Management
is the most important aspect of owning rental property. Bad
management can result not only in loss of rents and/or increased
operating expenses, but can lead to lawsuits and even criminal prosecution. Even
though proper management is such a very important part of real estate
investment, it is often ignored by the get-rich-quick book and tape
offers presented in TV info-commercials. When an investor decides
to manage their own property, they quickly learn that the job requires
totally different knowledge and skills than the investing aspect
of income property.
In view of the importance
of the property management subject, we are developing an e-course called
Managing Income Property that covers this subject in considerably more
detail so we will provide only a brief discussion of the subject in this
lesson. However, LandlordAmerica has devoted many pages to the subject
in our Property Management
Web and you may want to spend some time reading and researching there
when you reach that point in your rental property investment business.
Using A Property Manager
Some people want to reap the benefits
of real estate investment, but don't want to personally manage their
properties. If you are in this category, there are a couple of
issues that you need to keep in mind.
First, you need to take this factor into account
when purchasing the property because you need to include the cost of outside
property management in your analysis of the property. This cost must include
not only the management and/or leasing fees charged by a property manager, but
must take into account a few other factors.
Second, it is imperative that you use care in
picking a property manager. You should first read our
Selecting A Property Manager
page. And, even if you do hire a property manager, you should also
be knowledgeable about the aspects of management so that you can recognize
when your hired manager is doing his job properly and react quickly if
he is not.
One advantage to utilizing a property manager
is that it puts a third party between the property owner and their tenants. We
all tend to develop relationships that become personal, and those between landlords
and tenants must be kept on a business basis.
General Management Principles & Procedures
Being a landlord is really
a business of managing people more than of managing property per se. Most
problems associated with owning rental properties results from bad behavior
of individuals or misunderstandings between the parties rather
than any defects of the property itself.
Accounting
The better your records,
the more you can write off on your taxes. Then, if you are audited, the
more likely you are to be to keep your deductions . . . and your money.
Accountants and Bookkeeping
Services
A survey by LandlordAmerica of several bookkeeping
services and CPA firms a few years back found that the average cost for a typical
landlord with four or five units, from accountants familiar with the rental housing
business, was approximately $50 per month for bookkeeping services and about
$150 per month for CPA firms. That fee included rent deposits and preparing the
schedule E for the federal tax return. As is probably obvious, these services
are relatively expensive for the owner of one or two units. You also need
to take into account the time and trouble to interface with the service, phone
calls and/or visits to their office.
Doing It Yourself
Many small landlords still
try to keep books on slips of paper - and determine profits by how
much money is left in their pockets. Amazingly, some larger landlords
do almost the same thing, even in this day of computer-assisted bookkeeping
and tax preparation.
Small business people sometimes keep track of
their finances in a slipshod manner because of what is certainly an understandable,
but perhaps misguided, attempt to keep government from learning very much about
their business. It has been our experience, however, that landlords and property
managers who keep good books and use the deductions that are legally available
to them do much better with the IRS, and sleep much better at night than those
who don't.
There are still a great many incentives built
into the Internal Revenue Code designed to promote housing, and particularly
low income rental housing. Consequently, if real estate investors learn
the rules and take full advantage of the deductions and tax credits, they will
likely pay as little tax as those who try to circumvent the law and deal in cash
whenever they can.
Good books and legitimate tax returns will also
improve their chances of borrowing successfully and leveraging themselves into
real wealth. There is also less chance of a devastating encounter with our friends
from the government because of some new technological advantage to the IRS. Finally,
documentation that verifies the income and expenses of a property is important
when you sell the property.
Rent Roll
Create a simple form,
either on paper or in your computer, showing the building number, address,
tenant information, move in date, security deposit amount, rent amount
and, if applicable, the source of rent payments. We have included a
sample of a Rent Roll for you to compare or copy if you wish.
You are expected to have a receipt and deposit
system for your collected rents. If you are audited, the IRS is likely to want
to trace all your deposits. That means that they will want to know where all
the money came from and will want to know what happened to all the rents you
received, or should have received. The better your records, the less IRS
auditors are likely to look for fraud or errors.
Maintenance Log
A record of tenant maintenance complaints and
the timely solution or resolution can save very expensive legal costs in the
event of accidents on rental property to tenants or their guests. There are a
great many other reasons for good maintenance records as well, including evictions
and the IRS.
Check Register
A check register, with good detail, is about all
the actual bookkeeping that many small landlords need to do. Every check should
be coded, or contain the kind of expense that the check paid - when,
who, what for & why. Every deposit of income should
contain the same kind of information. Even if you don't deposit all of your income,
it is a good idea to note the cash income and what you did with the cash in this
same register, just don't carry the amounts over to your bank balance.
If you think you need to keep track of cash in
a separate book, that's fine, as long as you actually write everything down so
that you can have an accurate picture of what is really going on in your business. We
all tend to loose track of cash, even substantial amounts.
Bills & Receipts
Pay your bills by check or credit card whenever
you can. The reason is that you have both the receipt and the canceled check
or credit card statement. When you write a check, note what it's for on the memo
line and always write the check number on the receipt. Use the same credit card
for business purchases whenever possible.
If you can't resist, and pay by cash anyway, write
the relevant address and purpose on the receipt. A box of receipts may become
your most valuable asset in the event of an IRS audit, where you are forced to
reconstruct what happened two years or more ago. A dated receipt also helps to
show where you were and what you were doing if you need to reconstruct a portion
of your mileage log.
When an IRS auditor sees that you have all your
records in good order, with detail, and easily accounted for, they are likely
to do a cursory check and move on to someone else.
Computerize
There are now many good reasons
to use property management software that were not there just a couple
of years ago. Everything about using computers has become much easier
and much of the new "Landlord" software is designed to look and
feel a lot like your Web Browser. We believe that you can start using
a powerful program to manage your properties, tenants and finances
without ever having to read a manual or understand how it works.
Any landlord sophisticated enough to have found
us on the Web, has enough computer literacy to keep their own books and prepare
their own tax return using any of several good computer programs. Quicken and TurboTax are
two inexpensive and very popular programs.
Quicken is an accounting program and TurboTax is
a tax preparation program, both published by Intuit. You can learn
more about the products by visiting the Intuit
Web site.
There are certainly other good bookkeeping and
tax preparation programs available. You can check out the wide selection
available on our Property Management Software page.
Summary
You
can use a pencil and paper with a few simple forms like a rent roll,
maintenance log and a check register. You can do a good bookkeeping
job with an easy to use program like Quicken. The important things
is that you do maintain complete and accurate records.
Maintenance
The upkeep
and improvement of rental property is vital to continuing economic viability.
Property that is not regularly repaired and refurbished is not able to
compete effectively for new tenants, except with discounted rents. A
practice of deferring maintenance, and lowering rents, leads to a downward
spiral that is hard to reverse.
Many mom and pop landlords estimate and allocate
5% of gross income for maintenance and repair. However, national studies indicate
an average annual cost of $700 per unit in a large complex, to $1,100 for single
family homes. If you think you are not spending that much, perhaps Pop,
or Mom, are not being paid for their labor.
There is a tremendous quantity of information
available regarding maintenance, in both book and Web formats. LandlordAmerica
provides some information and links to other of the many maintenance-related
Web sites are found on LandlordAmerica's Maintenance Online page.
Selecting vendors to do your maintenance is an
important issue that can have both financial and legal implications beyond the
task at hand itself. This subject is covered in detail in our Managing Income
Property e-course.
Laws
It is important that a landlord
have a good understanding of landlord-tenant laws because failure to
obey the laws can be costly. Landlords should have access to the
actual state statutes, not just depend upon books or web sites for interpretation
of general law. The LandlordAmerica site provides members with
access to to laws of each state.
In most states, commercial landlord-tenant law
is significantly different than residential. For example, many states allow
the landlord to lock out a commercial tenant, essentially shutting down his business,
for non-payment of rent.
Civil Rights
The
Federal Civil Rights Act of 1866 - Prohibits discrimination based on race
without exception. The United States Civil Rights Act of 1968, and its Amendments
in the Act of 1988, are commonly called The
Federal Fair Housing Act of 1968 - These laws prohibit housing discrimination
against certain classes of individuals.
In a significant 1968 case, the Supreme Court
decided Jones v Mayer where the Court upheld the Civil Rights Act of 1866. The
ruling prohibits all racial discrimination, private or public, in the sale and
rental of property. The decision was important because the 1968 law, as it was
written, exempts homeowners who rent a part of the home they live in, and certain
groups who, for example, may wish to rent to members of their own religion or
club.
In addition, some state and local laws prohibit
discrimination based on a person's sexual orientation, family, marital or even
military status. Others prohibit discrimination based on even wider ranging issues,
including: source of income and political affiliation.
Religious Organizations and Senior Housing that meets
certain conditions are exempt from fair housing laws.
Federal Fair Housing Laws
Federal Fair Housing Laws prohibit discrimination
if it is based on: race, color, religion, gender, national origin, familial status,
mental, or physical handicap.
State and local Housing Discrimination Statutes
and fair housing laws sometimes provide even broader coverage. They often prohibit
discrimination based on: age, occupation, source of income, marital status, sexual
preference, ancestry, or even military background.
The most obvious example of discrimination is
refusing to rent to a member of a protected class. But housing discrimination
can take many forms, including: offering different lease terms to members of
protected classes; using discriminatory or preferential language in an advertising;
treating certain classes of applicants preferentially or segregating protected
classes into separate areas of a rental property or community.
The Fair Housing Act prohibits landlords from
taking any of the following actions based on race, religion or any other protected
category:
- Advertising or making any statement that indicates a preference based
on group characteristic, such as skin color or age
- Falsely denying that a rental unit is available
- Setting more restrictive standards, such as higher income, for selecting
tenants
- Refusing to rent to members of certain groups
- Refusing to accommodate the needs of disabled tenants, such as allowing
a guide dog, hearing dog or service dog
- Setting different terms for some tenants, such as adopting an inconsistent
policy of responding to late rent payments, or
- Terminating a tenancy for a discriminatory reason.
Penalties for violation of fair housing laws
can include Actual Damages, Civil Penalties, Punitive Damages. Injunctions,
and Attorneys Fees.
Americans with Disabilities Act
Individuals with disabilities have a right to
equal housing opportunities under both the Fair Housing Act (FHA), which made
them a protected class, and the Americans with Disabilities Act (ADA) of 1990,
which requires that a landlord make economically feasible "reasonable
accommodations" and "reasonable modifications" for disabled tenants.
Fair Housing requires that a landlord not discriminate based on a tenant applicant's
mental or physical handicap. The American's with Disabilities Act goes much further.
Those covered by the Act include: any physical, mental and emotional impairment
that limits one or more of life's major activities.
Disabled Americans are protected by both the
Federal Fair Housing Act and The American's with Disabilities Act. We have several
pages on the subject under a web called Barrier Free. You may also wish to visit
the U.S. government pages on Fair
Housing Requirements for People With Disabilities
Health & Safety
Landlords are sued more
than any other group of business owners in America. The average
settlement paid by a landlord's insurance company is $600,000, and the
average jury award is $1.2 million. Aside from civil rights violations,
most lawsuits are related to health and safety issues.
Health
Lead,
asbestos, radon, and mold are some of the health issues about which a
landlord needs to be aware. While not necessarily a health issue,
pests must also often be dealt with. These issues are covered in
some detail in the Managing Income Property currently under development.
Safety & Security
Although safety and security
can be somewhat intertwined by the broadest definitions of both terms,
we will consider safety issues to be those related to accidental injury
and security issues to be those related to injury caused by others. Hence,
a hole in the sidewalk that might cause someone to fall is a safety issue,
whereas, hiring a convicted sex-offender as gardener is a security issue. Inadequate
lighting can be both a safety and a security issue. The list of
items that should be of concern to the landlord includes locks, lighting,
smoke detectors, carbon monoxide detectors, and employees and agents.
These issues are covered in some detail
in the Managing Income Property e-course.
Insurance
Having the proper types of
insurance and adequate levels coverages is an absolute necessity. A
well-designed insurance program can protect your rental property from
losses caused by everything from fire and storms to burglary, vandalism,
earthquakes, floods, and personal injury.
Which company provides the best coverage at the
lowest price continually changes, so it is important to obtain new quotes for
the desired coverages prior to expiration of the current policy for a property. This
subject is covered in detail in the Managing Income Property e-course.
Forms & Agreements
Landlords
and property managers must utilize a large number and variety of forms
and agreements including applications, lease agreements, checklists,
letters, legal notices, and court forms. It is important that the
landlord use forms that are both legal and adequate for its intended
purpose.
Applications
The first line of defense against bad
tenants is having an adequate application form.
Checklists
Checklists are not only a good idea
for protection of both the tenant and the landlord, but they are required by
law in many states.
Letters
Letters are required for a variety
of matters where the landlord wishes to simply communicate with tenants in a
way where proof of the communication and of exactly what was communicated is
desired.
Legal Notices
By legal notices we mean a more formal
communication that is related to terms of the lease and which might later become
part of a court action.
Court Forms
Forms in this category are those
that must be filed with the Court. It is usually best to use forms that
are actually provided by the Court itself rather than generic or "printed elsewhere" versions.
This subject is covered
in detail in the Managing Income Property e-course.
Filling Vacancies
Advertising
Advertising is often the only way to
attract qualified prospective tenants to a property. The methods property managers
traditionally use vary from a simple sign in the window to slick brochures, ads,
and mailers to, more recently, the Internet. What works best often depends on
the competitiveness of the market and even on the time of year.
What ever advertising medium is used, property
owners must always be aware that housing discrimination laws apply to all forms
of advertising relating to housing offered for sale or rent. Fair Housing Laws
make it illegal to print or publish any real estate advertisement that indicates
a preference, limitation, or discrimination based on race, color religion, national
origin, sex, handicap, or familial status.
HUD has even selected 67 words that they believe
should be prohibited in advertising for housing.
Vacancy Listing on the Web
The newest, and perhaps soon the
best way to advertise rental housing vacancies is to post them on a searchable
vacancy listing site like our Vacancy Center.
The Internet allows, landlords, tenants, buyers and sellers, to post
their information directly into a searchable database that can be accessed
by others from anywhere in the world. They can search for your listing
by using keywords like: country, state, city, metro area, price, housing
type, description, and a large number of other variables.
Print Advertising
Newspaper classified advertising is
the traditional medium used for
rental
housing. It should briefly describe and sell the primary benefits of
the property, but must not contain any discriminatory language.
There is a real estate axiom
that if they call on a for sale or rent sign, they probably can't afford
the house; if they call on the price in the ad, they won't like the house
when they learn the address and drive by it. Save yourself a lot of wasted
time by always listing both the price and the address in your advertising.
Other Kinds of Advertising
- For Rent signs are usually effective and are the
reason most tenants apply for a
particular
rental unit. Friends and family of your property's neighbors are always
your best prospects. For Rent Signs should be clearly visible, simple,
attractive, and well-maintained, but they must not contain anything
discriminatory. The number of bedrooms, the words: "For Rent" and a
phone number to call is generally adequate.
- Apartment guides or magazines are effective in some
areas, particularly for larger high end apartment complexes, but they
are not designed to fill just one current vacancy. Guides are usually
published monthly, printed on attractive glossy paper, in color, so
advertising rates tend to be relatively high.
- Apartment locator and vacancy listing services can
be effective in areas where such companies are well established,
or in a high-vacancy rental market. These services typically charge
the owner a fee for each successful referral. Fees can equal one-half
to a full month's rent.
- Direct mail of flyers and brochures to tenants
in other nearby properties can be an effective marketing tool. Although
that may be upsetting to your competition. You can also post the
material in supermarkets, stores, Laundromats and other places frequented
by area residents.
- Word-of-mouth advertising from existing tenants is
often the best advertisement. If state laws permit, many landlords
pay a finder's fee for each successful referral. Some states classify
finder's fees as commissions, however, which may be paid only to
persons holding a real estate license. Landlords who want to establish
a referral payment program may be able to contact their local real
estate board to learn whether finder fees are legal.
- Employers in the local rental market. Try to contact
human resource managers to get permission to place notices on company
bulletin boards or in workplace newsletters.
In a tight rental market
many successful property managers advertise an open house at the vacant
property and make a party out of it, rather than arrange for separate
private showings. When several prospects show up together, they will
occasionally bid against each other for the chance to rent an attractive
unit and even pay more than the advertised price to get it. It is a good
system if you are careful to always offer the property to the "first
qualified tenant" who will pay the price, not the "most qualified".
Special Advertising
If you are an enlightened landlord who has discovered
the value of allowing pets, cash in on it by marketing your pet policy.
All Advertising
No matter what types of media you use, avoid charges
of discrimination by ahering to the following advertising guidelines:
- Do not use words such as "desired" or "preferred." Using that kind
of language can indicate a discriminatory preference. For example, "working
females preferred" indicates discrimination against ... say, male dead-beats. "Singles
desired" obviously indicates a discriminatory preference against families.
- Always avoid words that imply discrimination against families or
children. "Security deposit for children," "adult building," or "retirement
community" is generally discriminatory, unless the property qualifies
as housing for the elderly by conforming to one of the few legal exceptions.
- Do not use ethnic and religious connotation. An ad that reads,
for example: "Village Manor Apartments are located near the Catholic
Church," indicates a preference for Catholics, and implies that non-Catholics
would be happier elsewhere. "Convenient to Chinatown" may indicate
a preference for Asian tenants.
- Don't use photographs of people. Using people in advertisements
can indicate a preference for the kind of person depicted. If a particular
protected group is not represented in the advertisement, discrimination
may be inferred.
- "Absolutely no pets" could indicate to a prospective tenant who
is blind that you will not even allow seeing eye dogs. Using the
phrase "no pet policy," is acceptable because it does not imply a
strict prohibition against all animals. Besides, responsible but
lonely older adults, who make great tenants, often fill their lives
with caring for a pet. No pet policies can therefore be expensive
and short sighted.
- Avoid discrimination in the selection of places to advertise. It
is usually a good idea to place your advertisements in general circulation
print media, read by the public at large. Newspapers targeted to
Hispanic, Haitian, Korean, Polish, or any other group could lead
to possible expensive allegations of discrimination. However, if
you own property near a hospital, factory or college, there is nothing
wrong with advertising in their newsletters. In fact, it is often
the best place to advertise.
- Use the Fair Housing Logo. It indicates that you know and obey
the law.
Tenant Screening & Selection
Landlords and property managers
must understand that adequate tenant screening and proper selection are
crucial to their success. If landlords and property managers always
selected ideal tenants, their would be nothing but millionaires in the
rental housing business. Read everything you can, here and elsewhere,
then join a local Rental Housing Association. Many of them have
lists of tenants who are chronically evicted and landlord groups can
also offer a multitude of other services. You must always check out your
applicant before you commit. You can also collect an application fee
from your tenant to pay for this service. Collecting this fee is a common
practice and it is a very small cost to your tenant compared to a deposit.
Property managers must not only select tenants
who are good credit risks, but also people who will coexist peacefully with their
neighbors and other tenants. Middle of the night calls are much more likely to
deal with some kind of disturbance than with leaky plumbing.
Application
The first line of defense
against bad tenants is having an adequate application form. An
adequate form is one that requires the applicant to provide information
that can be used to verify his identity, obtain a credit report, verify
employment, contact previous landlords, and do a criminal background
check. And, the application should contain a clause specifically
stating that the applicant authorizes you to do all these things. The
application should also warn that failure to provide all items of information
being requested (unless not applicable) is grounds for not considering
the application. We suggest that the following information be requested
on an application:"
-
First, last, middle names of all applicants
-
Current and most recent previous address of residence
-
Current employer with address and phone number
-
Make, model, year, and license number of each vehicle
-
Driver license state and number for each applicant
-
Bank name, address, account numbers
-
Has tenant ever filed bankruptcy. If so, when?
-
Emergency contact (can be useful for tracing a skipped
tenant)
It is also important that
your application include permission to obtain credit reports on all applicants
and that all applicants sign the application or individual forms.
Some rental property owners and agents
require that tenant applicants provide a deposit of $200 or more to cover application
screening fees and to hold a rental unit until their application and credit is
approved. In most cases, the "holding portion" of the deposit is returned
if the applicant is denied - and some landlords apply the screening fees to the
first months rent if the applicant is accepted. Whatever the policy, be
sure that it is clearly stated in the application form or other document that
is signed by the applicants.
Many landlords with high-quality property hire
a tenant screening service to check evictions, credit, employment and references.
Those costs usually range from $20 to $100 per person. Low-income landlords
must also find a way to cover those costs, or do much of the work themselves.
If the tenant applicant withdraws their application
because they found more suitable or less expensive housing, the landlord may
elect to keep all or part of the deposit. Particularly if the landlord incurred
an economic loss as a result.
When the landlord holds the rental unit for a
tenant applicant, it is off the market and unavailable to other qualified prospective
tenants who may have to be turned away. If the applicant later changes their
mind, the property owner may have suffered financial harm in the form of a lost
business opportunity. In such a case, the landlord is justified in retaining
all or part of the holding deposit.
Landlords and agents should use good judgment
and be fair in their deposit policy. An applicant whose holding deposit is retained
without adequate justification may well have a cause of action for damages against
the property owner.
In the event a landlord elects to retain a deposit
with good cause, it is imperative that all records pertaining to the application
be kept for at least the time period prescribed by law, generally three years.
Keeping the application, with documents supporting any reason for refusal attached,
will ensure that the landlord has good evidence if a rejected tenant later decides
to bring a lawsuit or complaint charging housing discrimination.
Most professional property managers now
consider allowing some pets, providing the tenant pays a pet deposit and signs
a pet agreement. Pet fees at apartments now range from flat fees of $20
to $700, and monthly surcharges from $6 to $25. The most often quoted monthly
charge for a pet is $15. The average up-front fee is about $225, but the most
often quoted fee is $100. High fees are usually for large dogs. A few states
have limits on the amount allowed as a pet deposit (e.g., Nebraska limits the
amount to 25 percent of rent), but an overwhelming majority of states do not
have limits.
Investigation
Verify Identity
Identity theft has become a real problem
throughout the country and the prudent landlord will take steps to avoid
such fraud. Obtaining a credit report on the wrong person
is worse than no credit report at all because it might put at the top
of the list a person who would have not made the cut if no credit report
were available.
Require at least two items of identification. A
drivers license is usually the primary item. The second item should also
include a photo - for example, a photo credit card. Verification of a bank
account can also provide additional verification.
Credit Report
Be sure to provide the applicant a rejection
letter if the credit report is the reason for rejecting an applicant.
Previous Landlord Reference
For reliable results, you want to
check a previous landlord, not the current one. Although you wouldn't
do so, a landlord with a problem tenant will be happy to provide a good
reference in order to expedite departure.
Employment Verification
In recent years it has become more
difficult to get information from employers because of the fear of lawsuits. Some
employers will not even admit to knowing their own employee over the
phone. Many will not give out any information without written authorization
from the employee and will only respond to a written request. The
best approach is to have a separate form for completion by the employer
that has been signed by the applicant employee.
Criminal Record Check
If you are going to use criminal record
check, be sure that you run the check on all applicants in order to avoid
possible charges of discrimination due to the applicants' appearances.
Selection
Qualification Criteria
There are many good reasons for accepting or rejecting
an applicant that are not discriminatory if they are applied equally and fairly.
Make a written list of all requirements and use them to evaluate everyone who
wants to rent a property in exactly the same manner. The list should include
all qualifying items, including identity verification, credit report, employment
verification, criminal record check, interview, etc.
Some property managers brag that they select the most
qualified applicant, but since any such definition can be subjective, it
can also be challenged as discriminatory. The mere allegation of discrimination
can lead to expensive legal costs, time and trauma covering months or even years
Professional property managers protect themselves and
their employers from expensive charges of discrimination by employing a tenant
qualification check list and accepting the FIRST tenant applicant who meets their
established qualifications.
Landlords are allowed to select tenants using
criteria that are based on valid business reasons, such as acceptable credit
history, a minimum income or a positive references from previous landlords, no
criminal record, no pets (with restrictions) as long as these criteria are applied
equally to all tenants.
Deposits
The failure of some landlords to establish a clear
and fair system of setting, collecting, holding and then returning security deposits
has contributed significantly to the negative landlord image. It has also resulted
in legislation in most states and countries that now regulates almost every aspect
of rental housing deposits. Neglecting to inspect and document the condition
of the rental unit before the tenant moves in often leads to disputes or misunderstandings
over security deposits when the tenant moves out. Consequently, many landlord
tenant laws now require that inventory or move-in check lists be completed and
signed, prior to occupancy, in order for any charges to be deducted from security
deposits for damage.
Rents
What Should They Be?
What the rent should be depends upon market conditions,
the ability of tenants to pay, and, in a very few jurisdictions, rent control. Like
most prices in a free market, rents act like water and seek their own level based
on supply and demand. But today, tenant demand for a given rental property is
an absolute factor of the income in the area, and therefore tenants ability to
pay. While it was once considered that 25 percent of a person's income
to be the maximum that could realistically be paid in rent, tenants today often
have to pay 30 to 40 percent or more to find decent housing.
Average annual apartment rents in 1998 were $12.78
per square foot, up 7.8 percent over the previous year. That means a typical
900 square foot, two bedroom bath and a half, rented for about $958 a month. Is
that what you are getting?
Rent Control obviously effects everything
you do in those cities that maintain government controls on the amount of rent
that can be charged. Some states, like Massachusetts, have recently outlawed
the practice, others have forbid it entirely. A few states still allow it in
some cities.
Raising Rents
Unless your property is located in one of
the very few local jurisdictions with some form of rent control, there is not
legal limit to what you can charges as rent. However, there are definite
real limits imposed by market forces and the smart landlord takes into account
that the cost of replacing a good existing tenant usually requires many months,
often years, of trouble-free tenancy by the replacement.
Collecting Rents
There are many things that a landlord can
do to make sure that rents are actually collected and collected on time. Primarily,
it comes down to proper screening and selection of prospective tenants in the
first place, good leases and other documentation, and having a definite delinquency
policy in place and following it.
Collection failure is usually the result of a
fear of vacancy, confusing kindness with business necessity, and the landlord
simply not being diligent.
Reporting Tenant Histories
Credit is a necessity in today's
modern American society. Yet more than half of the people who apply for
a credit card are turned down. Many because of poor credit history, many
more because of no credit history.
As a credit grantor, landlords have the same opportunity
to affect a persons credit report as Sears, a bank or anyone else. Here is how
it works: When a credit grantor signs up to report credit, they must report all
the information, both positive and negative, every month. Your local rental housing
association can make arrangements to compile the information in a format suitable
to the big three credit data companies and transmit it electronically each and
every month.
It is a tremendous incentive for every tenant
to pay his rent on time.
Evictions & Collections
In
the event that a tenant does not pay his rent when due, and you have
asked him nicely for payment for the very last time, landlords may still
not take any action except that which is proscribed by the law of their
state for collection and eviction and the strict rules of the federal
Fair Debt Collection Act.
When all else fails:
EVICT. For detailed information visit our eviction page or, better
yet, take our Evictions
e-course.
If you have a money judgment on a former tenant
you can garnish wages, bank-accounts and more. LandlordAmerica's Collecting
Judgments e-course provides everything you need to know.
Miscellaneous
Section 8
A Section 8 rental subsidy is a federal payment
to a landlord on behalf of an individual tenant. In a Section 8 certificate tenancy,
the household pays 30 percent of their income for rent. The difference between
30 percent of the household income and the set "fair market" rent of a unit is
paid by the federal government.
