Being a Landlord
Renting out a property is easy right? Put an ad in the paper, get a tenant, and then just cash the checks, right?
Does this sound familiar? You should hope “Deferred maintenance” is not a euphemism for gross neglect in real estate jargon. Those "slumlord" property owners who ignore their tenants, neglect maintenance, and do shoddy repairs on their property suffer more losses than they realize. They will never get good tenants, they don't get good rents, and they don't get a good price when they sell. Their buildings are depreciating not only intrinsically at tax time, they’re depreciating in property value.
Anyone who neglects a business, any business, deserves to lose money at it, and people do lose money at landlording, for if its anything its a business, a business involving some very serious investment, both in terms of time and money.
Understanding the Business
Landlording is a funny business, definitely. The Property Owner must have some business savvy, some common sense and a good sense of the market. Of course, a thick skin, and a sense of humor, sure helps.
Many Property Owners overwhelmed by what’s required of them in terms of skills, attributes, and time. Landlording is nor simply business where you can be a "silent partner" as it is often regarded by theuninformed, one you sink your money into and forget all abut. No, it’s definitely a business, a tough business. You have to work at it. You have to learn a lot. You have to be extremely self-sufficient, and you have to understand people very well.
You need to recognize as well that you are not perfect, and when you fail to notify an irate tenant or fail to raise the rent on a “friend” or fail to do a repair of a roof properly or fail to confront a tenant about a mysteriously appearing pit bull, you need to recognize that. All of us Property Owners will fail at landlording at one time or another. And we shouldn’t let it worry us so long as we learn from our mistakes and keep them from happening again.
Landlording is surely more mistake-prone than the ordinary homeowner variety do-it-yourselfing, is different also because you as the landlord must repair and maintain your property promptly and professionally. It is thus recommended that you seeing consultation with an experienced third party, such as a property manager or even another landlard. After all, you have contracted with your tenants to provide them with habitable accomnukiations. Thus you cannot leave messy, unfinished, or neglected job, especially if you wish to continue landlording successfully. Normally tenants won’t stand for it, nor should they. Tenants are paying full price for habitable shelter, they have every right to expect full service for their money.
Also remember to be businesslike when you or your repairment are handling the maintenance and repairs on your property. This requires that you do the work as quickly and as well as you can and then quickly leave. Tenants have a habit for finding just one more little job for you to do if you linger around. If you don’t have any business in the unit, you should leave. Being businesslike doesn’t mean that you should be heartless and non-caring either.Just let common sense guide you. Be flexible when a situation calls for it.
Let's say a tenant gives you a 6 day notice that he’s moving having been there only 2 months, and he asks you whether he can get any of his deposit back in spite of his agreement to give you a full 30 day notice. Tell him sure as long as he leaves the place clean. Agree to give back a generous portion of his deposits, even though you may legally be entitled to keep every dollar, and if he does leave the place clean, pay up.
That deposit refund he knows he doesn’t qualify for is a great incentive for him to leave everything in good shape. Otherwise, the tenant might take out his frustrations on your rental property’s windows, doors, and walls over your angrily refusing to return any of his deposits. You defintely don’t want a mess on your hands because you know how much messes cost to clean up. When you return more of his deposit than the tenant is expecting, you will ensure that he/she doesn’t leave you with a mess, and you will be creating the goodwill that you need to succeed. The tenent will want to rent from you again if the need arises, and they will tell others that they should rent from you, because you treated him fairly.
Joining with Others in the Business
good business to align yourself with other landlords through membership in a rental housing association. These organizations offer a wide range of services and benefits to the small timer as well as to the big-timer.
Resides distributing a publication, holding periodic meetings, sponsoring seminars, supplying readily available and current landlording infin, ‘nation over the plume, providing access to credit bureau inffinnation on rental applicants, and in some cases maintaining websites with listings of available rentals, associations advise their members of pending legislation and support lobbying efforts so that not every new landlord-tenant law favors the tenant.
If all this doesn’t seem to you to be worth the basic membership fee of around $100 (the fee varies according to the number of units you have), then consider the advantage of meeting people who can keep you current on rents and vacancy factors in your area, people who will listen sympathetically to your woeful tales of landlording despair because the same thing happened to them only last week, people who can understand the lack of balance in media stories about landlords, and people who know What choice rental properties are coming on the market even before they’re listed. A hundred dollars a year is a small price to pay ffir all that.
If you don’t know of a rental housing association in your area, Google “rental housing association”(you town) first. No luck? Go to the National Apartment Association’s website www.naahq.org. There you will find listings of state and heal affiliates along with their particulars. If there is no affiliate near you, think of starting one.
Don’t assume that because you own only one rental house or one fourplex you’d be out of place in such an association. You won’t be. You’ll find people just like you at their meetings.
Finding Discounts
As a landlord do it yourselfer, you will use more supplies than the average homeowner do it yourselfer does, and suppliers know it.
Your local hardware store may give you charge- account privileges and a ten-percent discount to boot. Ask. Even if you can’t qualify for a volume-buyer’s discount yet, open a charge account anyway because it will simplify your bookkeeping chores to pay a bill only once a month and make only one bookeeping entry for most of your hardware needs.
Many hardware store owners will special order for you those items which they don’t stock regularly, items such as glass-fronted fire extinguisher boxes, apartment house mailboxes, and locksmithing supplies.
Sears has a omunercial sales department which offers rental property owners special discounts on certain merchandise, like coin operated laundry machines and other appliances. Home Depot, the nationwide chain of big box stores selling hardware and lumber, offers commercial accounts to landlords. Lowe’s, too, has a commercial desk offering special services fix rental property managers. That’s you.
Check the advertisements in your rental housingassciation’s publication fin those firms which specifically solicit business from landlords. They understand the nature of your business and give sou the service and discounts you deserve as a premium buyer.
Handling the Bucks
Keeping a separate checking account for your landlording transactions is a good business practice. Some landlords go even farther and open a separate account for every building they own (if their rentals are single family dwellings, they have one account for all), and then use that account as their only “bookkeeping system: funnelling all of each building’s income and expenses through the account, a simple but workable approach. Whatever you do, open at least one checking account specifically for your rental properties and itemize your deposits and checks carefully so your bookkeeping chores will be easier to handle.
Before you visit a bank to open your property account, select the name you want to use for the account. This name has nothing to do with how you hold title to the property, how you write rental agreements, what name the property bears on the sign out front, who is authorized to sign checks, or what street the building, is on. Its only the name which your tenants will use as the payee for their checks and money orders.
Presumably to prevent someone else in the area from using the same name you have selected, banks require that everyone opening an account under a business name, which does not include the owner’s real name, must file a fictitious name statement, a process involving a filing fee and legal advertising.
Financial institutions make their profit by obtaining your money at the lowest possible rate (they like it free if they can get it; did you k • that when Swiss banks are overwhelmed with deposits, they not only sum paying interest, they actually charge interest on new deposits?) and lending it out at the highest possible rate. Ask about the options available. Loa out for yourself.
Your checking account should bear maximum interest with the minimum of minimum balances you should make yourself keenly aware Of this minimum balance so you don’t start incurring the dreaded fees charged to accounts which fall below the minimum). It should allow you to write without charge as many checks as you’ll reasonably need each month.
It should provide printed checks at a minimum charge or let you use checks from a check printer you find online. It should make your deposits available to you for check-writing soon after you make the deposits rather than preventing you from using the funds until your tenants checks have cleared their accounts. It should charge reasonable fees for stop-payments, and it should have some kind of overdraft protection so your own checks don’t start bouncing after you have deposited several tenants’checks which do bounce.
In additurn to keeping at least one separate checking account for your landlording funds to flow through, you may want to open a savings account as your “escrow account” for refundable deposits only. These monies are not taxable when you receive then, and should be distinguished as separate from your other landlording income, all of which is taxable.’
These deposits still belong to your tenants, not to you, and separating then, will make them readily available when you need them to use or return. Separating them will also help to remind you to pay interest periodically if you are Compelled to do so by law in your area or if you are inclined to do so as a good faith gesture.
Sums designated as last month’s rent belong to you, not to your tenants. They are taxable as soon as you receive them, and they should not be kept in the same savings account as your tenants’ refundable deposits. All rents, whether paid in advance or arrears, whether they be first month’s or last month’s or any month’s in between are designated as rent and nothing else and should be deposited into your regular property checking account for operations use.