10 Steps Toward Low-Risk Landlording

Learn how to protect your rental property from common mishaps and risky situations.

Most rental property owners worry about protecting their investment. From physical damage to the property to insurance claims to lawsuits brought by tenants, there are myriad ways that you can lose money. Fortunately, minimizing risks in a rental business doesn’t require a ton of money or a staff of experts. All you need to do is learn where you’re vulnerable and then take commonsense steps to minimize that vulnerability.

Here are ten steps you can take to protect yourself against liability as a landlord. By acting now, you’ll enjoy a big payoff: reduced likelihood of lawsuits, harm to tenants and guests, damage to your property, and financial distress to your business.

Step #1: Get the Right Insurance for Your Property and Business

Don’t wait until a loss occurs before you determine whether you have the right insurance for your business and property. Review your current policy with your agent or broker, then discuss coverage options that fit your needs.

Step #2: Make Your Property Physically Sound

Keep your property safe so that people don’t get hurt. To do this, learn the basic legal requirements for repairing and maintaining your property, and then follow them.

Implied warranty of habitability. Virtually every landlord must comply with a legal rule known as the “implied warranty of habitability.” This means you must make sure your rentals are in a “fit” and “habitable” condition when tenants move in, and you must maintain this condition throughout the tenancy. Get familiar with your state and local health, building, and safety codes, and strive to keep your property compliant.

Take steps to prevent injuries and losses. In addition, take other reasonable steps to prevent injuries and other losses. For example, take all tenants’ repair requests seriously and fix problems promptly. Inspect your property yourself for hazards. If you can’t address a hazardous situation immediately, warn tenants and visitors about the danger. (For example, put traffic cones around a pothole, or post signs and safety tape near a spill on the floor.)

Step #3: Make Your Rental Property Accessible to Disabled Tenants

Make your property accessible to tenants with mobility impairments and other disabilities. Check whether structures on your property must follow the Fair Housing Act’s “design and construction” requirements. (Generally, multifamily buildings that were designed and constructed for first occupancy after March 13, 1991 must comply.)

Regardless of when your buildings were constructed, seriously consider all requests from a disabled prospect or tenant to modify your building in order to meet that person’s needs. Review each request on a case-by-case basis and grant it if it’s reasonable. For example, a prospect’s request to install grab bars in the bathroom or lower kitchen cabinets is probably a reasonable modification request.

Step #4: Remove Environmental Hazards from Your Property

Removing environmental hazards is often trickier than removing other physical hazards. Environmental hazards often can’t be seen, and they may not become apparent until they cause injury or property damage. For example, a landlord might not learn of lead paint dust on her property until a family gets their child’s blood test results showing elevated levels of lead. What’s more, in some cases environmental hazards remain invisible even once they’ve caused damage, as in the case of carbon monoxide or radon.

Do your best to address environmental hazards before they cause serious damage. Here are some ways to do so:

  • Require tenants to report all leaks and flooding to you promptly so that you can take quick action to prevent mold.
  • Maintain your heating systems and appliances, and install carbon monoxide detectors in order to prevent carbon monoxide build-up.
  • Comply with federal testing requirements when employees or contractors work on asbestos-containing building materials, such as sprayed-on ceilings. These tests will reveal to workers what’s in your building, and you can use this knowledge to protect your tenants, too.

Step #5: Prepare for and Handle Disasters and Emergencies

Take steps to safeguard your business and protect your property, tenants, and employees in an emergency. For example:

  • Back up your computer files and keep important documents (such as a mortgage, note, and management contract) in a secure and fire-proof off-site storage facility.
  • Report suspicious objects, activities, and mail to the police, and take bomb threats seriously.
  • Document the location of utility shut-off valves, a step that can save lives and minimize damage if a fire or other disaster occurs.
  • Create an emergency procedures manual with an evacuation plan that’s tailored to your property.

Step #6: Lower the Risk of Crime at Your Property

In recent years, courts have increasingly found landlords partially responsible for crimes on their properties because they didn’t provide adequate security.

To prevent problems and keep your property and tenants safe, comply with state and local laws concerning security measures on rental properties. Screen your applicants and employees carefully — don’t just look for experience and know-how when it comes to filling a position on your staff. Adopt a smart key policy so that keys don’t fall into the wrong hands, and make sure your intercom system doesn’t link tenants to their apartment numbers. Answer prospects’ questions about security candidly, and deliver on any promise you make to increase security.

Step #7: Avoid Fair Housing Complaints When Choosing Tenants

If a prospective tenant believes you violated her civil rights, she may take legal action against you. Even if you win, defending yourself takes time, money, and energy.

To avoid problems, learn the basics of fair housing laws. The key to compliance is treating everyone the same. Some ways to do this include:

  • putting your screening criteria into a written tenant selection plan and giving a copy to applicants
  • rejecting applicants for legitimate business reasons, such as poor credit or negative references from prior landlords, and letting applicants know your reasons for rejecting them, and
  • keeping an updated log of apartment availability, and granting prospects’ requests for reasonable accommodations. For example, if you have a “no pets” policy and a prospect needs a guide dog to accommodate his disability, let him keep the dog as an accommodation.

Step #8: Adopt Careful and Consistent Business Practices

Many landlords create risks just by the way they go about their business. Be a careful and consistent landlord by using a written lease or rental agreement with tenants and by enforcing lease clauses consistently. Create house rules for tenants to follow (for example, regarding pets or children’s health and safety) and enforce them. Don’t let a friendship with a tenant interfere with your professional relationship. Also, to prevent identity theft, don’t use tenants’ Social Security numbers any more than needed.

Step #9: Avoid Problems When Hiring Help

Hiring help brings the promise of efficiency, savings, peace of mind, and profitability to your business — but it also brings risk. To lower your risk, determine whether you must classify a helper as an employee or an independent contractor.

For employees, be sure to withhold the appropriate payroll taxes and create a zero-tolerance policy against sexual harassment.

When using contractors, make sure they have insurance and sign a written contract with you.

If you’re considering hiring a management company or need to hire a lawyer, ask questions until you’re satisfied you’re choosing the right one.

Step #10: Taxes: Stay on Good Terms with Uncle Sam

Take steps to avoid a tax audit and to maximize your deductions. For example,

  • Establish a recordkeeping system for your business so that you keep track of every document that will substantiate your claimed income and expenses.
  • Understand how your choice of business structure and tax year affect your taxes.
  • Find out what deductions you’re entitled to claim, and then claim them.
  • Finally, hire the right type of tax pro for your business, and review your past returns for evidence of trends or problems.
Information obtained from nolo.com

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Deadline for Returning Security Deposits by State


The following list is a guide to help landlords determine when the security deposit must be returned to the tenant.  As a reminder to all landlords, you should be performing a walk through prior to the tenant moving as this will prevent arguements as to the condition of the unit at move out.

State Deadline for Returning Security Deposit
Alabama 35 days after termination of tenancy and delivery of possession
Alaska 14 days if the tenant gives proper notice to terminate tenancy; 30 days if the tenant does not give proper notice
Arizona 14 days
Arkansas 30 days
California Three weeks
Colorado One month, unless lease agreement specifies longer period of time (which may be no more than 60 days); 72 hours (not counting weekends or holidays) if a hazardous condition involving gas equipment requires tenant to vacate
Connecticut 30 days, or within 15 days of receiving tenant’s forwarding address, whichever is later
Delaware 20 days
District of Columbia 45 days
Florida 15 to 60 days depending on whether tenant disputes deductions
Georgia One month
Hawaii 14 days
Idaho 21 days, or up to 30 days if landlord and tenant agree
Illinois For properties with five or more units, 30 to 45 days, depending on whether tenant disputes deductions or if statement and receipts are furnished
Indiana 45 days
Iowa 30 days
Kansas 30 days
Kentucky 30-60 days, depending on whether tenant disputes deductions
Louisiana One month
Maine 30 days (if written rental agreement) or 21 days (if tenancy at will)
Maryland 45 days
Massachusetts 30 days
Michigan 30 days
Minnesota Three weeks after tenant leaves, and landlord receives mailing address; five days if tenant must leave due to building condemnation
Mississippi 45 days
Missouri 30 days
Montana 30 days (10 days if no deductions)
Nebraska 14 days
Nevada 30 days
New Hampshire 30 days; for shared facilities, if the deposit is more than 30 days’ rent, landlord must provide written agreement acknowledging receipt and specifying when deposit will be returned — if no written agreement, 20 days after tenant vacates
New Jersey 30 days; five days in case of fire, flood, condemnation, or evacuation; does not apply to owner-occupied building with two or fewer units where tenant fails to provide 30 days’ written notice to landlord invoking provisions of act
New Mexico 30 days
New York Reasonable time
North Carolina 30 days
North Dakota 30 days
Ohio 30 days
Oklahoma 30 days
Oregon 31 days
Pennsylvania 30 days
Rhode Island 20 days
South Carolina 30 days
South Dakota Two weeks to return entire deposit or a portion, and supply reasons for withholding; 45 days for a written, itemized accounting, if tenant requests it
Tennessee No statutory deadline to return; 10 days to itemize
Texas 30 days
Utah 30 days, or within 15 days of receiving tenant’s forwarding address, whichever is later, but if there is damage to the premises, 30 days
Vermont 14 days
Virginia 45 days
Washington 14 days
West Virginia No statutory deadline
Wisconsin 21 days
Wyoming 30 days, or within 15 days of receiving tenant’s forwarding address, whichever is later; 60 days if there is damage

The above chart was obtained from nolo and is deemed reliable at the date of this post.

Back Rent Collection – Get on it Immediately!

Collect your back rent as soon as feasible. Clearly, it is a part of the rent collection procedure and not especially cheerful, however after you let the situation spin out of control, you will make collecting sometimes more difficult. If you do not allow that happen, you will have a significantly simpler occasion receiving rent that is later than usual. The 1st second your renter is behind schedule on money owed, you should step up to the plate!

It is valuable to get on it fast, however be judicious with doing so in person since that could lead to conflict. The ideal thing to do is send out a letter to the renter. The correspondence does not have to be sent certified and is not a legal paper. Be certain to send out your letter to the exact property and have the the required postage on it; this way, the second you mail it, it will be classified acknowledged. The subject of the correspondence must courteously say that he or she must notify you to solve the problem as soon as doable.

When the renter offers you some of the monies, it would be sensible to take it. And you ought to present the renter a receipt for the quantity of money you are handed noting that this is simply some of the money and that they are still obliged to shell out the balance of their money owed.

It is completely within your rights as a property owner to look into how substantial a circumstances your renter may be in. You are permitted to look into if they still have a job. If your original rental agreement does not avoid you from communicating with their employer, you might do so to determine if they are currently working at their job.

Additionally, the Fair Credit Reporting Act lets you to check their credit report once more if they are financially indebted to you (with back monies. Your property application is considered a legal paper and nearly always contains a clause noting that this is allowable.

Although it is inside your privileges to do so, it will not be of much benefit to you. Regardless of the renter maybe being unemployed and carrying extra debt, if they come up with the rent money, you can not send them packing. The only thing that getting this updated information may do for you is to give you personal rules as to how much breathing room you will assign them for closing out the balance of their rent.

What you do not want to have happen, if you can dodge it, is not collecting the rent and still having the renter in the apartment. If this happens, you are left with no options but throwing them out.

The first step is to send your renter a Notice to Quit which is considered a legal paper. This paper tells your late renter that they have a certain duration of time to pay you their back rent (usually between three and fourteen days depending on what city your property is located). If they can come up with the late balance, they are permitted to remain living there. If they can not, they must vacate.

If the renter vacates still owing you back payments, you might have to gather the overdue amount in some other way.

The Fair Debt Collections Practices Act (FDCPA) was established to protect consumers (in this case, your renter) from abuse by debtcollectors. The FDCPA states that a property owner is not considered a debt collector since they are acting on their own behalf. But even though you are not subject to the rules of the FDCPA, you can not use the same abusive and often, corrupt practices that the FDCPA disallows.

If your building is managed by someone other than yourself (for example, a residential property manager that lives on the site or you have hired a property management company to manage your property), they are not considered debt collectors either. This is for the reason that the rental payments are not owed to another individual or property management company. Know that, neither you nor your management company (if they look after your property) can mention a third party debt collector during the collection process. If you do, you are considered a debt collector and are subject to the practices of a debt collector under the FDCPA.

If you discover yourself unable to acquire your back payments paid in it’s entirety, you may have to sue the renter for breech of his rental agreement. If this occurs, you can maintain eviction on your own or hire an lawyer who is more familiar with the legal paperwork needed to complete the process to the courts satisfaction.

So, get on it now!

By Stirling Gardner (The Hollywood Landlord) is a writer and property management expert on StockMarketsReview.com

I currently use Rent Recovery Service collection service, they provide a flat fee program that has been extremely helpful in recovering my money.  Plus I get to keep all the money my tenant’s pay!!!  To find a collection agency visit my site here or visit Rent Recovery Service.

Tenant Screening is a Key to Low Vacancy Rates for Rentals

Nicole Lee, a leading property manager with the Ashford Realty Group / Masters Group, a Colorado Springs property management company specializing in investment properties, says finding quality tenants is a key to keeping low vacancy rates for her real estate investor clients.

Online PR News – 27-April-2010 – Colorado Springs, CO – Professional real estate property manager Nicole Lee of the Ashford Realty Group, a company specializing in Colorado Springs property management, says that finding quality tenants is one of the keys to keeping low vacancy rates for her real estate investor clients. She says that while many property managers shortcut the tenant screening process to save time, it invariably ends up costing both the manager and the owner more time and money down the road.

“We would much rather put the hard work into finding good tenants who are interested in taking good care of our properties up front than have to do two or three times the work in the long run by having to fill more vacancies.”

Lee says that there is a culture of cost-cutting among many management firms because most are only interested in the sales side of their business. That leaves the necessary task of screening tenants and keeping a property occupied underprioritized and understaffed.

“We take the long view with our business. We know that investors who place their properties with us do so to keep their investment property producing positive cash flow. That is impossible to do when you have a high vacancy rate due to insufficient tenant screening.”

She says her tenants have been known to go above and beyond the call of duty to leave a property in better condition than they found it.

David Tanaka, President of Rocksolidpower Solutions (http://rocksolidpowersolutions.com), says that the Ashford Group has saved him thousands of dollars on his four Colorado Springs investment properties, in part through excellent tenant screening.

“Ashford Realty Group is not only an expert in their field but they have an expert staff and vendors who can service our Colorado Springs rentals at the most efficient cost. I have been a property owner for over 20 years and I know how hard it is to find a fantastic property manager.”

While other Colorado Springs property management firms focus on simply adding more properties under management to their rolls, Lee says she works hard to cultivate good relationships with experienced investors who will become lifelong real estate clients.

“Building a relationship based on trust with our investors and renters alike is an essential part of our job description. We’ve found that produces rewarding business relationships in the long term.”

Provided by onlinePRnews

Please visit my tenant screening section for tenant screening providers.  As I’ve stated before, I am a Premium Member of the American Apartment Owners Association www.aaoa.com and they provide me with all my tenant screening needs.

The Importance of Credit History in a Tenant Screening

During a tenant screening, a landlord will often run a credit check on the prospective tenant. Here are a few things to consider about the importance of credit history in a tenant screening.

Credit Score

A credit score is calculated using a complex formula that was developed by the credit bureaus. One of the biggest factors in determining a credit score is whether an individual regularly pays his bills. If a credit score is high, you know that you are dealing with an individual who always pays his bills on time. Getting the rent payment is going to be one of the most important things to you as a landlord. By looking at the credit score, you will be able to predict if you are going to get your rent payment regularly.

Securing the Investment

As a landlord, you should look at the screening of tenants as part of your investment process. You want to take all of the proper precautions in order to secure the quality of the investment. By creating a good investment, you will have the option of selling your property with the tenant in place. If you have been thinking about unloading a property, quality tenants are a very attractive feature for potential buyers.

By Sequoia

For information on tenant screening please visit my tenant screening section.

Silicon Valley apartment rents nudge upward

After sliding since late 2008, apartment rents climbed in the first quarter of this year in Santa Clara and San Mateo counties — the latest sign that the region’s economy is stabilizing.

The average monthly rent for all types of apartments in large complexes climbed to $1,510 in Santa Clara County, up nearly 2 percent from $1,482 in the fourth quarter of 2009, according to a report from RealFacts. The company, which tracks rents and occupancy rates in apartment complexes of at least 50 units, said San Mateo County’s average rent inched up to $1,636 from $1,628, an increase of half a percent.

Despite the slight increases, rents are still lower than in the first quarter of 2009, when Santa Clara County’s average was $1,613, and San Mateo County’s was $1,741.

In the Bay Area and across the country, rents peaked in the third quarter of 2008, then fell as unemployment deepened.

“What’s been affecting rents and occupancy is really the economic climate that’s affecting the entire country,” said Sarah Bridge, owner of RealFacts, which is based in Marin County. With modest improvements in the economy and job creation, she said, demand for apartments has increased and rents have followed — modestly.

“My guess is we’re not going to go back down,” she said, referring to the uptick in Silicon Valley and Peninsula rents after five quarters of decline. “We’ll either level off, or there will be a continued increase in asking rents and occupancy.”

Bridge said renting a unit in a large complex is more attractive to some renters now because the move-in costs can be less than when renting from a small landlord. Property managers at large complexes will cut back on the usual security deposit to help fill up their buildings, but smaller landlords often can’t take that risk, and still require hefty deposits. At a time when many people don’t have a lot of cash on hand, she said, “some people will just say, ‘Hey, I’ll take the $99 move-in special, thank you’,” even though they might otherwise prefer renting a house.

But West San Jose resident Kapil Sethi, who has been looking for a new place to rent for about six weeks, said he has not seen many large landlords offer such incentives these days, at least in the West Valley neighborhoods he’s focusing on. He and his family have toured units in large complexes as well as single-family houses, which is what Sethi said he prefers to rent. Not only has he noticed that rents have begun to rise in the well-appointed apartment complexes, but “goodies like the first month free, that’s also stopped,” he said. “Last year there were plenty of them.”

Rents for houses in the neighborhoods he likes have not increased, he said. Right now he’s paying $2,000 a month, having talked his landlord down from $2,200 last summer. Now one of the landlord’s relatives is moving in, and Sethi and his wife and kids need to move. Sethi said he thinks he’ll be able to find a three-bedroom place with a nice backyard for $2,000 or so now.

“I think it’s still a buyer’s market,” he said. “The market is warming up, but there are still plenty of homes available.”

Economist Matthew Anderson of Foresight Analytics in Oakland called the increases in rent and occupancy positive signs for Silicon Valley and the Bay Area economy in general. But he cautioned against pinning too much hope on an indicator like rising rents.

The rate of occupancy also increased locally in the first quarter, according to RealFacts. Large complexes in Santa Clara County were 95.5 percent occupied last quarter, up from 94.7 percent in the fourth quarter of 2009. In San Mateo, the occupancy rate went from 94.6 percent to 95.2 percent. Landlords generally believe they can raise rents when their properties are at least 95 percent full. The recent peak for occupancy in both counties was in the first half of 2008, at 96.5 percent.

Rents in Los Angeles/Long Beach/Santa Ana, with an average monthly rent of $1,536, were the most expensive of the 41 metropolitan areas nationwide surveyed by RealFacts. The San Jose and San Francisco metro areas tied for second with average monthly rents of $1,513. (The San Jose metro area includes Santa Clara and San Benito counties; the San Francisco area includes San Francisco, San Mateo, Marin, Alameda and Contra Costa counties.)

By Sue McAllister of Mercury News

Should you have to write a letter to get your security deposit back?

There’s a very important piece of legislation coming before the Chicago city council, one that would do a lot for ordinary people waylaid by the foreclosure crisis. But there’s a problem with that bill, or at least a version of it floating around the council chambers. One that could hurt vulnerable tenants around the city. The main bill is basically this: If you rent an apartment and your building went into foreclosure and is now owned by a bank, that bank still has to give you back the security deposit you paid when you signed your lease. That’s the part of the bill everyone agrees upon. But there’s another version with an amendment tacked on that would do something entirely different. That version is sponsored by the Chicagoland Apartment Association, a group that represents landlords, that would require tenants to write their landlord a letter, giving them 14 days to return their security deposit, or they risk not getting it back at all. This letter flies in the face of the Landlord Tenant Ordinance, which gives a landlord 45 days to return that deposit or face legal action. Tenants from around the city gathered today before the meeting to support the main bill, but oppose this 14 day notice amendment. Why? Well, they say the people who would be affected by this are the people who are already vulnerable to unscrupulous landlords. People with little knowledge of the law, those who don’t speak English and those who don’t have the money for legal representation. Alderman Helen Shiller doesn’t like this amendment. She said the amendment would give landlords a financial incentive not to give the deposit back. “It’s in my economic interest not to do so,” said Shiller. “I would just wait until that tenant contacted me to return their money – most of them they won’t know they have the right, they won’t do it or they might be intimidated.” Schiller proposed an amendment of her own – one that makes tenants write a 14 day notice before taking legal action because the landlord didn’t calculate the interest on their security deposit correctly. So, for example, when my landlord sent me a check for $12 last year, if I determined that she owed me $15, I should give her 14 days notice before I sue her over $3. That sounds pretty reasonable, right? I mean, lets cut down on the extraneous lawsuits. On the other hand, just as there are a lot of unscrupulous landlords out there, there are just as many unscrupulous tenants – people that are lawsuit trigger happy and just like to sue for the fun of it or to see how much money they can shake loose from honest business owners. Those people often mess it up for the rest of us, raising our rents and costs because they were looking out for themselves. One man giving testimony (I didn’t catch his name) relayed story just like this. His parents and sister bought a building, and the tenants, who lived their only two days while they owned it, alleged that they didn’t get the properly formatted letter, letting them know they would be getting their deposit back. Not that they didn’t get a deposit – they just didn’t get a letter in the proper format. They sued for around $3500, plus legal fees. This poor elderly couple and their daughter paid that out of pocket. Judith Roettig, president of the Chicagoland Apartment Association, says that the ordinance they favor – the one with the 14 day period for everything – says it doesn’t go against the laws already on the books – the Residential Landlord Tenant Ordinance. Tenants right now can sue for twice their security deposit, plus legal fees, if they don’t get their security deposit and interest within 45 days of moving out. “This amendment does not absolutely does not change the owners obligation to comply with all aspects of the RLTO,” said Roettig. “It simply provides a way for the landlord and the tenant to work out out before going to court.” But volunteers who work with tenants at the Metropolitian Tenant Organization hotline say that tenants already have a hard enough time getting their security deposit back. Charlotte Starkes, who volunteers on the hotline, says she talked to one man who paid a $3,800 security deposit – several months rent – and only got $900 back with no notice as to why or what damages he was paying for. Other tenants are told their security deposit is being used to paint or clean the apartment for the next tenant. “It’s done city wide. This problem doesn’t have a color, a neighborhood, an age or a class. It’s going on everywhere,” says Starkes. At the moment, there’s a battle going on in the city council chambers. Fifty plus people are waiting to testify on this legislation, before the building committee even votes on it. So, since we’ve got some time on our hands, what do you think? UPDATE (2:46 p.m.) : As of about one o’clock, Loreen Targos from Metropolitan Tenants Organization told me that after a couple hours of testimony from both sides, the Buildings committee ended up passing the main bill – without either amendment – unanimously. So now it moves to the full council for a vote. The two amendments will be taken up by a subcommittee chaired by Alderman Shiller. Apparently, at the end, Alderman Bernie Stone asked, “Is anyone opposed to ending this useless meeting?” No one was. The democratic process at work…

By Megan Cottrell