Managing rental properties can be a lucrative side business or even a primary source of income, but such an endeavor does not come with headaches. Owning rental properties is not a get rich quick scheme and requires an awareness of not just fair housing laws, but also the ability to realistically factor the costs of repairs, insurance, and property taxes when setting rent amounts.
Repairs, Maintenance, and Improvements
The costs of repairs vary by location. A good rule of thumb is to mirror the routine repair and maintenance expenses required on your own home to the rental properties you manage in your area. Before purchasing a rental property check with local zoning and permit offices to ensure that all necessary repairs and improvements meet local codes. Even if you live in an area without a permit or zoning office, skipping modest improvements could limit the ability to rent to HUD (Housing and Urban Development) participants. Rental properties which are handicap accessible also open up the home to county mental retardation and development disabilities clients. Reliable long-term leases can often be achieved by establishing a good working relationship with area governmental entities which aid specific segments of the population in housing searches.
Two of the most common types of rental property leases are “at will” and those with a finite time frame. There are advantages and disadvantages to both types. At will rental leases do not provide guaranteed long-term income, but do allow the owner managing the property to adjust terms, alter rent price, or remove an unsatisfactory renter more easily. Rental agreements with a clearly defined end date put the renter on the hook for monthly payments until the date arrives, or both parties agree to relinquish one another from the terms. If a renter breaks the lease, the individual is liable for the amount owed until the end date. As an seasoned rental property manager knows, simply because a renter is legally bound to pay, it does not mean he or she will. Some renters take good care of the home and pay pretty much on time for years, others are transient and disappear into the night to parts unknown. I prefer the at will lease approach simply because the eviction process is facilitated more quickly. Once an eviction notice is served, there can still be a three-month wait to get the matter heard in court and give the renter the time allowed by law to move out after the court has ruled in the matter. One of the best tips for new property managers is to set a monthly fee high enough that mortgage, insurance, and property taxes can be made even if the home is tied up in eviction proceedings for several months and not producing income.
Use the services of either an attorney or licensed real estate agent to establish a lease template. Carefully spell out all rental lease terms to avoid problems and potential lawsuits in the future. A deposit review checklist, criminal background checks, long-term guests, pets, lawn care, and home inspection notice should all be detailed in easy to understand terms in the rental lease.