Some additional and exceptional advice from Terry CA, posted on Posted on: Apr 21, 2008 4:47 AM
(by Terry [CA]) Posted on: Apr 21, 2008 4:47 AM
Message: These are just a few of the many many tips a new LL should take to heart whether they have ONE unit or a THOUSAND units.
By posting them here on a regular basis, I hope to help prevent some of the routine mistakes made over and over again by new landlords and the resulting questions asked here "after the fact".
DISCLAIMER: Almost everything in being a LL is governed by STATE laws which vary greatly among the states. THEREFORE you MUST apply any tips given here to YOUR state law's interpretation. You also need to know any applicable LOCAL laws that affect your rental properties!
1. ALWAYS FULLY screen ALL applicants 18 and over - NO EXCEPTIONS (not even adult children). Check credit, evictions/civil/criminal (if you do criminal you must do on EVERY applicant not just "some" - same goes for all checks you do), SS#, bad check history, at least two previous LL references (VERIFIED), employment with WRITTEN income verification (stubs, bank records, certified tax returns, etc). NEVER take anyone with an eviction on their record. Create a list of minimum criteria to qualify and then apply that criteria to each and every applicant EQUALLY.
2. NEVER give a new tenant the keys/possession until you have received the first FULL MONTH's rent and FULL security deposit in CERTIFIED FUNDS ONLY (cash, bank check, etc.) and the utilities have been changed to their names. DO NOT pro-rate the first month..always take a FULL month and if need be pro-rate the SECOND month.
3. Use MTM agreements NOT fixed term leases (yeah OK this one is a TERRY TIP for sure - just READ here all of the woes of lease breaking (both sides) and you'll see why this is one of my tips! This way unless in rent control area, you can terminate the tenancy without having to "prove a case/state a reason". You can also change any material terms including rent increases with just a written notice of (usually) 30 days. Leases protect tenants much more than they protect LL's. There are many times a LL just wants a tenant gone but if it had to be proven why in court it might be a gray area (noise, bugging LL with requests, suspected drugs but no proof, etc.). Also with MTM you can manage your business and respond to the market, etc. as it happens. FACT: Tenants can and will move when they want/need to regardless of the agreement you have in place. Life changes happen.
4. You MUST learn and know well your state LL/Tenant state laws. Learn them all BEFORE you are faced with a situation. Many of the links above are valid but if your state is not a valid link, ask someone here to point you in the right direction for your state. Also learn fair housing laws in your state/locality and what you can do to prevent being challenged by fair housing.
5. Make sure that your rental agreement is in full compliance with your state laws. It is best to use one from a local LL association that has been tested numerous times in your local courts and reviewed by local LL attorneys. DO NOT try to write one yourself. DO NOT trust a real estate agent to "know it all" and write one for you.
6. ALWAYS serve the appropriate pay or quit notice (or whatever action your state requires) for past due rent as soon as legally OK to do so in your state. DO NOT WAIT. NO EXCEPTIONS HERE. DO NOT buy into tenant's "stories", IOU's, excuses, promises, etc. DO NOT ALLOW rent to get past due more than a few days. DO NOT WAIT months to wonder if/how to evict/collect. When the pay or quit/other notice legally expires FILE FOR EVICTION!
7. DO NOT "guess" at the process, the form/language required on a pay or quit notice, the method of service required by your state, etc. ASK HERE BEFORE you serve it or get assistance from a local LL association/attorney.
8. If you must evict a tenant and wish to use a lawyer (which you SHOULD especially the first time) BE SURE the lawyer is one who specializes in LL/Tenant evictions period. You will save a lot of money and know the job will be done right. DO NOT use a "generic" real estate attorney or other speciality one. Again, your local LL association can be of help to find the right person to use who will typically charge a FIXED FEE for evictions.
9. JOIN a local landlord association - EXTREMELY beneficial for ALL LL's to belong to at least one in their area. Even if you just have one or two units. Helps keep you up to date with ever changing market, STATE LAWS/PENDING LEGISLATION, vendor availability, etc. Many of the better ones offer all sorts of publications, onsite training and classes, special speakers, vendor referrals (including legal), tenant reporting, credit reporting services, etc.
10. ASK HERE BEFORE you try and "handle" a crisis not after. When you post a question here, please provide as much background info as possible, then return to the thread several times and answer any questions asked of you about your post to ensure you get accurate and good info you can use. Acknowledge the replies and as a courtesy post what direction you took, why and if/how it worked out. BE SURE TO POST WHAT STATE the property is in - it makes a HUGE difference in what advice you will get and how accurate it will be.
11. Do not try to do long distance landlording if you are new to this business, especially without a GOOD PM. Finding a good PM can be more difficult than finding good tenants and a BAD one can destroy your business.
12. DO NOT rent to family, friends or work associates.
13. DO NOT try to do "self help" evictions as they are illegal. This includes things like shutting off the utilities, changing locks on the unit, etc. You can serve notices but only the court can EVICT a tenant legally.
14. When buying a property, do a LOT of due dilligence. DO NOT "trust" the info provided by the seller and real estate agents. DO YOUR HOMEWORK BEFORE making an offer. Rents are often overstated, expenses understated. Make sure you demand to get copies of existing leases and all applicable paperwork for each tenant. Don't forget to get all security deposits transferred to you at closing.
15. In virtually all cases you must honor and abide by agreements in place at the time you take over a building. If they are FIXED TERM leases you typically must honor them until they expire.
16. Obtain updated tenant (AND guarantor if applicable) info every couple of years. This includes place of employment (address/phone), emergency contacts, car descriptions, etc. Sign updated rental agreements every year or two as well since laws change so often and therefore your forms should too.
17. DO NOT sign a new rental agreement with a new tenant until you have full legal possession of the unit to be rented. Also do not allow possession of a unit until it is fully in "rent ready" condition.
18. In virtually all states/instances you cannot just "keep" a security deposit. PER YOUR STATE LAW you must do a full accounting for it and send it to the tenant's last known address (your unit if no forwarding). There are a few states with odd exceptions..KNOW YOUR STATE LAW ON THIS. This is the area new LL's make the most mistakes in. You MUST send this accounting within a certain number of days per your state and if you don't you can be sued and in many cases have to pay up to THREE TIMES the amount of the deposit back to the tenant EVEN IF THERE WAS EXTREME DAMAGE.
DO NOT charge tenants for normal wear and tear or regular maintenance needed in between tenancies. YOU WILL HAVE out of pocket expenses to turn over a unit and should budget accordingly. You can't charge tenants for items just because they need to be done after they move. The tenant must have CAUSED DAMAGE beyond normal wear and tear in order to be charged for things. Some LL's unfairly overcharge tenants deducting items that the LL should be doing and paying for as a routine cost of business for vacancy turnovers. Or they "forget" to factor in required depreciated value considerations.
19. Never hold a unit for a new tenant for more than a couple of weeks. If you DO hold it, BE SURE to have them sign a holding deposit (or fee depending on your state law) agreement that clearly spells out the consequences if they do not "perform". Never sign a holding agreement with anyone until AFTER you have fully screened them and approved them and make sure ALL parties sign it! And of course do not sign one unless YOU have possession already of the unit in question.
20. Always insist that you meet and verify the identity of every applicant - NO EXCEPTIONS. Do not allow someone else to apply for them. Ask to see photo ID and make sure it is the person before you. Same goes for SS#. Do not rent to anyone you cannot verify identification on. NEVER allow anyone "new" to move into your unit during a tenancy until you have fully screened and approved them. This includes boyfriends/girlfriends, new roommates to replace old ones, etc.
21. Never let a tenant paint or do any kind of fixup work in the unit. The risks FAR outweigh any "perceived" benefits.
22. BEFORE you rent a unit when it is "rent-ready" take pictures in every room and focus on the areas that are most likely to receive damage. Carpets, walls, blinds, sinks/counters, stoves/ovens, toilets, flooring, etc. Also make sure you and the tenant moving in complete a "condition checklist" that lists all items in the unit (structure and appliances, etc) and notes the condition...making sure you have pictures that correspond to the same items listed. THIS IS CRITICAL.
23. When a tenant moves OUT, then complete the same condition list but instead noting the MOVE OUT condition of each item. Take pictures of EVERY AREA of damage you plan to charge for and some general pictures too that correspond to the move IN pictures you took at the beginning of that tenancy. The move in/out checklists and the photos combined are often the make or break point of winning or losing a case in court. VERY IMPORTANT.
Any other "admin" type questions regarding LL/Tenant relations, feel free to ask!