Do I have to pay rent if I lose my job?

Written by Laura Agadoni on . Posted in edited, For Renters, Leases & Legal, paid, Rent & Expenses

The short answer is YES! If you’re in financial trouble and can’t pay all your bills, make sure you pay rent. Otherwise, you can be evicted.

Many people think they can get away with letting the rent slide when finances are tough. This is especially true when renters are in a mom-and-pop type of landlord situation (as opposed to a huge management company).

Not paying rent is one of the worst financial decisions you can make.

Just because you have a mom-and-pop landlord doesn’t mean you’re actually dealing with your mom or dad. Maybe you could get away with not paying money owed to your parents, but you shouldn’t take that risk with your landlord. If you do, you could be out on the streets.

You could be evicted

Not only could you be evicted for not paying rent, an eviction goes on your personal record. When you try to rent another place, the new landlord or property manager will look at your background check and see that you’ve been evicted. And that will make it difficult for you to rent another place.

Prioritize your payments

It’s never good to skip paying a bill, but if you’re in financial trouble because of a job loss or other reason, prioritize which bills you should pay first.

Your top priorities are survival needs: food, medical, and shelter. Make sure you stay healthy and have a roof over your head. Pay for your basic needs first.

It’s better to skip your credit card payment than your rent.

Next in line: pay utilities, your car payment, and legal obligations such as child support and taxes.

After you’ve paid all the above, pay your unsecured debt, such as credit card debt.

Communication is key

When you know you won’t be able to pay all your bills, call your creditors and explain the situation. You might be able to work out a payment plan that you can afford. Some creditors might agree to take a lump sum payment—for less than what you owe—as a settlement. This lessens your bill and eliminates your monthly payments.

Talk with your landlord

Let your landlord know right away if you can’t pay rent. Don’t bury your head in the sand, hoping the situation go away. And don’t keep this information from your landlord, in the hopes they won’t notice—they will.

Besides, if you’re up front with your landlord right away, they might work with you on a solution. They might let you pay rent late one time, for example. Or they might discount your rent moving forward if you do some work in return.

Related: 5 things to do when a tenant stops paying rent

Note: Most landlords are more likely to work with you if you’ve always paid the rent on time, before you lost your job (or whatever financial difficulty has come up), and if you followed all other lease terms.

Keep in mind that your landlord doesn’t have to agree to any arrangement other than what’s in the lease. Your landlord has their own bills to pay.

But it’s a good idea to ask if you can work something out if you find yourself in financial difficulty. Whether you think your landlord will agree to a special arrangement or not, let your landlord know about major changes in your life that affect your ability to pay rent, rather than just skipping out on rent payments.

Note: In general, big management companies are less likely to be flexible with rent payments than independent landlords.

Figure out a game plan

Look at your income and expenses. Maybe not being able to pay rent will only be a one-time incident. But if it looks as though you won’t be able to afford your rent payment moving forward, discuss options with your landlord. They might let you out of your lease, for example, if you agree to leave quickly.

Every situation is different, so discuss your particular case with your landlord.

Discuss your personal situation with your landlord.

What to do if you’re in financial trouble

Here are some measures you can take to help you get back on your feet:

  • File for and collect unemployment if you lost your job.
  • Ask about a hardship program. Call the customer service department for your credit card or loan, and ask about a hardship program that can help you pay your bill. These programs can help in various ways, such as lowering your monthly payment. In many cases, if you enter into a hardship program with your credit card issuer, they won’t report you to the credit bureaus (if you complete the program).
  • Go to your city or county government website for assistance programs. You will often find grants offered by charities, churches, and the government to help with your bills and rent.
  • Get counseling on how to budget. You can find reputable counselors from your local government website.
  • Ask your family or friends for help.

The bottom line

It’s tough to lose your job and then have problems paying your bills. But rent is not an expense you can skip out on. Don’t risk losing your home. Many landlords, if they can financially afford to, will try to come up with a plan that both of you can live with.

What to consider when buying a foreclosure for a rental property

Written by Sarah Block on . Posted in edited, For Landlords, Income Ideas, Laws & Regulations, Maintenance & Renovations, paid, Rent & Expenses

The lure of a good deal can make some pounce before they think, and foreclosures are no exception.

Let’s say you’re scanning the internet for some hiking boots. As you know, your search history follows you, and a pair of hiking boots pop up in an ad for 50% lower than others. You pounce. You get them in the mail, and they look like a floppy, sad version of what you actually wanted.

That’s what acting too fast on a foreclosure is like. You see a good deal, buy, and find that it wasn’t worth the money.

Related: Save 40%-70% on your next rental property with a pre-foreclosure

Four considerations when buying a foreclosure

Before you buy a foreclosed home as your next rental property investment, consider these four things.

1. Can you view before you buy?

When you find a good deal, it might be tempting to buy sight unseen because of the fear of missing out (FOMO) nagging at your brain. Don’t let FOMO win. Always make time to see your potential investment before you buy, even if you need to travel to see it. No one wants a surprise money pit.

By seeing the property ahead of time, look for the following:

  • The neighborhood. This can tell you what kind of tenants you will likely have.
  • The house. This gives you an idea of what work needs to be done.
  • Area rents. You’ll need to know what rent you are likely to get to determine whether the deal will be worth doing.

2.  How long was it empty?

When homes are unused for a long time, the decay gets worse, not better.

Rodents and bugs infest the house. Plumbing dries up from being unused. Bigger problems could have happened and never noticed like a roof leak, plumbing burst, mold, or vandalism/theft.

If you are purchasing a foreclosure that had been abandoned for some time, it’s even more important to get a thorough inspection before buying. You always want to get an inspection, but when it has been empty for a long period of time, ensure that the inspection dives deep.

Related: Risks of leaving a property vacant

3. Should you find skilled labor before you buy?

With nearly all foreclosures, there will be repairs that need to be completed. You should have a team of tradespeople in place before you buy, and have them review the property with you.

By having trusted tradespeople lined up, you have a better idea of what you are getting into or on whether to pass on the property. Ask them to go to the inspection, and then begin pricing repairs before you purchase. Ask their opinion on whether this is a good investment. A reliable team can help you budget properly, quickly repair the property, and turn a profit faster.

4. Are there any rules I should know?

Foreclosures have different rules than a typical property-buying situation.

Some government programs will not allow a buyer to rent out a property for up to five years. Understand the program you are buying your foreclosure from, and ensure that you are allowed to rent it once you own it.

If there are current tenants, legally, you need to honor their lease in some states. The Helping Families Save Their Homes Act of 2009 requires that all new owners of a foreclosure honor leases of previous tenants if they plan on renting the property.

However, if the new owner plans on living in the property, they are allowed to give the tenants 90 days’ notice. This law expired in 2014, and now tenant’s rights vary by state. In Illinois, tenants still need 90 days’ notice; however, in Wisconsin, they can be evicted immediately.

Related:  Are tenants required to move out during a foreclosure?

Use the same best practices as with any property

The same considerations for any rental property are still valid with a foreclosure.

Before buying, consider the cap rate. What is your predicted rent? Subtract expenses, including expenses to get the property ready to rent, from the annual rental income. Divide that number by the value of the property. A cap rate of 5%-10% shows that the property is a good investment.

The bottom line

Before making the decision to buy a foreclosure as a rental property, know what you are getting into. Landlords need to find tenants, make fixes, collect rent, and have great relationships with your tenants. You’re running a business, so weigh the pros and cons before diving into renting a foreclosure.

Don’t buy the discount hiking boots without doing the research first.

How to pick a good roommate

Written by Kathy Adams on . Posted in edited, For Renters, paid, Rent & Expenses, roommates, tenant

There’s an art to choosing a good roommate. The more responsible the person, and the better you get along, the better everything will work out for both of you.

Even though it may take a little time to find a great roommate, it’s well worth the effort to prevent unnecessary strain on your sanity and your wallet. Here’s what to do.

1. Advertise

  • Craigslist. Be prepared to be inundated with responses. Help weed out types you don’t want by providing information that’s important to you in a roommate, such as nonsmoker or even a vegetarian.
  • Facebook. Post your quest to your status. It’s up to you whether you make it public or send it only to your friends’ list. Making the post public nets more views, but sending it only to friends also has value, because bots and spammers won’t respond. Tag a few friends who may know of others seeking a new home. This way, you and the potential applicant have at least one mutual contact in common.
  • Roommate apps. These apps can be great places to find someone, but know that some charge for premium versions of their services. RoomieMatch.com, Roommates.com, Roomster, and the Roomi app work a lot like a matchmaking service, helping filter out seekers who don’t match your search criteria.
  • Online college-alumni boards. Great places to find roommates with similar interests and work schedules.

2. Ask questions

  • Do you have a steady income? Ask the other party for proof of income to determine whether they make enough to cover their share of the rent.
  • What other expenses do you have? Other bills such as student loans, medical expenses, or a car lease make a dent in monthly income. Make sure there’s still plenty left over to cover the rent.
  • Do you smoke?  If you don’t smoke, rooming with a smoker may not be a good idea, especially if they smoke indoors.
  • Do you have a pet? Since some rentals have restrictions on pets, it’s good to know upfront whether a potential roommate has any pets. If you have a pet, this is the time to mention it to applicants to see if they mind or if they have allergies.
  • What’s your work schedule? Work schedules are also worth discussing, as this could affect the other party’s sleep routine. If you work nights and they work days, their after-work Netflix sessions might impact your pre-work nap, for instance. If they work from home and spend time making calls, this could also impact your post-work relaxation time.
  • Are you dating anyone? While this may seem too personal, it’s best to know if they have a significant other and if they plan to invite them over frequently. This could be an issue if you don’t like houseguests.
  • Do you have any questions for me? Allow the other person to ask you questions.

After going over the basics, discuss one another’s general habits, likes, and dislikes openly. This gives both of you a chance to find out if rooming together is a good idea. After all, you’ll both probably be named as tenants on the rental agreement.

3. Screen applicants

  • Meet in person. Once you’ve narrowed down the list of potential roommates, arrange an in-person meeting. This allows the chance for you both to make sure you feel comfortable around one another and to discuss furniture, pets, and potential move-in dates.
  • Order a background check. Just as a landlord screens tenants before moving in, due diligence on your part helps ensure you won’t get burned or stuck for the entire rent. Cozy offers a complete screening suite that looks through local and nationwide criminal records and sex-offender registries. It also notes any previous evictions, which comes in handy for weeding out potential deadbeats.
  • Ask for references. And call them. An employer can let you know whether the applicant really works where they say they do. A past landlord can tell you whether they’re a good renter.
  • Get proof. Ask to see several months of pay stubs or other proof of income.

4. Think twice about friends

It may seem like a good idea to rent a place with a close friend or three, but that’s not always the case. That old adage, “Familiarity breeds contempt,” holds especially true for friends and family members.

It may be fun to hang out with your bestie on weekends, but not so fun when you discover they’re a complete slob or that they drink out of your personal jug of juice. A close friend or family member who falls behind on rent could be even more of an issue, since you care about them and may not want to kick them out.

The bottom line

The effort spent finding the perfect roommate is well worth it. You’ll both potentially spend a lot of time in the same space, and you deserve to be as comfortable as possible in your own home.

How to get your landlord’s approval to sublet

Written by Laura Agadoni on . Posted in edited, For Renters, paid, Rent & Expenses, Rental Advertising, Screening, Security Deposits

Permission to subletYou just found out you need to be away from home for an extended time. But you’re still in the middle of your lease period. Subletting your rental would be the perfect solution … but what will your landlord think?

Related: A renter’s guide to subletting your apartment

When you sublet, although you’re still a tenant, you act as a landlord by leasing your rental unit to someone else—a subtenant. Whether you’re allowed to sublet your rental is usually addressed in the lease, and you typically have one of three options:

  1. You are not allowed to sublet—game over, end of story. Don’t do it!
  2. You are allowed to sublet. Go for it—you have free rein!
  3. The norm—You are allowed to sublet only after obtaining written consent of the landlord. (Landlords typically want to screen subtenants.

But what if the lease doesn’t say anything about subletting?

A rarity, but if your lease is silent on the issue, check to see whether your state has any laws on the books about subleases. And more important, just ask your landlord.

Keep in mind that your landlord can refuse your request to sublet your rental, particularly if they have a good reason. With that said, there are ways to help ensure you get your landlord’s approval to sublet.

1. Find a suitable subtenant

It’s best to ask someone you know and trust. A dependable person you can rely on both reassures the landlord and gives you peace of mind that this person will uphold their end of the bargain—paying the rent on time, taking care of the property, and following all other lease terms.

If you don’t know anyone who wants to sublet, you can still find a suitable subtenant.

  • Tell everyone you know that you’re looking.
  • Post on social media and Craigslist.
  • Ask if your roommates will do the same—they’re the ones who’ll be living with this person, so it benefits them to find someone.

If you do post the unit online, make sure you list the benefits (basically whatever it is that you like about it). Also include photos, and of course, your contact information.

If you’re having a hard time finding someone, lower the rent or offer to pay utilities. Even if you need to subsidize part of the subtenant’s rent, it will be cheaper than paying all the rent and probably cheaper than breaking the lease.

2. Screen potential subtenants

You can sign up with Cozy as a landlord and have your subtenants apply. (If you are already signed up with Cozy as a tenant, you’ll need to use a different email address.) Request that applicants allow a credit and background check. This lets you know whether they have a criminal record and how they handle finances.

Ask for references, and call them. Ideally, you will speak with their employer and their current landlord.

3. Get your roommates on board

If you have roommates, make sure they’re okay with your subtenant. You don’t want to cause any drama before you leave by surprising your roommates with a stranger suddenly living with them. If your roommates approve your subtenant, have them sign a form stating so.

4. Draw up a lease between you and the subtenant

A written lease makes everything clear, protects both parties, and eliminates your-word-against-theirs types of scenarios.

Here are some must-haves to put in the lease:

  • The dates the subtenant will be renting the unit from you
  • The amount of rent they will pay
  • Whether they will pay the rent to you or directly to the landlord
  • Who will pay for utilities

Also provide your subtenant with a copy of your lease so they will know all the particulars of your rental situation.

A note about rent: You can continue to pay the rent to your landlord even if you have a subtenant, and your subtenant would pay you. This way, you know that rent is being paid. You can also choose to let your subtenant pay the landlord directly. But if your subtenant doesn’t pay, the landlord could evict you (unless you pay rent pronto plus any late fees).

It’s a good idea to ask your subtenant for a security deposit. A usual amount is half or a full month’s rent.

5. Put in a written request to your landlord

Let your landlord know that you are taking this matter seriously by mailing (or at least emailing) them about your sublease proposition at least 30 days in advance.

Here’s what to put in the letter:

  • Your reason for needing to sublet
  • The start and end dates of the sublease period
  • The proposed subtenant’s name and current address
  • Your address (or a way of contacting you) during the sublease period
  • A copy of the sublease agreement and any roommate approval form

6. Wait for your landlord’s response

If your landlord doesn’t respond in a week or so, follow up. If your landlord won’t respond or refuses your sublease proposal for no good reason, you may need to contact an attorney or legal aid.

7. Understand what you’re getting into

You are ultimately responsible for your rental unit.

If you choose a subtenant who is irresponsible and skips out on rent, damages the rental unit, or becomes a nuisance to the point of violating the lease terms, your landlord can come after you for the money.

Make sure you have a clause in your lease with your subtenant that states they will be responsible for unpaid rent or damages they caused. That way, if your landlord sues you or keeps your security deposit to pay what’s owed, you can then come after your subtenant or keep part or all the security deposit if you requested one.

Note that the expectation is to return your subtenant’s security deposit. If you do keep all or part of their security deposit, you need to provide a reason.

A subtenant could save you from paying rent for a place you won’t be living in or from having to break your lease. If done correctly, the arrangement could work out well for all parties involved: your subtenant, your landlord, and you.

If you have tips for subleasing, please share them in the comments!

Should I increase rental rates every year?

Written by Laura Agadoni on . Posted in edited, For Landlords, Income Ideas, paid, Rent & Expenses, Step 1 - Perform Research

Raise the RentI know a landlord who charges less than any other rental around, never raises the rent, and is happy about it. He rarely has tenant turnover, but he isn’t making any money, either.

Then again, I know a renter who wanted to stay in her rental at least another year, but the management company informed her of a $200 rent increase to renew. She left that place so fast the property managers didn’t know what hit them. A vacancy, that’s what.

There’s an art to striking the right balance between making money on your rental properties and alienating good renters. We’re here to help you hone your art.

Related: How to Raise the Rent in 4 easy Steps [Free Template]

Why rent increases are a part of life

When expenses for owning property go up, raising the rent is necessary to just maintain the bottom line in your rental business. We’re talking expenses for which you have no control:

  • Property taxes
  • HOA fees
  • Mortgage payments with an ARM
  • Utilities
  • Landlord insurance
  • Property management fees

Add in expenses for which you have some control but are still expenses nonetheless:

  • Maintenance (lawn care, pest control, gutter cleaning, etc.)
  • Repairs (appliance repair or replacement, plumbing issues, tree removal, etc.)
  • Vacancies

If you don’t raise the rent when your expenses go up, it’s like taking a pay decrease. Not too many people do that. If the thought of raising the rent at lease renewal time makes you queasy, just run the numbers to determine whether you must increase rent just to maintain your cash flow.

Your expenses don’t determine rent

Higher expenses might be the reason you need to increase rent. But the market ultimately decides how much rent you can charge. If you need to charge more for rent than what comparable units in your area charge, you probably won’t get it. If that’s the case, you should reevaluate whether it makes sense holding onto that property.

You are allowed to make money

You can raise the rent even if your expenses have not gone up or—by some miracle—have decreased. Being a landlord is a business, and the purpose of being in business is to make money. If your rents are lower than area rents, and your property is in comparable shape to those higher-priced rentals around you, go ahead and raise the rent to be on par with the other rentals.

How much of a rent increase is good?

Remember my friend who left her rental and found another place to rent because of the astronomical rent increase? Don’t be that landlord. The $200 increase represented 16.67 percent of her rent. A better yearly rental increase that most people can handle is in the range of 3 to 5 percent, or in this case, a rent increase somewhere between $36 and $60. Most renters probably won’t leave if the rent increase is slight.

When you can’t raise the rent

If your rental property is rent controlled, or if your jurisdiction has a statute limiting rent increases, you must comply with the law. You might not be able to raise the rent as much as you like—or at all.

You also cannot raise the rent on a fixed-term lease during the lease term, so if your lease agreement is for two years, for example, you cannot raise the rent after one year. You must wait until lease renewal time to raise the rent. On a month-to-month tenancy, you need to give proper notice per your state law before you raise the rent. This is usually 30 days, but check your state law first.

If you really can’t bear to raise the rent

If you are like that landlord I know who charges less rent to decrease turnover, that’s fine if you’re happy with the arrangement. But as soon as that tenant moves out, consider getting the market rate for your rental property.

Cozy rent estimate

If you want to find out the rent prices in your area, I recommend using the Cozy rent estimate tool. There’s a slight fee involved, but if you find out that you can get more for rent than what you were planning to charge, this cost pays for itself many times over. Or you might find that you’ve been asking too much; hence, the difficulty finding tenants.

Here’s how the Cozy rent estimate works. Note: the whole process is complete in a minute or two.

  1. You fill out the particulars about your property. (If you already have your property stored in Cozy, this information auto fills for you.)
  2. You pay.
  3. You immediately get your rent estimate for your property.

You can then view the six-page report for a detailed analysis of how Cozy arrived at your rent estimate. Here are some highlights of what you’ll see:

  • High and low rents for your ZIP code
  • Days on market vs. vacancy for your county
  • Addresses of comparable homes and the rent other landlords charge (my favorite section)
  • Rent trends

View a sample Cozy Rent Estimate report.

Bottom line

If you know what comparable rental rates are for your area, you can feel confident in what you charge for rent. There are no rules (except if your property falls under rent control) on how much you should charge or whether you should raise the rent each year. But it’s always easier for renters to handle a slight rent increase each year than a one-time ginormous rent increase.

3 ways to stay up-to-date on rental prices

Written by Samantha Clark on . Posted in edited, For Landlords, paid, Rent & Expenses

communicationEvery landlord needs to know how to price their rental property. Listing the rent too high or too low can result in money lost, but finding the right balance between the two is tricky.

You don’t want to charge too much and risk the unit staying vacant, but you also don’t want to cheat yourself by not charging enough. Fortunately, when you stay up-to-date on rental prices, you’ll know what to charge appropriately every time.

No matter how big or small your business, it’s always a good idea to stay up-to-date on rental prices. Knowing the rental market ensures you’re earning maximum profit with the least amount of stress.

As you determine the right rental price, you might find that you need to raise the rent. Doing so can be stressful if you’re worried about your tenants fighting the price increase. The good news is raising rent is easier than you think as long as you give your tenants enough notice and gradually increase the rent at each lease renewal period.

Related: How to raise the rent in 4 easy steps

If your research suggests that you should possibly decrease rent, only do so if you’re having trouble renting out the unit or if your tenants don’t usually renew their lease. Here are three ways to stay up-to-date on rental prices.

1. Get a Cozy Rent Estimate report

Cozy’s Rent Estimate reports give you a detailed estimate on how much to charge for rent, which takes away the guesswork. Instead of spending a few hours doing the research yourself, these reports give you a recommended rent price so you can stay competitive with other properties.

Rent Estimate reports calculate the recommended rent price by comparing actual rents charged in your rental’s area, and you get that info in the report. The Rent reports also include other key info about your rental, including localized vacancy rates, county rent trends, and other investor metrics. These data points will help you ake informed decisions about pricing and marketing your rental.

2. Join your local landlord’s association

Your local landlord’s association is an organization within your town or city made up of other landlords, property owners, and investors. Joining can be beneficial to your business in a number of ways. You can network with landlords, stay updated on new eviction procedures, and get information on properties for sale. You’ll also get access to resources like tenant screening services, rent collection services, and credit reporting services.

Being a member of your local landlord’s association is a great way to stay up-to-date on rental prices. You can reach out to other landlords within the association who have properties in your neighborhood and get advice on how much to charge. Asking around will give you most of the information you need for rental prices, and you’ll build relationships in the process.

If you’re not sure how to find your local landlord’s association, Landlordology has a search tool that finds one for you. In case there isn’t a landlord’s association in your area, there are other resources out there. Another alternative is joining online landlord forums to answer your questions and get information about rental prices.

3. Conduct research

It’s simple to do a little research around your neighborhood without leaving your desk. You can start by calling other apartment building managers or landlords of other rental homes nearby and asking what their rates are. Also, sites like Craigslist and Apartments.com can give you a good idea of what rent is going for with properties similar to yours. Pay attention to what prices are going for in your neighborhood compared to what landlords are asking (and hoping!) to get.

But keep in mind, just because landlords are asking for a certain price doesn’t mean tenants are willing to pay that much. Sometimes landlords list a higher rent as a test to see if people are interested. So take caution when you are researching, and make sure to find at least three other properties that are similar to yours to compare to. Looking at three other properties instead of just one gives you an average of what your property is renting for.

With these tips, staying updated on rental prices doesn’t have to be difficult. Some people don’t do any research at all and end up losing money, even though there are simple resources out there. Take the right steps, and you can avoid missing out on the best possible rent price.

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