Being a property management company specializing in single family homes and small residential rental property, we have helped hundreds of owners manage their homes and small rental properties. We have found similar mistakes that these owners have made while managing their own property. The following are the ten most common. We hope this report will help you become better rental property owners.
Besides the fair housing violation by screening some applicants and not others, you are heading for trouble if you don’t properly screen your prospective renters. Good tenants are a key to an enjoyable rental property investment. You should have each interested renter fill out an application, which should be screened according to credit, prior rental or ownership history, income, income stability and criminal history. Your criteria needs to be consistently applied to every applicant applying for the property.
Rental owners are losing millions of dollars every year because of ignorance and blatant violations of the Fair Housing Laws. It is against the law to discriminate against anyone based on Race, Color, Religion, Sex, National Origin, Handicap or Familial Status. This is a Federal Law. Minnesota State laws also includes marital status, status with regards to public assistance, and depending on the municipality your property is in, may also include affectional preference and age. There are some exceptions to the law if you are an owner occupant, however, it is best to consult with your attorney or HUD before you rent your home.
Most rental home owners simply look in the newspaper or internet to see what other owners are renting their property for and determining a rent. This is a way, but certainly not the only way or the best. Unless you rent out hundreds of properties, you are not going to have the data and experience to effectively set the rent. If you don’t have professional management, try some testing. Start advertising your property two months out. Set the rent higher than what you see in the newspaper or internet. See what response you get. If you get flooded with calls, you may feel good, but this usually means your rent price is too low. It is a matter of testing.
Upon lease renewal, most owners are hesitant to test a higher rent. The typical excuses are that they think the tenant will move or they don’t have enough time to re-rent the property. Consider the cost, time and hassle for the tenant to move. If your tenant is serviced like a valued customer during the course of the lease term, coupled with the hassles of moving, a modest rent increase will typically not scare them away. Tenants don’t expect rent will never go up; and a modest increase every year, as the market dictates, is far easier than a large increase every so often.
Many owners have the idea that a month-to-month lease is the best way to go, since they can get the tenant out easier. Consequently, these owners don’t sign a lease. Although it is true that you would only have to give a 30-day notice to the tenant to vacate, if they didn’t, you still would have to evict them. By then, they would probably be a month behind in rent. Having a good written lease is always the best way to go. You reduce your risk and have a better understanding with your tenant. Even if you decide to go month to month term, get it in writing.
One of the best ways to justify withholding money from a tenant’s security deposit is to have proof of the condition of the property prior to the tenant moving in and again after the tenant moves out. This can be in the form of a written report, photos and/or videotape. Without such proof, you will be defenseless if it goes to court. Be sure to give a copy of the move-in condition report to the tenant upon move in. A good lease would indicate that the tenant needs to complete the Move-In Property Condition Report Form, noting any defects or damages to the property, and deliver it to you within 7 days after the Lease begins. In addition, it would state that tenant’s failure to timely deliver the Move-In Property Condition Report Form shall be deemed as tenant’s acceptance of the property in a clean and good condition.
For most rental property owners, as of December 6, 1996, the Lead Based Paint Disclosure Law went into effect. According to the law, every owner with a property built prior to 1978 must give all new and renewing tenants a disclosure and pamphlet on lead paint. Failure to do so could result in a $10,000 fine.
If you have your tenants move into your property without cleaning, repairing items and painting if needed, you are asking for more calls and complaints and less renewals. Good tenants expect to move into a clean, well-maintained property. By doing it before the tenant moves in, you can work around your schedule, the tenant is happier, and you have to deal with less phone calls and enjoy fewer turnovers.
It’s easy to defer maintenance because you are too busy to do it or don’t have the funds. However, it costs a lot more down the road when the item becomes a problem. Set up a preventive maintenance schedule of changing furnace and A/C filters, testing for carbon monoxide, cleaning gutters, recaulking bathtubs and floors, testing smoke detectors, cleaning under and behind refrigerators along with general upkeep of your property. It doesn’t have to cost a lot but will surely save you a lot.
Owners consistently violate security deposit laws and end up losing in court. Even if you are entitled to withhold the deposit, in Minnesota, you must give the tenant an accounting of it within twenty-one days after they move out. Don’t forget to include interest. The rate is set by state statute.
Most municipalities in the Twin Cities area require rental licensing. This means you have to fill out the city rental license form and pay the license fee. These fees range from $50 all the way to $1000 for an initial license in Minneapolis. Failure to license your property can have some serious implications. Call you city before you rent out your property.
This article is not intended to give legal advice. Please consult your attorney. To learn more about how to make owning rental property hassle free, contact R.P. Management, Inc at 612-379-7890 x 113 to set up a property evaluation.Download EBook