know that the applicant will be able to pay the monthly rent.  Asking questions about monthly income, job history and credit background is permissible as long as the same criteria are applied to all candidates.

3. Know your state’s laws.

Beyond the Fair Housing Act, renters’ law is regulated under Residential Landlord Tenant Acts that differ in each state, according to Virginia real estate attorney Brent Timberlake. These acts spell out very clearly who is and isn’t considered a landlord (which can differ depending on the size of the property in question) and what his or her responsibilities are.

You can check out this copy of Virginia’s act to get a better idea of what these laws entail. However, generally speaking, most of these acts stipulate that:

  • Landlords provide an inhabitable or tenable environment for their tenants.
  • Landlords can only collect one month’s rent as a security deposit.
  • Landlords cannot keep a tenant’s security deposit longer than a year without paying interest.
  • Landlords must give adequate notice before raising rent.

Additionally, these state laws can also carry very specific and lesser-known stipulations. Texas landlord Matt Kuhlhorst points out, for example, that property owners in his state are required to install locks leading to the building’s exterior a certain way. To get a better understanding of what your hometown requires, Timberlake suggests contacting your state’s General Assembly for a copy of its Residential Landlord Tenant Act. Griswold says that many of these acts can also be obtained through state affiliates of the  National Association of Realtors or the National Apartment Association.

4. Live the Lease.

According to Timberlake, most landlord/tenant disputes can be avoided. Prospective landlords just need to take the time to write a comprehensive and detailed lease that outlines what a tenant is or isn’t responsible for, and what they can or cannot do while renting out the apartment.

To ensure that your lease is as straightforward and legally accurate as possible, Timberlake suggests prospective landlords shy away from using form contracts that are available on many legal websites. While convenient, utilizing these forms can work against you. For example, certain states don’t require those who rent out a single family residency to follow all provisions of their Residential Landlord Tenant Act. If the landlord, however, were to use a form contract that stipulated they did, however, they are beholden to it.

5. Do your research before setting the rent.

Unless you are renting out government-subsidized properties, there are no laws stating what the maximum or minimum you can charge for rent. Instead, that amount should be driven by the market. You can use websites such as Craigslist or Rentometer.com to gauge the price of rental units in your area. Or you can consult with a realtor who has access to the Multiple Listing Service, which will help you set a competitive price for your property.

—For the best rates on loans, bank accounts and credit cards, enter your ZIP code at BankingMyWay.com.

Show Comments

Back to Top