Becoming a Landlord – Opportunity or Nightmare?
Nightmare landlord stories can be heard on every street corner these days. Your uncle rented to his neighbors daughter, she sublet to her sister who ended up breeding dogs in the house. A few months later they all stopped paying rent. Once he finally got them out, the house was trashed and he lost three months rent, plus he was in over his head with repairs. Your boss rented to his best friends son. The son promptly stopped paying rent, claiming the property was not habitable because of mold in the kitchen. Your boss nearly lost the house to foreclosure because he wasn’t getting the rent. The stories go on-and-on; you probably have a good one too. So how do you protect yourself? You’ve crunched the numbers, made an offer, went through a vigorous escrow process, and got writers’ cramp signing all your documents. You are now an investment owner, a “landlord” … Now how do you survive when there are so many laws to follow and most in California are written to protect your tenant, not you, as the landlord.
Here are a few things to consider when purchasing and maintaining an investment property:
- Know the Neighborhood
Get familiar with where you are purchasing. What is your fair market rent? Renting in the right price range will pull in more solid tenants than renting too low or too high.
Try using Rentometer or asking neighbors what they are paying and make adjustments. Do your homework.
- Know the Property
Does the property have any issues? What maintenance issues may arise? Be pro-active instead of reactive. Make sure to review that buyer’s inspection report you paid for. Where there any red flags in the report? Were they addressed? Read all the notes. If done properly, the report is your best friend. Check out a sample report here.
You don’t have a good inspector? Call Mike.
Was your rental built prior to 1978? If yes, has it been LEAD tested? Make sure any work you have done on the property is in compliance with the Safe Lead Renovator Law. As a property owner, you can receive fines of $37,500 per day if you aren’t careful. Get information about lead certification here.
- Know the Law
Research your city, state, and federal habitability and landlord rules. How often can you “disturb” or visit your property once tenants are occupying the home? How do you properly serve a rent increase, notice of changes to their lease, or ask them to move. The California Department of Consumer Affairs is a great resource for dealing with problems.
What can, and can’t, you do when marketing your property, processing, and application, or even writing your lease? Learn about Fair Housing laws here.
How do you pull credit and abide by Fair Credit Reporting Act?
The San Diego Apartment Association can assist private owners in pulling credit.
When all else fails, when you start running your costs in buying investment property, build in your property management fee, and contact us.
Article by Bethany Luchetta, Feel Good Property Management Broker