What sparks joy in your rental business?

Written by Sarah Block on . Posted in edited, For Landlords, Income Ideas, Landlord Tips, paid

Marie Joy RentalsMarie Kondo’s new Netflix show “Tidying Up” is inspiring people to find what “Sparks Joy” in their homes. But what about the landlord tasks in your rental business that spark joy in your life (or don’t)?

Landlords have a multitude of tasks involved with their business. Some we love, and some we hate. Life is short. So why aren’t we spending our time doing what we enjoy and outsourcing the rest?

The key is deciding what tasks to keep and what to outsource to someone else. But outsourcing can be difficult for most landlords. Whenever I speak with landlords about this topic, the most common response I hear is, “That reduces my profit.”

It does if you choose to think of it that way. However, if you think of your time in terms of dollars per hour, you factor in how much your time is worth. If you outsource a task you don’t enjoy and it costs less than your value, it frees your time up to make money doing something you enjoy.

Related: How to automate landlord responsibilities

Find what sparks joy in your rental business

One of the bests aspects of being a landlord or property manager is there are so many different things to do to make the business work.

  • Researching and finding the best rental
  • Preparing the unit to be rented
  • Advertising
  • Finding tenants
  • Screening tenants
  • Onboarding tenants
  • Managing maintenance and communication
  • Handling the finances

The hard part about being a landlord is that you are bound to hate some of those tasks.

How to decide what to outsource

Make a list of everything you do for your rental properties—from cleaning to showings—and number them from 1 (what you love) to 10 (what you hate).

Figure out how much money your time is worth. Consider commute costs, how much you get paid doing other jobs, and any other factors that affect the value of your time to determine how much your hour is worth.

Consider whether special tools or equipment are needed for any of the tasks. What is the cost for those tools?

Look at the tasks you marked in your bottom 5.

  • How many hours would those tasks take you to complete? Keep in mind, it will take you longer than an expert.
  • What is the cost of special tools, equipment, or materials for those tasks?
  • What is the going rate for someone to complete those tasks?

Add up the hours it would take for you to complete the task and multiply it by your value per hour. Add in the cost of materials and equipment needed for the task. What is the cost of that task if you complete it?

Now, how much would it cost someone else to complete it? If this number is less than your number, outsource it.

Related: How to find a contractor you can trust

How to increase profits by “Sparking Joy?”

You might be thinking that this method of outsourcing and doing only what sparks joy for you is all well and good. But not actually getting paid during the time you’re outsourcing a task to someone else isn’t ideal.

But what if you can be paid while you outsource?

Look at the top five tasks on your list, the tasks you love doing. Can you offer any as a service to other landlords?

You have experience doing those tasks. You enjoy doing them. Other landlords might have them on the bottom of their list. Why not build a service business doing what you love?

Conclusion

Life is too short to do tasks you hate. Outsource the landlord responsibilities you don’t enjoy doing, and focus on what you do love.

The end result will be better quality work. And you will find more joy in your life.

How to deduct rental business startup expenses on your taxes

Written by Sarah Block on . Posted in edited, For Landlords, paid, Step 1 - Perform Research, Step 14 - Pay Annual Dues & Taxes

Rental Startup Expenses and TaxesIt’s tax season! If you started a rental business this year, you’ll want to know how to deduct all your expenses. Or perhaps you’re researching how to start a rental business and need to know how taxes work.

This guide explains how to deduct startup expenses, what the tax rules are for expenses after you start the business, and changes to the 2018 tax laws that affect landlords.

Rental property startup expenses

Use the $50K rule.

Keep startup expenses under $50,000. You can deduct $5,000 the first year and amortize the rest over the next 15 years. Above that amount, the first year deduction becomes less and less.

The $50,000 limit is easy to meet for most rental businesses. But it can be exceeded with a BRRR—buy, renovate, rent, refinance. That renovation can certainly add up.

What expenses can be deducted during the startup phase?

The “startup” phase is before the unit is rented and no income is coming in. Any expenses that incur during this period are considered “startup” expenses.

These expenditures can include:

  • Repairs that get the unit or property ready to rent
  • Office expenses like office supplies, phone service, or office space
  • Time related to researching rental properties
  • Pre move-in rental expenses such as landscaping, handyman, cleaners, or leasing agent
  • Any business permit or license fees
  • Fees for attorneys, accountants, property managers, or other professional services

When starting up a rental business, try to keep these expenses under $50,000. Do this by holding off on items that can be purchased after the place is rented. Once it is rented, you can deduct your expenses fully each year.

Tax write-offs for rental businesses

Each year, landlords can deduct many of their expenses related to their rental business.

Related: How to track property expenses and streamline taxes

What can landlords deduct on their taxes?

As a landlord, you can deduct many expenses on your taxes. Keep all your receipts and use a CPA (certified public account) to make sure you don’t miss a write-off. Each one counts!

How does the 2018 tax law affect landlords?

Landlords benefited from the 2018 tax law.

An updated pass-through law lets landlords “pass-through” the profits from their rental property to their personal tax rate (IRC Sec. 199A). If you make $30,000 in profits on your rental properties, for example, and your personal tax bracket is 24%, you would pay $7,200 in taxes.

If your rental business qualifies as a business, now through 2026, you can deduct 20% of your rental income plus expenses. From the previous example, if you make a profit of $30,000 from your rental properties, you can deduct 20% from your profit. This brings your taxable income to $24,000. If your tax bracket is 24%, you now pay $5,760 in taxes, saving $1,440. Be sure to ask your CPA if you qualify for this bonus deduction.

Conclusion

The updated 2018 tax law benefits landlords. Make sure you get all the new deductions available to you. Find a tax accountant that understands taxes for landlords. The new tax law is complicated, so it’s time to bring in the experts to get your landlord deductions right.

What to do if you’re underwater on your investment property mortgage

Written by Sarah Block on . Posted in edited, For Landlords, Income Ideas, Mortgages & Loans, paid, Rent & Expenses

Underwater mortgageWhat do you do if you’re underwater on your investment property mortgage?

I have been there. Most likely, many who bought during the infamous real estate bubble have been there, too. In 2009, I thought the bubble had burst and prices dropped as much as they would. How wrong was I? I bought an investment property and quickly became underwater on it. I was drowning on that mortgage, and I didn’t know what to do. However, I had options, and so do you.

Let’s take a look at some baseline numbers to determine your best move.

Are you making a monthly profit?

The first thing you will want to do is look at the month-to-month profitability of the property. While a rental unit might not have equity, it might have profitability each month. To determine the profit you make each month, add up your mortgage, monthly taxes, monthly insurance premium, and anything else you pay. Then, subtract this number from the rental income you make on that property.

(monthly PITI, maintenance, 10% to reserves) – Rental income = Profit

Related:  How to set the perfect rent price for your rental properties

Questions to ask yourself

1. Are you in the positive?

If so, hold out on selling. If you are making a profit, it makes sense to hold the mortgage and wait for the value to increase to build equity.

2. Are you breaking even?

If you are breaking even, it might be a good idea to hold the mortgage. Each year, you pay down the principal a bit more. Your rent check each month brings you closer and closer to the surface. Unless you truly don’t enjoy being a landlord, or it is more work than you can handle at this time in your life, keep it in your portfolio.

3. Are you in the negative?

Did your calculations show that you were in the negative? That doesn’t necessarily warrant selling. Can you foresee an eventual turnaround? Real estate historically increases in value as time goes by.

What if I have a negative cash flow/loss?

For my property that was underwater, I was making negative cash flow the entire time I owned it, but I could afford to cover that cost. I covered the negative cash flow for nine years, knowing that the market would turn around, and it did. Earlier this year, I sold it at a profit. While it didn’t make sense for me to hold it as a rental because my mortgage was too high to ever have a positive cash flow from rent, it did make sense to hold until I could sell for a profit. My renters helped me pay down my mortgage and I made a little money in the end.

Look at your scenario and ask yourself these questions:

  1. Can you afford a negative cash flow?
  2. Will your property ever regain its value?
  3. Do you have consistent renters that help pay down your mortgage balance?

If you answered “Yes” to these questions, it makes sense to hold the property. However, if you answered “No,” it might be time to look at your options.

Related:  When to sell a rental property?

What are your options to sell an underwater property?

When you have an underwater property that you have decided to unload, you have three options:

1. Short sale

To sell a property with a short sale, the owner needs to negotiate with their lender to accept a lower payoff than the balance. An owner or their Realtor can call the lender and speak with the real estate short sale or work out department to begin the negotiation process. Once you have found a purchaser, the lender needs to approve the purchase price and might decline to pay certain added items such as inspections. After the lender approves the purchase price, you can request they do not report this to credit reporting agencies, and they may or may not comply with your wishes.

2. Foreclosure

While no one wants to go through a foreclosure, sometimes choices are limited. When starting a foreclosure, the first step is defaulting on the loan. After 30 days, a lender sends a notice of default. This likely comes after they have reached out trying to change the loan payments to work with your financial situation. After 90 days of being in default, the owner gets a notice of sale. The last step is selling the property at auction.

3. Sell + pay loan balance

You can avoid short sales and foreclosures if you have cash on hand. The last option for homeowners is to sell the property for what it is worth and bring a certified cashier’s check to the closing for the shortfall. While it is not ideal to pay to get out of the mortgage, it keeps your credit intact.

Conclusion

Investment properties with underwater mortgages can make an owner feel helpless and stuck. However, there are options. In my situation, my property was underwater for about five years. I was losing money each month, but it was a manageable amount. I chose to wait it out, and eventually I sold for a profit. But each person’s financial situation is different. Look at yours to determine what the best move is for your lifestyle.

Can a landlord take possession of an abandoned property?

Written by Laura Agadoni on . Posted in edited, For Landlords, Laws & Regulations, paid

Can a landlord take over an abandoned propertyThe answer is a resounding, “Yes!” Landlords can most definitely take over abandoned property.

The real question, though, is how?

Even if you have a signed lease with your tenant, they don’t always stay the entire lease term. Things happen:

  • Maybe they could no longer afford rent.
  • They found a better job elsewhere.
  • They are in jail.
  • They are in the hospital.

Whatever the reason, if your tenant left without telling you, they have left you with an abandoned property.

It’s never a good idea to have an abandoned property. For one, you’re probably not collecting rent. You can sue your ex-tenant for rent until you find a new tenant—that is if you can find your ex-tenant.

Related: 6 ways to find your deadbeat ex-tenants

Another reason abandoned property is not good is that it opens your property up to the possibilities of squatters, vandals, water damage, and fire.

Related: Risks of leaving a property vacant

I have a clause in my lease that states what happens if the tenants will be gone for just seven days:

There is no question that you can and should take control of your abandoned property, but you can’t just start re-keying and tossing out your ex-tenants’ belongings.

Why not?

Your tenant might have left but had every intention of returning to the property. If you took possession in that instance, your tenant could claim wrongful eviction, and you might need to pay damages.

Here’s what to do if you suspect your tenant abandoned your property.

Determine whether the property is truly abandoned:

Unless your tenant told you they were moving out early, you can’t necessarily be sure they abandoned the property just because no one’s been home for a few days or even weeks. Assuming they abandoned the property is not the same as knowing they abandoned the property. Here are some ways to tell.

1. Your tenant is still paying rent

If your tenant continues to pay rent, even though they haven’t been living there for a while, it means the place is not abandoned. In this case, it’s best to contact your tenant to find out what’s going on. If they are away for an extended time, let them know that you or your representative will need to check on the place every week or so until they return. It’s unsafe to leave a property vacant. If your tenant has stopped paying rent and is gone, they might have abandoned the property.

2. Speak with the emergency contacts

This is one of the times to call the emergency contacts listed on your application. Let them know your concerns and ask if they know whether your tenant has moved out.

3. Ask the neighbors

Maybe one of the neighbors saw your tenant moving out.

4. Check to see whether the utilities are off

Give your tenant 24-hours’ notice that you will come in. If you hear back, you can ask what’s going on. But if you don’t get a response, come over and check all the utilities. If they are off, it’s a sign the place might be abandoned.

5. Check for garbage and old food

If the place has old garbage and rotting food in it, you have found another sign that your tenant might have abandoned the property.

What to do with abandoned personal property left behind

If there are valuables such as clothing and furniture still in the unit, the place might not be abandoned. But then again, it might. In this case, you need to get in touch with the tenant. Notify them to pick up their property by a certain date. If they don’t get it by that date, let them know that you will dispose of it, donate it, or keep it for yourself.

Related: What to Do with Abandoned Personal Property

Once you determine the place is abandoned:

If your tenant has stopped paying rent, their emergency contacts told you your tenant has moved, the utilities are off, and nothing is left in the rental, you can probably determine that your tenant abandoned the property. Here’s what to do.

1.  Send a letter

Send your tenant a letter notifying them they have 10 days to let you know whether they have abandoned the rental unit. If you have not heard from them, you will declare the property abandoned.

2. Take photos

Take photos of the property that demonstrate why you think the place has been abandoned, such as lack of furniture or an overgrown lawn.

3. Document and describe the situation

Document the reasons you believe the place has been abandoned, such as not receiving rent or finding that the utilities have been turned off. Note the date of the last rent payment you received.

4. Record your conversations with the neighbors

Keep a record of any interviews you had with emergency contacts or neighbors.

5. Use USPS certified mail

Send all communication to your tenant through certified mail to prove you tried to contact them about whether they have moved and about picking up their belongings.

It’s never fun to find that your property has been abandoned. Your job now is to mitigate your losses by doing something about it. Take back your property as soon as possible, but make sure you do so the right way.

It’s best to have a lease clause that addresses abandonment issues. But whether you have such a lease clause or not, take the necessary steps to document your reasons for taking back your property.

Year in review: the best of 2018

Written by Lucas Hall on . Posted in For Landlords, For Renters, General

2018 Year in ReviewWelcome to the new year! As we dive into 2019, we’d like to take a moment and reflect the highlights of the past year. Whether you’re a landlord or a renter, we’re glad you’re here. Please enjoy the best articles of 2018.

2018 summary:

We’re proud to be a part of an amazing community of real estate investors, landlords, managers, and renters. Thank you for being there with us.

Without further ado, here are the best articles from last year, based overall on quality, popularity, engagement, and traffic.

Best articles of 2018:


JANUARY

How many pets are too many?

Some landlords believe that even one pet is one pet too many in their rental property. But if you allow pets, you should have a plan on how many to allow. It’s a good idea to have a pet policy in your lease that you go over with your tenants before they move in.


FEBRUARY

Umbrella insurance: can it replace an LLC?

Did you know there’s an alternative to an LLC that protects your finances? It’s umbrella insurance. Landlords can protect themselves from lawsuits with a simple umbrella insurance policy and avoid the problems involved with an LLC.


MARCH

Offer incentives to current tenants so they stay

If you do your job properly when it comes to taking care of the tenants, they’ll ultimately take care of you by wanting to stay. After all, every renter wants and deserves a good landlord and a well-kept property.


APRIL

Cleaning and repair rules when you move out

If you leave your rental in bad shape when you move out, your landlord can hold the cleaning costs from your security deposit. After all, it’s your mess. But the security deposit is your money. You want as much of it back as possible, right? So what are your responsibilities?


MAY

Withholding rent

When can you withhold rent?

Tenants will learn when it is legal to withhold rent when the landlord is not making proper repairs. But this can be a very risky move for tenants: it can result in eviction.


JUNE

Rental application fees: what you need to know

Experienced landlords, particularly those who’ve been burned by less-than-exemplary renters, always screen future tenants. And that costs money. Thus, the application fee, which pays for background checks and credit reports for each person on a lease.


JULY

9 maintenance issues tenants are responsible for

A landlord is required to provide a safe and habitable residence, but landlords and tenants share responsibility for keeping it that way. Tenants should maintain sanitary conditions and contact the landlord whenever repairs are needed.


AUGUST

Tenant move-out letter plus two other free templates

When your tenant plans to move, you should make the move-out process as smooth as possible. This benefits you and your tenant—when your tenant knows what to expect, they’re more likely to meet your expectations. Here are some templates you can use when your tenants’ leases are about to end.


SEPTEMBER

What to do when your tenant is locked out… again

If you don’t mind being on call 24/7 to deal with every Mr. and Ms. Forgetful you rent to, don’t worry about it. But if you appreciate peace of mind and wish your tenants would learn to be more responsible, there’s a few things you can do about those lost-key situations.


OCTOBER

Should I accept credit card payments as rent?

Is it a good choice to pay rent with a credit card? Learn the pros and cons of which payment method makes the most sense for your finances.


NOVEMBER

When is rent considered received?

It’s best not to push the limits on your monthly rent calendar if you want to avoid landlord-tenant friction, or worse yet, eviction. Although many mortgage companies offer a payment grace period beyond the listed due date, the same is usually not true for rental payments.


DECEMBER

A basic guide to landlord and tenant responsibilities

Landlord and tenant responsibilities can be complicated. This guide will outline which party is responsible for common landlord/tenant issues.

9 tips for getting your property ready to rent

Written by Chris Deziel on . Posted in appliances, edited, For Landlords, heating and cooling, landlord, Maintenance & Renovations, move-in, Move-in/Move-out, paid, painting, Step 10 - Repair & Maintain

Things to do when prepping a rentalA turnover gives you a little time to spruce up a rental in a way you can’t while it’s occupied.

You may not need to do a major cleanup or repair, but you can take care of some of the small but important details that make a rental attractive to quality tenants and ready to rent. You should always make repairs necessary to satisfy habitability requirements, but don’t stop there.

Here are 9 tips for getting your property ready to rent.

4 essential and inexpensive tasks

Once your rental is empty and disrupting tenants is not an issue, seize the opportunity by completing tasks that affect habitability, such as checking the smoke alarms and making sure all the electrical outlets and plumbing fixtures work and are safe. While you’re at it, pay attention to the following four tasks:

1. Test and service appliances

  • Turn on the oven to verify that the temperature on the dial and that recorded by a thermometer inside are the same.
  • Check the water heater pilot to make sure it’s steady and blue.
  • Wash a load in the washing machine and dry it in the dryer.
  • Clean out the dryer vents.
  • Perform any repairs that your tests indicate are needed.

Related: How to test appliances before a tenant moves in

2. Clean and deodorize

The entire unit needs cleaning after a lengthy tenancy, but especially the kitchen and bathrooms.

  • Grease buildup in the kitchen may call for a strong detergent, such as TSP, for removal.
  • Use liberal amounts of disinfecting cleaner in the bathroom.

Also clean the carpets. Unless the tenants who just moved out were particularly conscientious, they will probably need shampooing.

Related: How clean does my rental need to be when I move out?

3. Search for and eradicate mold

Look for mold in the following places:

  • Dark corners of the laundry room
  • Bathroom tiles and fixtures
  • Closets

Scrub mold with soap and water, but don’t try to scrub mold out of drywall. Unless the mold is clearly only growing on the surface paint, the only way to eradicate it is to replace the affected drywall.

Related: Is a Landlord Always Responsible for Mold Remediation?

4. Re-key or change the locks

It’s a good idea to change locks between tenants. If you can’t re-key the existing locks on the entry doors, replace them. This might be a good time to install keypunch locks that you can simply reprogram during the next turnover.

Related: 4 Considerations When Choosing Locks for Your Rental Properties

5 important jobs that may cost a bit

If you’re prepared to devote a modest sum—in the neighborhood of  $1,000—toward getting your unit ready to rent, the following items should be high on your to-do list so that you can attract quality tenants who’ll pay top dollar.

5. Paint the walls

Repainting a rental unit before occupancy is a good idea, but it isn’t something you always have to do to get a unit ready to rent. However, painting freshens up the space in a way that cleaning can’t. Professional painting costs from $400 to $700 per room, but you can reduce this cost by more than half by doing the work yourself.

Related: Save money by learning to paint

6. Spruce up the landscaping

If you’re renting a detached unit, pay some attention to the lawn, garden, and entryway.

  • Trim back foliage that covers windows or hangs over the roof
  • Edge the walkways
  • Plant a few decorative plants

You might even consider paying a contractor $100 to $150 to paint the front door, which Realtors advise is the easiest and most effective way to upgrade the exterior of a home.

Related: 5 hardscaping features that attract renters

7. Clean or replace curtains and window screens, and wash the windows

  • Take the curtains down, and put them in the washing machine or have them dry cleaned.
  • Remove the window screens, and wash them or replace them if they are torn or the frames are bent.
  • Consider having the windows professionally cleaned to bring light into the house.

8. Service the central air system

A vacancy provides a golden opportunity to bring in a technician to do a furnace and cooling system tune-up. It will include checking the seals in the compressor and blower, replacing the filters, and inspecting for small other small problems that could turn into big ones at some inopportune moment when an emergency repair is the last thing you need.

Related: Is My Landlord Required to Provide Heat and Air Conditioning?

9. Restore hardwood floors

A floor restoration, unlike a refinish, doesn’t involve sanding off the finish. Instead, you merely scuff up the finish with a floor buffer and apply a refresher coat. It costs a fraction of what refinishing costs and can make a floor in good shape—but dulled by years of traffic—look new again.

Don’t be afraid to spend money to make a unit ready to rent

The amount of time and money you have to invest in getting a unit ready to rent depends on the rental market and the condition of the unit. In a community with rental shortages, you may not have to invest much money or time at all. Things are different in a competitive market, but don’t worry if you need to make a small investment.

By working to attract renters, you’ll reduce downtime and future maintenance costs, thus recouping your investment and keeping your books in the black.

How to convert your home to a rental property

Written by Laura Agadoni on . Posted in edited, For Landlords, Income Ideas, Laws & Regulations, Maintenance & Renovations, Mortgages & Loans, paid

Turning your house into a rentalYou’ve made the decision to convert the home in which you live, in other words, your primary residence, to a rental house.

Maybe you’re moving, or maybe you figure you can make some good money, collecting that all-important cash flow, by making your home your rental property. Whatever the reason for the change, congratulations on your decision!

But you can’t just move out and declare your home a rental. There are some things you need to do first. Find out what they are.

You need to take care of some business before you can turn your primary home into a rental property.

You might need to wait if you have a mortgage

Do you have a mortgage on your home? If so, you generally need to live in the home for at least 12 months before converting it into a rental. Why? Certain perks are associated with buying a primary residence as opposed to investment property.

You often get a lower interest rate and can put down less of a down payment when the mortgage loan is for your primary home versus a vacation home or an investment property.

If you say you’ll live in the house but you really are buying it as investment property, you are committing mortgage fraud. The penalty? Your lender could call in the loan immediately upon finding out. And that will probably lead to foreclosure.

Read your loan paperwork or call your lender to find out the waiting rules that apply to your loan. After you’ve lived in the home for the required time for your mortgage, you’re free to turn your primary residence to rental property.

Find out whether you can get another mortgage

When you move from your primary home, you might want to buy another home to live in. If that’s the case, find out whether you’ll qualify for another mortgage before you rent out your current home.

Your lender might consider the rental income you’ll get, but they might not. Either way, get the ball rolling by talking with a mortgage lender before you make any moves.

Check with your homeowners association

If your home is in a neighborhood governed by an HOA, you need to find out whether there are any restrictions regarding renting out your house. Some HOAs have no restrictions, some allow only a certain percentage or a certain number of homes in the neighborhood to be rentals, and some ban the practice altogether.

Change your homeowners insurance policy

Insurance policies for primary homes differ from insurance policies for rental properties. “In my experience, the insurance classification is really the biggest issue when converting a primary home to a rental property,” says Lucas Hall, Landlordology’s founder and Head of Industry Relations at Cozy.

And Lucas makes a great point. Why? If you need to file an insurance claim after you convert your home to a rental, but your policy has not been changed to a landlord policy, your insurer could deny your claim. “New landlords need to make sure they change the policy from a homeowner occupied policy to a landlord’s policy,” says Lucas.

Related:

Learn about tax changes

It’s best to consult a tax professional both for your rental property and for your primary residence. But you shouldn’t be totally in the dark about taxes. Here’s what you need to know.

The bad news (regarding taxes) is that if you make money, that money is taxable income, so you should figure out how that might change your tax rate.

But here’s some good news. Once you have rental property, you get to take these deductions for rental property expenses:

  • Utilities (if you pay them)
  • Homeowners association fees
  • Landlord insurance policy
  • Repairs you make to the house
  • Property taxes
  • Mortgage interest

Related: Top 15 tax deductions for landlords

Ask your tax advisor or find out from your local municipality about the homestead exemption you probably have on your current home. You are allowed to have that only on your primary residence, so find out what you need to do when you wish to convert your home to a rental.

Ready your property

Look at the competition. Are the rental homes in your area upgraded? If they are and your home isn’t, you should consider putting some money into your home to help ensure you’ll get renters and at market rate.

A new coat of neutral paint throughout the house and nice landscaping in front are good starts. You might want to then make a list of all the improvements you’d like to make and get them done gradually. At the very least, make sure your home is well-maintained and that everything is in working order.

Related: Top 10 Amenities Renters Can’t Resist

Learn how to be a landlord

Once you rent out your home … hello, you’re a landlord. Many of us, myself included, learned the business by jumping in headfirst. But, you are apt to make costly mistakes this way. I know I did.

Related: 5 Unexpected Traits of a Profitable Landlord

But lucky you: If you happened to find this site, browse around. We are here to help you along the way with informative articles, a comprehensive state law section, and a toolbox with tons of resources to help landlords succeed.

A basic guide to landlord and tenant responsibilities

Written by Sarah Block on . Posted in edited, For Landlords, For Renters, Laws & Regulations, Leases & Legal, Maintenance & Renovations, Move-in/Move-out, paid, Security Deposits

Who’s responsible for what in a tenant/landlord relationship?

I have my fair share of crazy landlord stories. I once had a tenant who wanted to move out a month after moving in. The question was: did they need to abide by the lease even though it just started? A year later, I had a tenant file a lawsuit because they believed damage in the unit was the landlord’s responsibility. So, who was right in each of these scenarios? What responsibilities did each party have?

We are going to dive into the not so fun, but always relevant, topic of responsibility. Laws vary between states, and even cities, so pay particular attention to your jurisdiction’s laws. Additionally, the lease will have specific rights outlined that must be obeyed. To learn specific landlord/tenant laws by state, visit this comprehensive guide.

Top 5 debated tenant/landlord responsibilities

1. Security deposit

Landlords are responsible for returning security deposits, usually within 15-45 days of the move-out date, but this varies by jurisdiction, so be sure to know yours. Landlords who own between 10 and 25 units or more often need to hold the security deposit in an interest bearing account. This also varies by state.

If the landlord is withholding any of the security deposit for loss of rent or damage costs, an itemized list needs to be sent to the tenant within the legal time frame for your jurisdiction. What happens if a landlord ignores this law? They can owe the tenant twice the security deposit plus court fees.

Related: What to do if your landlord wrongfully kept your security deposit

2. Lease termination notice

Occasionally, tenants need to break a lease for various reasons. Whether moving out of state or fighting with a roommate, the law needs to be followed. Annual leases lapse on the date listed in the lease. Although, state-by-state the laws vary, and you might need to give notice that you will not be renewing.

When ending a lease early, additional issues arise. The lease generally outlines requirements for breaking a lease; however, a rule of thumb is that the tenant is responsible for the rent until either the end of the lease or a new tenant takes over the lease, whatever happens first.

Monthly leases, in general, require 30-days’ notice from the date rent is due.

So what happened with my tenant who wanted to move out a month after moving in? When that tenant wanted to break the lease so soon, we went by the lease agreement. The tenant paid a fee to have the unit re-listed and was responsible for the rent until new tenants signed a lease.

Related: Can my tenant break the lease?

3. Damage responsibility

The party responsible for rental property damage is a touchy subject, and the reason is clear. The answer is not cut and dry. The general understanding is that the tenant is not responsible for normal wear and tear but is responsible for the damage they have caused. The question is: what is normal wear and tear?

Normal wear and tear falls within these categories:

  • Minor paint damage
  • Faded or worn carpets
  • Faded lamp and window coverings
  • Lightbulb replacements
  • Rust or mold in the bathroom
  • Smelly garbage disposal

As you can see, normal wear and tear are items that would have happened if anyone was was living in the unit; you, your tenant, your mom, your mom’s tenant, etc.

However, more extensive damage is the tenant’s responsibility, such as:

  • Broken window coverings
  • Holes in the wall
  • Pet damage
  • Broken items—doors, windows, appliances
  • Unapproved decor

And here’s what happened with my tenants who thought damage in the unit was my responsibility: When my tenants sued us over the definition of normal wear and tear, the judge decided that all damage above the wear of general use was considered damage that needed to be repaid. Something to note: the judge did not allow us to charge based on quotes to repair damage, only repair receipts.

Related: The ultimate guide to normal wear and tear

4. Habitability

Landlords have a responsibility to provide a habitable place for their tenants to live. But what does habitability mean? Habitability means a safe and healthy environment. Plumbing, electricity, heating, and (in some areas) cooling need to be in working order. Doors and locks must be working correctly. The structure needs to be sound.

Landlords are required to:

  • Ensure the building structure is intact
  • Maintain common areas
  • Keep utilities in working order
  • Remove rodent infestations
  • Manage environmental hazards

Related: 9 maintenance issues tenants are responsible for

5. Utilities

The party responsible for utilities can be complicated to determine. While landlords have the right to require tenants to pay for their own utilities, the renter has the right to working utilities to meet “habitability” requirements.

A good course of action is to have a solid lease with clear responsibilities. The lease must outline who is responsible for paying utilities. Many utility companies have landlord provisions. A landlord can contact a utility company and set it up so if a tenant does not pay the bill, the landlord is notified. This way, the utilities won’t be turned off for nonpayment, and the landlord can avoid frozen pipes or a lawsuit for a rental property that is not habitable. The landlord can then bill the tenant for the nonpayment, and there should be a provision in the lease for utility nonpayment and associated fees.

In conclusion

While I have acquired some crazy landlord stories during my years in the industry, they have each taught me something new. I became an expert in my local jurisdiction’s rental laws and became better able to protect myself in the future. When taking on a new tenant and lease, re-examine your lease and make sure that the responsibilities are legal and clearly outlined so there are no gray areas. Gray areas are the cause of many landlord and tenant headaches.

I’d love to hear your landlord-tenant stories. Feel free to leave them in the comments below.

Rental property in a snowy area? 5 pieces of snow removal equipment you need

Written by Chris Deziel on . Posted in edited, For Landlords, Laws & Regulations, lease clause, Leases & Legal, Maintenance & Renovations, paid, rental maintenance, snow removal, Step 10 - Repair & Maintain

Owning snow removal equipment is practically a basic need in a snowy climate. And in many communities, snow removal is mandatory.

If you have a rental unit where snow accumulates, check the local bylaws. You’re likely to find that someone has to remove snow from public thoroughfares that cross your property, and there is often a time limit. For instance, cities like Ann Arbor, Michigan, give you 24 hours from the time it stops snowing to get rid of the white stuff.

Related: Snow removal—how to avoid being negligent

Whether you do the work yourself, pass the responsibility to tenants through the lease, or hire maintenance personnel, someone has to remove snow if you want to get around, and they’ll need equipment and supplies to do so. As the property owner, you’re responsible for non-compliance with snow removal ordinances, so it’s best if you make sure snow removal equipment is available. Here’s a list of what you should have:

1. Snow shovels

And not just one—you need two or three. You need them even if you have a snowblower. One of the shovels should have the capacity to move a lot of snow at once, but the others should be smaller. Snow is heavy when it’s slushy, and you don’t want anyone to pull a muscle, so the smaller shovels are an option if using the big one is impractical. They also come in handy should a snow shoveling party develop.

Snow shovels are lightweight, usually made of plastic, and they’re inexpensive, so there’s no reason not to have a collection. Keep them on the property so they are ready when the need arises.

2. Scraper

Where there’s snow, there’s usually ice, and clearing it off thoroughfares is part of the job of snow removal. You need a scraper to remove ice, and it should have a long handle so you don’t have to bend over. The scraper itself is usually nothing more elaborate than a flat piece of metal with a slight edge. A spade shovel will do the job in a pinch, but a scraper is lighter and easier to use. Save the spade for digging and spend $30 on a scraper.

3. Snow broom

When you get less than an inch of accumulation, it’s easier to sweep snow off walkways and driveways than to shovel it. While you can use any broom, a snow broom, which is a push broom with moderately hard bristles, works best. Some snow brooms come with a scraper installed on the other end of the long handle, and some come with LED work lights, which makes sweeping easier at night. These are great for sweeping snow off railings and steps.

4. Salt or sand spreader

The stuff that falls from the sky in winter isn’t always snow. If the temperature hovers just above the freezing point during the day, precipitation can take the form of sleet or rain. When the temperature drops at night, though, you’ve often got a frozen mess and a slipping hazard on your walkways.

Salt or sand is a must for these situations, so you should have some. You should also have a spreader to distribute it evenly. It’s akin to a fertilizer spreader for the lawn, and in a pinch, that’s what you can use. However, if you use a spreader for salt, don’t use it for fertilizer. Residual salt in your fertilizer spreader is bad for your lawn.

5. Snowblower …maybe

Sure, a snowblower makes fast work of a large driveway or a long sidewalk after a nice powdery dumping, but it doesn’t work nearly as well in slushy snow. Not only that—someone has to start it. A snowblower engine is like a lawnmower engine, and if you’ve ever tried to start one of those in the spring after a long, wet winter, you know how difficult that can be. How much harder is it to start it in the middle of a wet winter? Often very.

If you have a tenant or maintenance staffer who is savvy about small engines and a warm, dry storage place, a snowblower can be a good investment. Otherwise, consider joining a neighborhood snowblower pool, or stick to manual snow removal equipment.

Snow removal liability can be confusing

Communities in northern climates are usually specific about snow removal requirements, and the bylaws are easy to understand. Not so in communities in which snow is uncommon. For example, Jonesboro, Arkansas, has no law regarding snow removal, so when the town got a 2-inch accumulation in 2013, some landlords let the snow melt rather than clear it. The result was general pandemonium in the town for a week.

One way to avoid liability and keep the community safe is to pass the responsibility to tenants by including a snow removal clause in the lease. Tenants are often in a better position to assess the situation after a snowfall than landlords. In multi-family dwellings or large apartment complexes, it’s probably a better idea to contract snow removal with a third party. Either option is better than doing nothing.

Related: 7 Extraordinary Lease Clauses That I Can’t Live Without

6 easy ways to get more rent for your home

Written by Chris Deziel on . Posted in appliances, edited, For Landlords, Maintenance & Renovations, paid, painting, rental improvements, rental maintenance, Step 10 - Repair & Maintain

Make more money with your rentalsWhen renting out a single-family unit, one rule of thumb is the rental price should be a fixed percentage of the purchase price—something in the range of 1 percent for most parts of the country.

Realities of the real estate and rental markets don’t always make it possible to attain that figure, especially in coastal cities. However, if you want to get as close as you can, try making some improvements to your rental property.

Start by using Cozy’s online rent estimation tool to gauge where you currently stand, and you’ll know how far you need to go to get there. You may find you have some work to do to get top dollar, but the improvements you need to make might be easier and less expensive than you expected. The ideal improvements are those that make the most impact on rental value while costing the least to implement.

1. Tidy up the front

Realtors will tell you that giving your home curb appeal is one of the most effective ways to make it attractive for buyers. That’s also true for renters. Here’s what to do:

  1. Mow the lawn.
  2. Trim back the part of the lawn that overlaps the driveway and walkway.
  3. Clean the driveway and walkway with a pressure washer.
  4. Tidy up the garden and hardscape.
  5. Plant some trees and flowers.

You might consider painting the house, but if that isn’t in your budget, at least paint the front door. It’s the first thing people see, and it makes an instant impression.

Related: 5 hardscaping features that attract renters

2. Add light

Darkness makes a room feel like a dungeon, but light opens it up and makes it feel welcoming. Add light to dark rooms by replacing small, outdated sash windows with larger sliding or casement ones.

Home Advisor’s 2018 average cost estimate for window replacement is lower than you might expect, about $500.

If the rental property is a brick building, or if there is some other circumstance that drives the cost of modifying windows out of your budget, you might consider placing a few mirrors in strategic places to augment light. Renters can always remove them after they’ve signed the rental agreement and moved in.

3. Provide quality amenities

Most people don’t want to move into a rental unit with a stove from the 1960s or a washing machine that makes bumping sounds. If anyone does, they won’t pay top dollar, or they’ll end up complaining if they do.

Quality appliances add value in two ways. One, they are more efficient than older, out-of-date appliances, so they cost less to use. And two, most newer appliances are equipped with technology features and smart functions that consumers who pay top dollar for a rental have come to expect.

Pay special attention to the kitchen. According to Consumer Reports, improving the kitchen is the number one way to make a house attractive to buyers, and this can apply to renters as well. Stainless steel is king when it comes to appliance finish, and stone, quartz, and faux marble outrank plastic laminates by a long shot in the countertop category.

Related: 

4. Paint the interior and exterior

Painting is the easiest and most effective way to transform a property from shabby to scintillating, thus raising the rental price. Pay attention to both the interior and exterior of the property.

Outdoor colors that blend with the surroundings make a property feel more inviting and comfortable. Inside, it’s all about light. Don’t try to be an interior designer, because your tastes might not match those of your prospective renters. Keep the interior colors neutral and clean.

Related: Paint Walls a Neutral Color

5. Get the property professionally cleaned

A rental property should look and smell clean. The bathrooms, kitchens, walls, and floors should be spotless when you’re showing the property.

Odors left by your previous renters must also be gone.

  • A coat of paint covers most odors that have accumulated on the walls, but sometimes it takes more than that.
  • Check for mold and be ruthless about eradicating any that you find. Sometimes, that involves replacing drywall.
  • Open the windows and leave trays of baking soda in inconspicuous places to absorb any smells left by the previous tenant.
  • Do not spray fragrance to cover the odors. Many people find them offensive, and some people are even sensitive enough to get sick.

6. Raise the rent price incrementally

Unless the community in which your property is located has rent control, you can raise the rental price after a lease expires or, in most month-to-month rental situations, on 30 days’ notice.

It’s best to make a rent increase in intervals that make sense. Most people who sign a lease expect a rent increase before they sign the next one, and those on a month-to-month rental agreement also expect one periodically. Keep the increase small enough to encourage your renters to stay, and by the time they move out—if they ever do—the rent will have moved that much closer to your target for the property.

Related: Should I increase rental rates every year?

The bottom line

If you increase your rental price by a significant amount between occupancies, you should be ready for extra scrutiny. You’ll probably have to sink more of your resources into improvements, and the tradeoff in rent might not be worth it. Limiting your rent increases to keep your current renters not only avoids those extra expenses, but by encouraging them to stay, it creates a neighborhood. That’s what many renters, especially those with families, are looking for.

Let me know in the comments if you’ve used any of these tips to raise the rent, or if you have other techniques that have worked!

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