Real estate investors often think owning and managing a rental property is as simple as signing the lease agreement and collecting a check each month. The truth is that property management requires dedication, time management and attention to detail. Some of the most simplistic aspects of owning a rental property are often overlooked. The following highlights some of the basic responsibilities investors must be prepared for when owning rental properties.
1. Repairs and Maintenance
Whether a property is leased or sits vacant, repairs and maintenance are going to be required. Some investors think a tenant can handle the simple issues in a rental property, but the truth is that landlords are required by law to make all needed repairs. The definition of repairs may vary from state-to-state, but generally, this means keeping the property in habitable condition, such as making sure that the heating, plumbing, water and electricity are in proper working order. The expense with tenant turnover is also an important consideration. As leases expire, many investors forget about costs associated with marketing, applications, and basic make-ready for the next tenant. These costs can add up and affect returns significantly.
Understanding these potential profit killers can help you manage your property more proactively, thus retaining more of your cash flow.
2. Collecting Rent
Not receiving rent payments promptly is one of the top issues that many property owners face. When collecting rents, landlords should consider requesting that tenants make automatic payments directly to their accounts. It is best to have a no cash acceptance policy, as this creates no paper trail if the tenant disappears. Landlords should also make sure to enforce their rent collection policy. This includes having the lease specify the exact amount of rent due every month, where and to whom payments are made, if there is a grace period for payments and the consequences of non-payment or bounced checks.
3. Problem Tenants
The definition of a “difficult tenant” is not confined to those people who simply pay late, but can encompass a whole series of problems that can catch an inexperienced or unprepared owner off-guard. These kind of tenants can be someone who constantly requests items to be fixed or replaced in the house. Other problem tenants destroy personal property or do actual damage to the structure of the house. Sometimes these tenants sublet the property to another renter, or even worse, commit criminal acts on the property. Effective pre-screening can help a landlord avoid losses and potential liability issues associated with the wrong tenants.
The eviction process varies from state to state, but one common thread connecting all evictions is that it takes time and money to evict a tenant. Eviction is the legal proceeding for removing a tenant from a property for breaching the terms of a lease or rental agreement. The timeframe for an eviction commonly takes 30-90 days depending on a state’s laws, and requires following specific steps to peacefully remove the tenant.
Make sure to consult with an attorney who is familiar with the local and state property laws regarding evictions before taking action. With that said, eviction should be a last resort for a landlord. Offering some incentive such as cash-for-keys in order to terminate the lease is often a cheaper and quicker way to remove a problematic tenant.
5. Fair Housing Act
Complying with the Fair Housing Act (FHA) is not optional, and ignorance means nothing in the eyes of the law. When advertising or interviewing prospective tenants, you can face a substantial fine and penalty. Additional discrimination restrictions apply to certain city and county areas, which may include discriminating on sexual orientation, gender identity, Veteran and military status, age, etc. Check with government agencies in your area to make sure you are in full compliance.
ABOUT LONGHORN INVESTMENTS
Longhorn III Investments, LLC is a direct private lender offering short term acquisition and renovation capital to real estate investors for both residential and commercial assets. We operate in major metropolitan areas throughout Texas, Missouri, Indiana, and North Carolina.
Highlights of our loan program include:
– Up to 70% of ARV (after repair value)
– Finance up to 100% of cost
– Close in 3 – 5 business days
– No income requirements
– Streamlined, simple approval process
– No pre-payment penalty
Longhorn was formed in 2008 and has funded over 2,100 loans since inception. Our complementary businesses include a title company and real estate law practice operating out of our corporate office. Our wealth of experience puts us in the unique position of being able to help investors through all aspects of each transaction.