Who Are Today’s Renters?

Posted by Teresa on July 27, 2012 under Landlord Tips, Tenant Credit Checks | Be the First to Comment

With a still-slow economy and high unemployment rate, the face of today’s renter is changing. No longer just young people starting out in life, more middle-aged and older folks are now renting homes than ever before. Some are choosing renting over homeownership. Others are former homeowners who have no choice but to rent.

Here are some tips for a successful relationship with today’s tenants:

1. Be patient with potential tenants. Some may have been forced to sell a dream home, or have lost their home to foreclosure. They may have never rented a home before. Clearly explain your application process, review the lease carefully, and be sure to point out any rules and regulations you’ll want them to follow.
2. Be sure to run tenant credit checks on every applicant. Many potential renters are facing bad credit scores, and could be high risks. However, higher deposits and co-signers can help ease the risk of leasing to them, as long as they otherwise qualify per your requirements.
3. Ask prospective tenants for pay stubs from their current job, a reference from a landlord or work supervisor, and other proof that they are stable and employed.
4. Consider giving a little leeway on painting or planting flowers. Former homeowners often take great pride in their living spaces, and are accustomed to maintaining and upgrading them. Why not allow them to paint (with approval on the colors, of course) or spruce up the exterior of your property?

Displaced homeowners may turn out to be great tenants. They may be ready to stay in your rental property long term, since buying another home might be a long way off. Work with them, and you could have a mutually beneficial, long-term relationship.

How to Determine Market Rents

Posted by Teresa on July 26, 2012 under Landlord and Tenant FAQs, Landlord Tips | Be the First to Comment

When setting rents for an income property, how can a landlord know whether or not it will be competitive with similar nearby properties? If you set the rent too low, you run the risk of losing money; too high, and you could have a hard time filling vacancies.

Fair Market Rent (FMR) is set by the U.S. Department of Housing and Urban Development (HUD), and is based on what a household can expect to pay in a given area for a non-luxury rental unit. Efficiencies, one-, two-, three- and four-bedroom units are included in the FMR listings, which are revised each year. FMRs are set at the 40th percentile of gross rents, which is the point at which 40% of rents are below or equal to, and 60% of rents are greater than or equal to.

Landlords might use the HUD’s FMR when dealing with Section 8 tenants, or to see where their rent stacks up against the government’s estimate. Keep in mind that this figure is going to be set among the lower half of average rents, and also that gross rent includes utilities paid by the tenant.

“Market rents” refers to the going rate for rental properties in an area. As in any other venture, rates are often dictated by what the market will bear. In times of low vacancy, when rental properties are harder to come by, tenants will often pay higher rents. When the rental market is struggling, and tenants are harder to come by, rents tend to go lower as landlords compete for the best tenants.

It’s always a good idea to know where your rents fall in the spectrum between “too high” and “too low.” Here are a few ways you can figure that out:

1. Check Craigslist. Scan the online classified ads site for properties with the same number of bedrooms and bathrooms as yours. Check square footage, neighborhood and amenities that are included, such as fitness rooms, swimming pools or free WiFi.
2. Conduct Some Drive-Bys. Drive around your area and look for “For Rent” signs. Call the number, inquire about the rent, ask about the size and what’s included. If you really want to see how your property compares, schedule a viewing of the property.
3. Call Property Management Companies. They will have lots of information about rentals in your area. Tell them what you’re looking for (a rental that compares with yours) and find out how much they’re leasing them for.
4. Go Online. Zillow, the real estate valuation site, has a “Rent Zestimate” for every property. Simply enter the address, and see what the algorithm comes up with. Rentometer also compares rent rates, as does Rent Jungle. Enter the address, rent amount and number of bedrooms, and it will tell you whether it’s too high or low.

It’s a good idea to check market rents on a regular basis. You don’t want to find out your rents are out of line by leaving money on the table or staring at vacant units!

Why Some Would-Be Landlords Should Think Twice

Posted by Teresa on July 20, 2012 under Landlord Tips, Lease and Rental Agreements | Be the First to Comment

Conditions for entering the rental housing market are great right now. Home prices are low, and interest rates are too. Demand for rentals is up, vacancies are low, and are expected to stay that way for the foreseeable future. That means investors could make buying a home and renting it out actually work.

But there are downsides to being a landlord, which any experienced one could explain in great detail. Here are just a few:

• You’ll dread the sound of your phone ringing or buzzing. Too many times, it will be a call or text from a tenant, to inform you of a problem. Overflowing toilets, stopped up sinks, broken appliances or frozen pipes tend to happen when you least want them to—like in the middle of the night, on Christmas Day, or when you’re on vacation.
• Your lease will be ignored. Sure, you’ll spend time and money creating an iron-clad lease to protect yourself and your property. Only trouble is, tenants don’t always read leases—nor do they understand what things like “no pets” really means. And if they do understand what they’re reading, they may think it can’t possibly apply to them. “Fluffy” is just a tiny kitten, so surely you won’t mind if a tenant brings her home, right?
• Tenants will put others in danger. From allowing boyfriends, girlfriends, unemployed kids, ex-spouses or complete strangers to move in without your permission (or knowledge), to using your property as home base for a drug business, some tenants will try to get away with behavior that could put other tenants in danger. They could also leave you liable for their actions—criminal, dangerous or otherwise.
• You may not get the rent on time. Okay, you probably won’t get the rent on time, all the time. Tenants will pay late, or just stop paying completely. In the meantime, you still have a mortgage and other expenses to pay. Landlords need several months’ worth of reserves set aside in the budget.
• There’s a lot of upkeep. Any property requires care. Rental properties get more wear and tear, so they generally need even more maintenance and repairs. Landlords are required to keep their properties in habitable, safe condition for tenants, and professional plumbers and electricians are expensive to hire.
• It’s difficult to get rid of problem tenants. Eviction is not fun, and it’s expensive. In many places, it’s also a very difficult process. To make it worse, some tenants are experts at avoiding eviction, by exploiting laws designed to protect them.

If you’re smart, tough and know how to run a business, landlording could be a good fit for you. Just be picky about the property you buy, and pickier about the tenants you allow to live there. Thoroughly screen all tenants. Run credit checks and criminal background checks with a reputable company. Then, make sure you enforce your rules fairly and consistently.

Is That a Red Flag? Avoiding Problem Tenants

Posted by Teresa on July 17, 2012 under Fair Housing Act, Landlord and Tenant FAQs, Tenant Screening & Background Checks | Be the First to Comment

No matter if you’re a long-time landlord or new to the business, you’ll likely encounter a wide mix of tenants. Some will be easier to deal with than others. They pay their rent on time, follow your rules and cause no problems. Other tenants can only be described as problem tenants. Most landlords would probably agree that if they could turn back the clock, they would not have agreed to lease to these tenants in the first place.

Trouble is, you can’t always know if a tenant will be a problem. Experienced landlords know that even those with good jobs, good credit scores and sparkling references can later turn out to be duds—or worse. But there are warning signs that every landlord should know.

Five Warning Signs of Problem Tenants

1. They gripe about the application fee. Good tenants realize that running background checks and tenant credit checks, calling references and processing paperwork take time and money. They pay the application fee without complaint. A lease applicant who can’t pay the fee, or complains about it, is a red flag.
2. They ask for more time to pay the first month’s rent and security deposit. Sure, it can be tough to come up with that much money at once. But remember, you’re running a business, not a charity. If a tenant cannot pay all of the rent and security deposit up front, you may want to pass on him or her and wait for someone who can. It’s a matter of choice. Let another landlord deal with it.
3. They are new at their job. This isn’t always a bad thing. Plenty of people switch jobs because they’re offered better positions that pay more, and they can afford more rent. But if a prospective tenant has had several jobs in the past two or three years, the new job might not last for long. And soon, the excuses for paying rent late will begin.
4. They mention relationship problems. Keep in mind that according to the Fair Housing Act, landlords may not discriminate against applicants based on marital status. It’s illegal to refuse to rent to a divorced person, a single person or a married person because of their status alone. But if an applicant mentions boyfriend or girlfriend problems, or that he or she is trying to get away from someone, consider these red flags. Trouble typically follows people around. If you don’t want an upset estranged husband or troubled ex-girlfriend on your hands, pass on this tenant.
5. They ask too many questions. There’s a fine line between having a healthy interest in your rental property and showing warning signs of being a problem tenant. Be on alert if a prospective tenant asks about things like:

• The racial makeup of your building or the neighborhood.
• Exactly what the electric, sewer or gas bills will be.
• How to file complaints or repair requests.
• Where they can smoke (if you have a non-smoking property).
• How often you’ll be inspecting the property, and how much warning you’ll be giving.
• The type of questions, the number of them, or the way they are asked can tell you a great deal about the person who’s applying to live in your property.

As a landlord, you get to decide with whom you enter into a lease agreement. Keep your eyes and ears open, trust your gut instinct and always verify everything a prospective tenant tells you.

Maybe You’re Not Cut Out to be a Landlord

Posted by Teresa on July 13, 2012 under Landlord and Tenant FAQs | Be the First to Comment

Not everyone is destined to be a landlord. It’s a tough profession, and it takes a tough person to do it successfully.

If you agree with the statements below, you might not be cut out for owning and leasing rental property.

• It’s okay to rent out a property without requiring tenants to complete an application.
• I don’t have a problem with tenants allowing their friends and family members move in without my knowledge or permission.
• Background screening and tenant credit checks aren’t that important. I go by gut instinct.
• If a tenant has trouble paying rent, I’ll take some of it out of the security deposit.
• A handshake is better than a written lease.
• I always give tenants a grace period to pay the rent.
• If there are three roommates in a property, I’ll accept three rent checks.
• I’d feel bad telling someone they needed to leave my rental property.
• If I don’t like how someone looks, I won’t rent to him or her.
• I’ll go out of my way to make things work with a tenant.
• Even a bad tenant is better than a vacant rental.
• I’m not familiar with the housing codes or rental laws in my state.

These are just a few ways to get in trouble, lose money or fail at being a landlord. What can you experienced landlords out there add to the list?

To Accept Pets or Not? 4 Reasons For and Against

Posted by Teresa on July 10, 2012 under Landlord Tips, Lease and Rental Agreements | Read the First Comment

While there are some exceptions (such as service animals for tenants with disabilities), landlords are free to decide whether or not they will allow pets in their rental properties. Some welcome tenants with dogs, cats, birds, snakes and spiders. Others allow just dogs and cats. Still others refuse to allow any animals at all (even goldfish!).

4 Reasons Landlords Deny Pets

1. Additional wear and tear: From scratches on wood floors, to torn screens and blinds, to holes in the walls, animals can stretch the definition of “reasonable wear and tear.” This term generally applies to wear and tear by people, not animals.
2. Fur, dander and insects: Many people are allergic to pets. In multi-unit dwellings, pets may cause additional duct cleaning. And they could infest a rental unit with fleas.
3. Damage: Dog and cat urine and droppings can ruin carpets, walls, floors and window coverings. Woodwork, doors and baseboards are often chewed or scratched up. And outside, animals can tear up plants, dig holes or trample grass.
4. Potential liability: Landlords are often found liable in the courts for tenants’ dog bites. Even when they’re not found guilty, court costs can be significant when defending against such a claim.

4 Reasons Landlords Allow Pets

1. To attract good tenants. Pet-owning tenants are often very responsible and willing to pay extra pet deposits. They typically are happy to find a place to rent where their pets are welcome. They can be ideal tenants.
2. They love animals. Many landlords love animals and know how much enjoyment and companionship they bring. They don’t want to deny that pleasure to their tenants.
3. They see a market that needs to be serviced. More Americans own pets than ever before. They’re spending more money on them, as well. In fact, approximately 60% of all households own at least one pet, compared to about 35% of U.S. households that have children.
4. They realize that many tenants will have pets regardless of policies. Even if pets are not allowed in your rental property, some tenants will have pets anyway. So many landlords have changed their policies in order to have some control over the situation, set pet deposit rates, and establish some rules.