Robert S. Griswold - Property Management Kit For Dummies

Be extremely careful that your new lease or rental agreement fully complies with current state and local laws. This warning may seem to be obvious, but residential landlord–tenant laws in many states and even local jurisdictions change constantly, especially since the pandemic. If you attempt to use a lease or rental agreement from another state or even another jurisdiction within the same state, or one that hasn’t been reviewed recently by a landlord–tenant legal professional, a court might determine that your lease is illegal and unenforceable, which could be a very expensive lesson. Never use leases or rental agreements that you find online (including the ones that I’m sharing with you) without having a landlord–tenant legal professional review the lease or rental agreement.

The tenant information the seller provided you during escrow may be outdated. One quick way to update your records is to have the tenants voluntarily complete your rental application form. In many states, you may not have a strong legal argument for requiring existing tenants to provide this information, but many tenants will understand your reasoning and not mind. Other tenants may be reluctant to complete a new rental application. Even if you receive initial resistance, seek this updated information before renewing any lease. You need to be able to determine the financial qualifications of your tenants, particularly if you anticipate future rent increases.

When you acquire a rental property, part of your research is to establish its market rental value. This accurate calculation should play a role in your decision to buy. If a tenant’s current rent is below market value, one of your toughest decisions is how to handle rent increases. If you are in an area that has rent control, you may find that you are unable to increase the rent at all, or that you can do so only over many years until you can get close to the market value. You also need to know whether there is vacancy decontrol, which allows the landlord to raise the rent by some amount or even up to full market rent at the beginning of a new tenancy.

Consider the potential effect of making significant changes in rental rates or policies immediately after you acquire the property. Although you may have strong feelings against allowing pets on the property, for example, your tenants may already have pets. Although you legally have the right to implement your no-pet policy upon lease renewal or proper legal notice, you’re almost guaranteed to have a vacant rental units if you do so. Impose your policies over a reasonable time frame, but be sure that you’re aware of the potential financial consequences in the short run.

As the new owner, you often have higher mortgage payments and expenses (such as necessary repairs and upgrades to the property) than the last owner did. Some tenants get very upset and antagonistic about any rent increase, however, and you won’t be able to appease them. If tenants simply can’t afford an increase, work with them, and give them ample time to relocate if necessary. Other tenants welcome the improvements that accompany the purchase of their building by a new owner and will accept the rent increase.

Fortunately, most tenants expect to be treated fairly and honestly. They understand that you may have higher expenses and will reluctantly accept a rent increase as long as you meet two basic conditions:

You don’t raise the rent beyond the current market rent for a comparable rental unit in the area or beyond any legal limits. Give tenants documented information on comparable rentals in your area to show them that you’re not asking for unreasonable rent.

You’re willing to make basic repairs to the rental units. Don’t ask tenants to shell out extra cash without proving that you’re committed to maintaining and even improving the property. But tenants don’t appreciate all improvements equally. A new roof may not mean much if a unit didn’t leak, but a new boiler or water heater could mean better water pressure or more consistent hot water, which all tenants will notice.

Most tenants just want to be sure they’re receiving some of the benefits of paying higher rent. If you ask for more rent, be willing to reinvest a portion of the rent increase in the property with cost-effective improvements that conserve energy and/or increase tenant desirability.

Although you may be tempted to do so, be wary of making significant renovation or repairs to the property before the close of escrow. If the sale of the property doesn’t go through as planned, you may have spent considerable sums to upgrade the seller’s property without any recourse.

Part 2

IN THIS PART …

Understand the process of renting your residential property.

Get your rental unit ready for tenants.

Set the rent, and evaluate marketing and advertising options.

Show your property to prospective tenants.

Develop good tenant-screening policies.

Chapter 5

IN THIS CHAPTER

Examining and assessing the exterior and interior of your rental property

Cleaning, repairing, and upgrading your property

Working with professionals to prep your rental unit

Properly preparing your vacant residential rental property for its new tenants is critical to your overall success as a rental property manager. Because vacant rental units don’t generate rental income, you need to fill your vacancies with good, stable, rent-paying tenants as quickly as possible. How, you ask? By making sure that the interior, exterior, and grounds of your vacant units are clean and in rent-ready condition when you show them to prospective tenants.

In this chapter, I show you how to look critically at the exterior and interior of your property to formulate a plan for preparing the unit. I also help you figure out what needs to happen, when it needs to happen, and whether you’re better off hiring outside contractors to assist you in your preparation efforts.

First impressions are huge, which is why you want to make sure that your prospect’s first impression of your property is a positive one. If the property’s exterior and grounds don’t look nice, your prospect won’t even bother to see the interior — where you’ve just installed new appliances and the latest in high-quality wood laminate flooring and solid-surface countertops. Similarly, a prospective tenant’s positive first impression of your property’s exterior soon disappears if its interior isn’t just as sharp and well maintained.