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How to protect your investment, maximize your return, and make the tough tasks much easier
What's the hardest part of being a landlord? Raising the rent? Turning down a prospective tenant? Evicting a current tenant? Dealing with tenant complaints? Whether you're an experienced landlord or new to the business, you know that these problems are just the tip or the iceberg. You might find yourself wishing there were faster, easier, more profitable ...
How to protect your investment, maximize your return, and make the tough tasks much easier
What's the hardest part of being a landlord? Raising the rent? Turning down a prospective tenant? Evicting a current tenant? Dealing with tenant complaints? Whether you're an experienced landlord or new to the business, you know that these problems are just the tip or the iceberg. You might find yourself wishing there were faster, easier, more profitable ways to make these headaches go away-and now there are!
What Every Landlord Needs to Know provides innovative, effective, completely legal solutions for everything from property and tenant issues to maintenance and repair problems, to legal obligations and responsibilities. Landlord Richard Jorgensen also offers ingenious tips on how to avoid many of these difficulties altogether. This comprehensive guide shows you how to:
Complete with a sample rental application, lease, and credit check, as well as a list of credit bureaus and landlord associations, What Every Landlord Needs to Know is your key to making your tenants happier, your property more valuable, and yourself more successful.
Selecting High-Quality Tenants
Marketing Your Product
The key to a successful and profitable real estate investment business is selecting the best tenants possible. And one of the key elements in selecting and attracting the best tenants is to market your rental unit so the ideal tenants like what they see. As you begin the search for the best tenants, the number-one concern for you should be this: Start with what you have to offer. In other words, get your "house" in order.
Here's a 10-Step Program on How to Get Your House in Order
Step Number 1: At all times, before making arrangements to show the rental unit to a potential tenant, take the time to thoroughly scrutinize the rental unit yourself. Look it over. Ask yourself, "Is this a place where I'd consider living?"
As they inspect the apartment, most people will be looking for obvious deficiencies. They want to know if the various utilities, stove, refrigerator, dishwasher, and hot water heater are in good working order. The good tenants you're seeking aren't dumb, so you can be assured that they are going to be very observant of whether the unit is clean.
As you go through your building, check the basement. Make sure it's not full of leftover junk from previous tenants. I've gone into some basements and found a collection of clutter consisting of old mattresses, davenports, chairs, and many other items.
Once you've completed your inspection and you're ready for the showing, go through the unit and review your property and ask yourself, "Am I satisfied that everything is in tip-top shape and ready to show?"
Step Number 2: Check the fire extinguishers, smoke detectors, and smoke alarms. I highlight and magnify this item, fire-related equipment, because of its importance. Make sure that all of the fire safety equipment is in proper working order.
Here's something many landlords overlook. Smoke detectors and smoke alarms have a limited life span. If you have any question about the length of time they've been in your unit, don't hesitate to buy and install new fire and safety equipment at regular intervals. It's inexpensive insurance.
Periodically ask the tenant to check and make sure the smoke alarm and fire extinguisher are working and in proper order. If you have a feeling that the tenant might not do this, then take it upon yourself to check them.
In fact, I'd make it a point to personally take the time to inspect the fire extinguisher. There's an indicator that shows if it's in proper working order and whether it is fully charged. If it's not at full charge, have it recharged.
If the fire extinguisher is located inside of a cabinet or cupboard, purchase a red warning sticker that says "FIRE EXTHIN-GUSHER INSIDE." Place this sticker on the outside of the cupboard door.
I don't think it's a sound idea to buy and install the least expensive fire prevention equipment. If a fire should occur, and it's discovered that you installed a "cheap" fire alarm or detector, an attorney will focus on this detail and might be able to use it against you.
If your building has natural gas heat and gas appliances, stove, and gas dryer, install a carbon monoxide detector. As with your fire protection equipment, this also can be inexpensive insurance. Here's a case to illustrate why you must have all this equipment working properly and in first-class condition.
My friend, the owner of a sixplex, rented one of the units to a single working woman. She checked out well in the application for rent and the credit report. One evening she returned to her apartment and started preparing her meal on an electric stove. She left the kitchen, went into the living room to watch the news, and fell asleep. The stove burner remained on while the food was cooking; well, let's say it overcooked. Eventually, with no one watching, something ignited and started a fire. The smoke awakened her. As she woke up, she discovered flames in the cooking pan and all over the burner.
She didn't have a working fire extinguisher available, so, in a state of panic, she quickly grabbed the food pan by the hand and put it in the sink, ran water over it and put out the flame. By then the kitchen was filled with smoke. She called the fire department and fortunately they used a chemical rather than water to douse the flame. After everything was doused there was considerable smoke damage throughout the apartment. This included burned and scorched woodwork around the countertop, and the stove itself was ruined.
My friend, the owner of the building, filed a claim with his insurance company. There was no problem with the claim, and basically few questions were asked by the adjustor. The insurance company covered the fire loss in the apartment.
But what made this an unusual story was that as she picked up the pan that she put it in the sink, she suffered severe burns to her hands. She went to the hospital for treatment, and the cost was $500. Even though she was completely at fault, the landlord's insurance company paid the $500 hospital bill.
The owner was out a couple of months' rent because the fire damage throughout the apartment rendered it unusable, because it needed a considerable amount of repair and replacement. He, unfortunately, didn't have insurance coverage for the rent loss.
The landlord asked his insurance adjuster about the $500 hospital bill, "Why should we be responsible for her carelessness?" The adjuster simply said, "It's less expensive to pay this small claim rather than getting involved with any legal action. He said, "Once an attorney enters the picture, the cost doubles and triples, and you never know what we could end up with, loss of work time, psychological trauma, inability to have children. Who knows what all?"
I'm sure there are hundreds of stories about fires that occurred when the smoke detectors, fire alarms, or fire extinguishers didn't work or weren't available. Therefore, do whatever it takes and everything within your means to keep that property from being vulnerable to any kind of lawsuit.
Step Number 3: The next important inspection should be the kitchen. Check the floors, window coverings, curtains, blinds, or drapes for stains, dirt, and grease. Make sure the refrigerator is clean and in prime condition. Does the dishwasher smell from the previous tenant's use, and is it clean?
Are the stove and air vents clean? Are there cracks and crevices on the stove filled with cooking grease from the previous tenant?
How are the kitchen cupboards? Think of this. Tenants are placing all of their personal eating utensils, probably a lot of them wedding gifts, into that cupboard. I'm sure you can understand that no one wants to see dirt, spider webs, or, worse than anything, mouse droppings in the cupboards.
The kitchen and bathroom are two prime areas that you want to present to the new tenant as being meticulously clean.
Step Number 4. How does the all-important bathroom look? Would you have second thoughts about using the bathroom if you lived there? If so, correct whatever you observe, smell, or find objectionable. Is it clean? Does it smell good? Is the shower or bathtub clean? A new toilet seat is a simple and inexpensive improvement. There's nothing that will turn off anyone more than an ugly, cracked, or dirty toilet seat. Put in a new roll of toilet paper.
Step Number 5: Don't hesitate to use a good-smelling soap or cleaning agent. If the unit smells fresh and clean, it's to your benefit. Maybe it's best to avoid Lysol. Another smell that is distasteful is roach spray.
Excerpted from What Every Landlord Needs to Know by Richard H. Jorgensen. Copyright © 2005 by The McGraw-Hill Companies, Inc.. Excerpted by permission of The McGraw-Hill Companies, Inc..
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
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Chapter 1 Selecting High-Quality Tenants
Chapter 2 Finding the Ideal Tenant
Chapter 3 Screening Out the Most Undesirable Tenants
Chapter 4 Discrimination Laws
Chapter 5 Avoiding Rejection Lawsuits
Chapter 6 The Legal System
Chapter 7 The Rent Application or Application for Lease
Chapter 8 Understanding the Lease and Contractual Agreement
Chapter 9 Know and Understand the Benefits of the Credit Report
Chapter 10 Finding a Credit Bureau
Chapter 11 Repair, Replacement, and Maintenance
Chapter 12 Developing a Financially Successful Self-Management Program
Chapter 13 Creeping Socialism in Real Estate
Chapter 14 Insurance Coverage
Chapter 15 Eviction and Collecting Past-Due Rent
Chapter 16 Moving Out and Rent Deposit
Chapter 17 The Positive Aspects of Real Estate Investing
Chapter 18 Forms