HAVE YOU CONSIDERED RENTING OUT YOUR PROPERTY?
If so, may we suggest a few tips to help with that process?
It seems that homeowners are renting their properties more and more these days. Understanding the responsibilities involved, being knowledgeable about regulations and protecting yourself and your investment are key to have the best results for all parties.
ARE YOU UP FOR THE JOB? Being a landlord isn’t as easy as simply cashing a rent check! Rentals don’t always run smoothly. Staying on top of your renter’s calls, repair needs, accounting and management of your property takes time and experience. If you’re up for the job here are some things to keep in mind.
LOCAL REGULATIONS Your city’s website has information on renting legalities that will help you to better understand the local regulations. Use them as a resource to get questions answered
FINDING THE BEST TENANT & SCREENING Just because you’re friends doesn’t mean that you will have a great tenant/landlord relationship. This is a business transaction that comes with lots of responsibility on both sides. Paying on time, respecting the property, maintenance upkeep, and communicating about repairs are a few of the things to remember. Carefully choosing your tenant is key and not just taking the first call received. Background and credit checks should be done along with getting on the phone with the tenant’s rental history contacts.
According to HUD.gov, the provisions of the Fair Housing Act states it is “…unlawful to discriminate in the sale, rental, and financing of housing, and in the provision of brokerage and appraisal services, because of race, color, religion, sex, handicap, familial status, or national origin.” In marketing a property, it is illegal to use marketing language such as, “Perfect for students” or “No families allowed.”
Remember to avoid interview questions like disabilities, marital status, or whether the applicant has children or is expecting. There are a few legal grounds to reject a tenant’s application. For example, admitted smokers applying for a non-smoking property, not meeting credit requirements and also owning a pet in a no pets allowed property.
COMMUNICATION IS KEY It’s state regulated that if you know that your property has mold, asbestos, etc that information must be disclosed to the potential tenant. We recommend becoming familiar with what you must disclose according to your state and communicate properly to the potential tenant. It is recommended putting all of that in writing before renting and having the tenant sign that they were made aware.
BE PROTECTED Asking a tenant to provide rental insurance is common. Homeowners should verify the coverage and make sure the policy is current prior to renting. In some cases, owners need landlord’s insurance. Check with your insurance agent to safeguard against all potential risks. Being confident and secure will help with future liabilities. Tenants will also need renter’s insurance to cover their possessions and provide accident liability protection.
SIGN ON THE DOTTED LINE To avoid risk, owners should make sure the lease documentation covers specific agreement details about the tenant’s responsibilities. Items to include are all upfront costs (first and last month’s rent and a refundable damage deposit). The agreement should also specify any rules the owner has about how many people are allowed to live in the unit, sublet options, the length of the lease, penalty for late rent payments, required notice for lease termination, pet requirements, acceptable sizes/breeds, pet rent or non-refundable/refundable pet damage deposits. Landlords and tenants should also agree on the maintenance requirements of the property when signing these documents. Tenants should sign all agreements and a copy of the signed document should be given to all parties. A notary is usually available for free at your bank and highly recommend.
HIRE PROFESSIONALS Turning your home or investment property into a rental option may seem like an easy task at first, but it’s important to discuss your options and liabilities with real estate attorneys and accountants to make sure you are abiding by tax laws, zoning ordinances and local property rules.
For instance, the IRS stipulates that all rental income must be reported on tax returns annually. Sure, you may qualify for tax deductions, but know which expenses are in fact deductible. There are limits on how much you can deduct each year, and the amount you are able to deduct may differ with the rental activity reported on your tax return.
You may also choose to hire a community manager to facilitate all the communications between the tenant and the owner. This creates a barrier between the two and hiring a third party can streamline communications, repairs and payments while saving the property owner time and possible headache. It can also keep your identity private which in many cases is worth the nominal management fee.
If Southern States Management Group can help you in any way to feel more confident about your rental property, we would love to discuss with you options that we offer.
Please call Tracie at 386-414-3445 for more details.
Author: Diane Michael, Callan Group Communications **The views, thoughts, and opinions expressed in the text belong solely to the author, and not necessarily to the author’s employer, organization, committee or other group or individual.