While the idea of owning your own rental property may seem like a quick way to make good money, it is not always a ticket to paradise. There can be many problems, including tenant and legal issues as well as other unforeseen problems.
Knowledge is Power
Renting out the home you used to live in before you got that raise that enabled you to move to a nice beachfront home or a larger home to support your growing family may seem like a ticket to extra income with little effort. If you are not prepared with the knowledge that goes along with renting a property, whether a small single-family home, an apartment building or multiple properties, you can not only end up with time taken from your day job to go to court on landlord-tenant issues, you can end up bankrupt.
We, or I should say “he” decided that “we” were going to be the proud new owners of an apartment building. I saw problems with the plans he had from the start. His lack of experience would have devastating results.
Always get a signature of all adult residents on a written lease, which will include the term of a lease. It protects you as well as your tenants. You have more leverage if you present a written lease in court should a tenant default on rent.
Upon becoming new owner, he made immediate changes that were detrimental to tenants and to us. The property was a small apartment building with tenants who had all lived there for several years. He was not satisfied with the income that we would receive from the eight tenants. Without discussing it with me, not only because we were a couple, but since I have two legal-related degrees, he showed me a notice that he drew up and left for tenants that their rent would increase by $200 each month! The tenants were given 45 day notice. While Ohio law only requires that a 30 day notice be given, the law also protects tenants as well as landlords. He would have learned, had he come to me with his idea before sticking it on the door of the tenants, that when there is an existing lease, a landlord cannot raise rent while that lease is in effect.
That is just one example of why it is imperative to have a copy of the Landlord Tenant Act in your state prior to undertaking becoming an owner of any rental property. Many property managers and owners go out of their way to perform their lawful duties with the utmost compliance with the law with a pleasant, helpful demeanor towards their tenants. Others, like my ex, are hell-bent on making money as fast as possible and ruling their property like a prison warden. I once had an owner of a property that I was renting who included this statement in the lease to tenants; “Quiet time begins at 10 pm and lasts until 6am. TVs and all other sound will be kept at a minimum.” This was a single house, not a prison or juvenile group home!
It is also imperative that you abide by the laws requiring what you, as a landlord, are responsible for regarding upkeep and repairs. The property owner is responsible for things like electrical and plumbing. You must specify in the lease who is responsible for other duties such as shoveling snow and mowing the lawn. If you get a notice from the city because the grass is two feet high and you cannot prove that the tenant is responsible, you will be liable for the fine.
Proper Notification is Crucial
If you manage or own a property, you cannot just decide to go and inspect the property without notice to the tenant. A 24 hour notice is what is normally required, as well as just good business. Do not leave a notice when you know your tenant is out of town and will not see your notice. The tenant can win a court case if you enter the property illegally. I won such a case several years ago. I had noticed small items missing from my home such as a certain bath towel, a ring and other small items. I brushed it off and put it in the back of my mind to look for them on my next day off. Two days later, my 14 year old son, home from school sick, called me at work to inform me that the landlord was there and had a woman in our house! The landlord started yelling at my son that “your mother is behind in the rent and I can come in here any time I please; I own this place!” I called the police and he left. I had put my rent in court escrow because he was not making repairs and he had received notice from the court that my rent was in escrow. I then filed an “illegal entry” charge against him and won the case in court. We were able to move out and legally break the lease. If you want to be a property owner, never put yourself in that position.
When I told me ex about that, it fell on deaf ears. He soon ended up in court for the very same thing. He decided that since he owned the property, he could use his keys to go into the basement of each property, pretending to be conducting an “inspection of the furnace and water heater” when his real intentions were to see inside each apartment. While FindLaw advises to inspect the property regularly, they also indicate that landlords should notify tenants before entering the premises. “Every state has different guidelines on when it is permissible for a landlord to enter a rental unit, but most laws are based on the tenant’s right of privacy,” according to FindLaw. Three tenants vacated the premises within three months after my ex used his poor excuse to gain entry. That left three vacant apartments that we were not getting rent money for because he infringed on tenant privacy.
Bullying Tenants Can Lead to Foreclosure
If you are still making payments on a rental property, the importance of keeping it occupied cannot be stressed enough. But tenants do not want to be bullied, harassed or have their privacy violated. If you act like a bully, you may find yourself in foreclosure and even bankruptcy. After five of eight tenants refused to pay a sudden $200 monthly increase in rent and refused to put up with his bullying his way into the property, the tenants left and so did I! He was left holding the $80,000 foreclosure notice and lost the case. The property was sold, his credit ruined. Thank goodness I never had my name on documents to that building!
When I feel I am financially able to become a property manager again, or owner, I will manage within the full requirements of the landlord-tenant laws, but will do so with respect for tenants.
Quick Tips and Reminders
If you are a rental property owner, it is required that you comply with all housing codes for your properties, keeping them in full repair as well as sanitary, clean conditions. You also cannot raise rent while a lease is in place. Obtain and frequently re-read a copy of the landlord-tenant laws in your state so that you are always informed of what your responsibilities and rights are, as well as the responsibilities and rights of your tenants. Give tenants a copy so that they know their responsibilities under the law. When you and your tenants are fully informed and abide by the laws as well as the terms of a reasonable lease, there are fewer chances that a legal case will arise. You must protect yourself against tenants who do not pay rent, damage the property or commit crimes, but do not treat your tenants as if they are prisoners. You will likely find yourself with an empty rental property and a reputation as a bad landlord as word gets around.