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10 Steps Toward Low-Risk Landlording

Posted on May 6, 2010 | Leave a comment

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

For more help regarding these issues please visit:

https://helpforlandlords.com/landlord-state-guide-assistance/

Application to Rent – It’s all in the details

Posted on April 28, 2010 | Leave a comment

When renting to a tenant or renting to multiple tenants its extremely important to have them fill out a rental application. Rental application form or application to rent form can sometimes be found at your local stationary store like Staples or Office Depot. You can also obtain the form from a tenant screening company, find my list here. Apartment Associations or some may call them landlord associations will also provide the necessary landlord forms. There are local apartment associations and nationwide associations, you can find my lists for them here.

The Application to Rent is one of the most important pieces of information you can gather from a prospective tenant during the tenant screening process. Any information they provide assists you with your decision to rent as well as helps you recover lost rent should they skip out (more on this later).

Here is some of the information you should be requesting from your prospective tenant or new renter when they apply for your apartment for rent or home for rent:

Tenant full name; include first name, middle name, last name, and any AKA’s
Tenant address history; ask for 7-10 years of addresses to assist you in their prior living history
Date of Birth; You cannot base your decision to rent on a tenant’s date of birth, however, many tenant screening reports will require this piece of information. It will also help with the debt collection process should you need to search for them later. Lastly the tenant’s date of birth also assists should a Jr. vs. Sr. issue ever arise.
Social Security Number; This is required to obtain a credit report or tenant screening background report. The tenant’s social security number can also be used for skip tracing should they leave and owe money. Many tenant screening companies will also provide Social Security Fraud reports, I recommend you obtain one on your prospective tenant.
Phone numbers. Get their home phone, cell phone, work phone (see below), and any other phone number they will provide. Why are so many tenant phone numbers needed? There are 2 main reasons: (1) to let them know you want to rent to them and (2) to chase after them if the tenant leaves owing you money!
Work history for 7-10 years. It’s important to know where your prospective new tenant’s income is coming from. Do they have a job? Where is the job? What is the address of the job? Their boss’s name? The phone number to the boss? The title of their job? Their previous and current salary? You want to know all of this information to help in determining if the tenant can afford your rent. A tenant screening report or tenant background check will provide credit and criminal information as well as insight on their debt/credit,, but their current job should still be verified. Employment information also will assist in the debt collection process should the tenant skip out owing you money!
Banking information is also important. First you’ll need this information to verify the tenant has the money to pay your rent. You want to know they can write you a check each month! (and that it will clear!) Plus, as I stated with other information above, this will help with the debt collection process.
Tenant’s Relatives and Non-Relatives. This information is helpful for the tenant screening process and the debt collection process. Relatives will help you confirm the type of person your new tenant is, they will also help you locate the tenant when they leave you owing rent. Non-relatives are also important because friendships change over years. Your tenant may list someone that, after moving out, they are no longer friends with. That person may be more than willing to assist you in your debt collection needs.
Additional Occupants in the apartment. Who else is going to reside in the unit? What is their name? What is their social security number and date of birth? How are they related to your prospective tenant? Depending on the age of the occupant you may want them to sign the rental lease too. You should perform a tenant screening background check on every occupant over the age of 18 even if they aren’t signing a lease!
Pets. Do they have any pets? Do you even want to allow pets? What kind of pets are they? Age of pet? Type of pet? How big (weight) is the pet? What’s the name of the pet? You’d be surprised how often the pet “gets out” and how helpful it can be to know its name. Or if that dog is parking all night because your tenant is gone and you can yell out to the dog.
What type of vehicles does the prospective tenant own or lease? A tenant screening background check will not always show automobiles. You should obtain the type of car, color, year, make and model. Always know whose vehicles are parked on your property. This includes autos for co-tenants/additional occupants.
Ask the hard questions! Ask the tenant on your rental application form if they have ever been evicted from an apartment or home. Sure many will lie and you’ll discover an eviction on their tenant screening eviction background check, but others may fear the question and not even apply — saving you time, money, and aggravation.
Important: You must have a signed release from the tenant authorizing you to obtain and investigate information on them such as a tenant screening credit report, criminal background check, eviction records, etc. The law requires this release, so don’t forget it!
Always have the tenant print their name and provide a signature and date. If the application is more than 1 page, its not a bad idea to have them initial or sign the bottom of each page in the corner.

My apartment association provides rental applications for free. You can also find landlord forms like the application to rent from some tenant screening companies. Visit my listings to locate an apartment association by state or visit the American Apartment Owners Association, a nationwide landlord association providing larger discounts than local chapters, for the necessary landlord forms.