SMARTERLANDLORDING

ADVICE FROM EXPERIENCE

Dealing With Tenants

A Problem With Money Orders

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Money orders are a common method used to pay rent. Usually a money order is quick and easy for everyone.  A tenant uses their cash to purchase a money order, gives it to the landlord, landlord deposits the money order, all is good.  Well, maybe.

What if the money order gets stolen?  It then becomes not so easy.  For both you and the tenant.

As a landlord, I generally appreciate money orders.  They are basically money in the bank. They can’t bounce because the money has already been paid. Plus, we are not lugging around large amounts of actual cash, which can be a pretty tempting target.  

But if lost or stolen, money orders can be pretty difficult to replace.  Money orders are not like checks which can be easily canceled and then rewritten. A money order has to instead be reissued, which often takes cash the tenant does not have.  

Think about it.  Your tenant saves up money all month.  The tenant then uses this money to purchase a money order to pay you the rent.  The money order then gets stolen, leaving both you and the tenant high and dry.  It can be difficult for some tenants to catch back up, and do you really want to evict an otherwise good tenant for something that was not really their fault?  

The money order provider can perhaps cancel the money order, perhaps not.  They may eventually refund the money or re-issue the money order to the tenant.  But it is up to the tenant to demonstrate that the money order was stolen by providing a police report and then following up with the procedures of the company that issued the money order.  Trust me when I say that this is not as easy as it sounds.  

The above scenario does not happen very often, but it does happen.  And it has happened to us more than once.  The best solution for us landlords is to stop accepting checks or money orders and require tenants to go electronic with a service such as clearnow.  We used this service for years and it worked great.

Some folks are however “unbanked,” meaning they do not use banks.  Yes, even in this day and age people still run to the post office or wherever, wait in line and purchase money orders. These folks will not be able or want to use a system like clearnow.  But the costs of trying to clean up messes which occur with stolen money orders, may mean that unbanked tenants will just have to select another landlord when looking for some place to live.

Kevin Perk is the founder and publisher of Smarterlandlording.com.  He is the author of Advice From Experience To New Real Estate Investors.  Subscribe to Smarterlandlording here. Contact Kevin here.

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Can Landlords Require Their Tenants To Pay For Repairs?

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Can a landlord require a tenant to pay for repairs?

Repairs are a constant in the life of a landlord. Things break and need repairs.  The repairs never, ever stop.  Unfortunately, repairs cost money. Some repairs are bigger ticket items like HVAC equipment, but most repairs are the smaller nickel and dime variety.  Either way it adds up.  Can landlords shift some of these costs to tenants?  Can landlords require their tenants to pay for repairs?  If so, should they?  Read on to learn more.

It Is Done With Commercial Properties

In a word, yes.  Landlords can make require their tenants to pay for repairs, even the ones they did not directly cause.  All that needs to be done is to include certain language in a lease, have the tenant agree to that language and sign the lease.  In fact, requiring tenants to make and pay for repairs is quite common with leases on commercial property.  

A residential lease could theoretically do the same thing (as long as there are no local laws prohibiting it).  Or, as I know a few landlords do, a clause could be inserted into a lease that would make the tenant responsible for any repair under a certain dollar amount.  $100 for example.  Sounds easy right?  Why are more landlords not doing this?  Perhaps because making tenants pay for repairs is not so easy to do and it may in fact cost a landlord more later on.

It Is Perhaps Not That Easy

Making tenants pay for repairs, even minor ones, is just not very common in the residential rental market.  The residential rental market here in most of the US has evolved with the landlord responsible for maintenance.  This fact means tenants have choices in the market.  Because they have to agree to pay for repairs before signing the lease, they can search for properties where they will not be responsible for repairs and then choose to live there.  Of course, if a rental market is particularly tight, their options may be more limited.  On the other hand, placing such a requirement in your lease may limit the number of applicants and restrict your ability to rent a property.

Plus, a landlord must consider the incentives created by such a policy.  Will a tenant do the repairs their lease says they are required to do?  Especially when they have to pay for it?  Maybe, maybe not.  To avoid a backlog of maintenance when a tenant moves out, a landlord with such a repair policy would need to be very proactive with property inspections to ensure that everything is being maintained properly.  

Do The Benefits Outweigh The Costs?

So in sum, yes, a landlord can make a tenant pay for repairs, if they agree to do so in their lease.  While this may sound like a great policy for a landlord to enact, I am not so sure the benefits would outweigh the long term costs.

Do you have a policy in your lease where the tenant pays for repairs?  If so, what is it and how is it working for you?  Please share with a comment.

Kevin Perk is the founder and publisher of Smarterlandlording.com.  He is the author of Advice From Experience To New Real Estate Investors.  Subscribe to Smarterlandlording here.  Contact Kevin here.

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When Can A Landlord Disturb Tenants?

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Tenants have the right to quiet enjoyment.  That grand legal term means that your tenants must be left alone in their home.  It means that you as the landlord cannot just barge into their home anytime you please.  You cannot disturb tenants quiet enjoyment without good reason. What is a good reason?  Read on to find out.

Quiet Enjoyment

Some landlords hold the notion that they truly are the lords of their properties.  And to some extent they are.  But once a lease with a tenant is in place, landlords give up some of their property rights.  One is the right to freely enter the property.  Landlords are not allowed to go in their tenant’s home anytime they want even though they own the property.  Imagine if the bank that holds the mortgage to your home was allowed to come and go anytime they wanted to.  You would not like it.  Under the law, a person’s home (even a leased one) is their castle.

There are times however when landlords can, and should disturb a tenant’s quiet enjoyment.  Landlords just have to know when these times are and how to properly go about it.

When And How To Disturb Your Tenants

Three scenarios come to mind.  The first is repairs and maintenance, the second is routine inspections and the third is showings for prospective tenants.  Each of these scenarios is a legitimate reason to disturb your tenants.  But, each also requires a bit of planning on the part of the landlord.

First, landlords must insert clauses into their lease which allows them entry into a tenant’s home for the reasons stated above.  It has to be spelled out for example, that the landlord will enter the property and conduct an inspection every year.  It has to be stated that the tenant will allow showings to prospective tenants when they give notice to move.  And it has to be stated that you will at times need to do routine maintenance nd upkeep.

Of course, even with these clauses in your lease, a landlord has to give their tenant advance notice of the disturbance.  How much notice?  A week or two for routine maintenance and property inspections is usually enough.  Notice for showings and unexpected maintenance could be a little as twenty-four hours however.  In any case, be sure to provide as much notice as you can.  Doing so will cut down on a lot of tenant animosity.

Disturbing Tenants Without Notice

Are there times when you can barge in to your tenant’s home?  Times when you will just have to disturb your tenant no matter what?  Yes there are.  These are times of emergency.  If water is gushing, sparks are cracking or gas is leaking, you are just going to have to go in and disturb them.  They may not like it and may protest, but it has to be done to save your property and perhaps even a life.

For example, I once had a tenant bump the knob of his gas stove and accidentally turn it on before he went to sleep.  Gas leaked for hours before it was smelled by another tenant.  Since I could not get an answer on the sleeping tenant’s door, I went in, turned off the gas and likely saved the building.  Another time a tenant got drunk, passed out and left her kitchen sink running.  The sink overflowed and started to pour through the ceiling downstairs.  Thinking a pipe had burst and unable to rouse the tenant, I went in.  She was mad I woke her and I was even angrier at her stupidity, but that is another story.  Both times I was completely justified in disturbing my tenants (and yes, she had to pay to repair the ceiling.).

Do Not Disturb Your Tenants

Your tenant has the right to be left alone in their home.  You cannot go in and disturb them just because you own the place.  Even failure to pay rent does not give you the right to barge into their home anytime you want.  In fact, doing do may just get you in trouble.  But, with proper lease clauses, reasonable and expected notice or in the case of an emergency, you can go in and disturb your tenant.

Have a good “disturbing your tenant” story?  Please share it with us.

Kevin Perk is the founder and publisher of Smarterlandlording.com.  He is the author of Advice From Experience To New Real Estate Investors.  Subscribe to Smarterlandlording here.  Contact Kevin here.

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Clauses Every Lease Should Have

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Your lease is the contract between you and your tenant.  For any contract to work and be legal, certain clauses are necessary.  If these clauses are left out or are poorly written, the the landlord runs the risk of serious problems in the future.  This post describes several clauses every lease should contain.

Before I get to clauses, let me start off by saying that there is no universal, standard lease.  Situations between landlords and tenants differ. Properties differ.  State and local laws differ.  Thus the lease found at Office Max or even my lease will not work for you.  A lease needs to be tailored to your unique conditions.  Plus, it should be reviewed by a competent real estate attorney from your area.

That said, here are some clauses every lease should have.

Duration

While tenant turnover may be a cash flow killer, I would strongly advise against open ended leases.  Instead, every lease should contain a duration or a length of time the lease runs.  You want a definite end date, so that either you or the tenant can get out of the contract (with a no-fault eviction if necessary).  Traditionally, with residential leases, the duration is a year, but that amount can be adjusted to fit your particular situation.  Six month or two year leases are not unheard of.

Term

Most residential landlords set the term lengths of their leases at one month.  In other words, while the duration for the lease may last for a year, the term is monthly.  This term is why rent is due to most of us every month.  Some leases have weekly terms.  Hotels have daily terms. Terms can therefore vary, but are important clauses as they set out when we get paid.

Cost

Don’t forget the most important part, which is how much the rent is.  Rental amounts need to be clearly spelled out.  I think most of us know that, but it deserves a mention as it is so important.

Extension

What happens when your lease duration is up?  Does the tenant have to move?  Do they need to sign an entire new lease?  Does the existing lease continue on in some fashion?

I have seen landlords do all of the above.  But the most common way to extend a lease at the end of its duration is to go by the term.  Most of us landlords use monthly terms so the lease becomes monthly, or month to month, in duration.  Of course this can also be weekly or even daily.  Whatever it is, it has to be spelled out in the clauses of the lease what happens when the duration is up.

Late Fees

How much will be charged if the tenant is late with their rental payment?  How much can you charge?  When is a rental payment considered late? All of these items should be spelled out in your lease so there is no confusion.  Plus, you need to provide incentives to get the rent in on time.  State laws often dictate when and how much landlords can charge with late fess.  So know and understand what those laws say.

Notice of Termination

Both side to any contract, like a lease, need advance knowledge that one party to the contract is terminating the relationship.  In the landlord world, this notice of termination means the notice given by a tenant that they are planning to move.  How long should this notice be?  Most landlords require at least the term of the lease, which is most commonly a month.  But why not require a little more?  Would not 60 or 90 days of advance notice give you more time to market and re-rent the property and reduce the interruption of your cash flow?  We have found in our business that it does.

Allow Showings

Once a notice of termination has been provided by your tenant, you need to get the property re-rented.  How do you do that if you cannot show the property?  In our leases we insert a clause that allows us to market and show the property once a notice of termination has been submitted.  Sometimes tenants complain about the intrusion, but we just point out the clause in the lease they singed and that usually ends the discussion.

Overstay

What happens if a tenant gives you notice of termination, whereupon you re-rent the property but the existing tenant does not move when they saw they will?  Where does your new tenant go?  Who pays for the expenses incurred?  Could get pretty sticky if you do not have the proper clauses for tenants that overstay their lease.  In our business, we charge $100 per day of overstay.  That clause tends to keep things moving.

Local Needs

Some states require special stipulations in leases.  You may need to tell folks where their security deposits are held for example.  In Tennessee where I work and live, leases need to have special provision related to notices of non-payment of rent.  Not having such a clause can lead to lost time, income and much frustration for the landlord.

Leases are legally binding contracts.  What they say and how they say it is important.  Carefully consider the words and clauses in your lease. Do not use a “boiler plate” lease and have a competent real estate attorney in your area review it.  What you say, or not say, can make all the difference towards helping or hindering your life as a landlord.

What is in your lease?  Do you have any special clauses that are required in your area or help your landlord business?  Please share with your comments.

Kevin Perk is the founder and publisher of Smarterlandlording.com.  He is the author of Advice From Experience To New Real Estate Investors.  Subscribe to Smarterlandlording here.  Contact Kevin here.

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Can You Call The Cops On Your Tenant?

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Can you call the cops on your tenant?  Yes you can.  But the real question is whether or not the cops will do anything when you call.  It is likely they will not.  Not because they do not want to or do not sympathize with you, but because the landlord-tenant relationship is treated differently under the law.  Here is how.

Criminal vs. Civil

Cops get called to all sorts of situations.  From the murderous to the mundane, they see the darker, stranger side of life and will often take action if a criminal offense has occurred.  The occurrence of a criminal offense is the key.

So what is a criminal offense?

Shoplifting bread from Wal-Mart constitutes theft, passing a counterfeit $20 bill is fraud, breaking a window is destruction of property and someone sitting on your front porch that refuses to leave is trespassing.  All of these scenarios are types of criminal acts that the cops can and often will take someone to jail for.

But what about the tenant that does not pay their rent?  Is that not theft?  Does punching holes in your walls equal destruction of property? When the boyfriend who is not on the lease moves in is that trespassing?  Is it not fraud to knowingly write a rent check that will bounce?

Many would answer yes to the above questions.  Theft is theft and trespassing is trespassing.  However, the powers that be do not quite see it this way.  In most states (Arkansas being an example of the opposite) these issues have been deemed civil matters as opposed to criminal.

In effect, legislating most landlord-tenant issues as civil matters means calling the cops will do the landlord no good. The cops will not likely be able to do anything because the various state legislatures have prohibited them from doing so.  The cops may respond to your call, but unless there has been violence the responding officer is likely to tell you there is nothing they can do.

Your Remedy Is With The Courts, Not The Cops

Instead, the police will tell you that the matter is a civil one.   They will tell you that your remedy is to be found in the courts, not with them.  To reverse a wrong and reclaim your rights as a landlord you have to file a lawsuit.  These lawsuits can range from the eviction we are all familiar with, to a request to garner wages due to damages above and beyond a security deposit.  Even that boyfriend who has moved in and is trespassing will likely not result in any action.

As I said, only in the most extreme cases will calling the cops result in any action.  In all my years as a landlord, and in taking to hundreds of landlords, I can count the number of times the police have taken action against a tenant on one hand.

Screening Is The Key

So yes, you can call the police on your tenants but it is likely that nothing will come of it.  In most cases, the police are legally barred from taking action.  A better idea is to screen tenants thoroughly so that you will not need the services of the police in the first place.  Of course, people can and will do things that no screening method will uncover, so if you need to, call 911.  Most of the time however, screening is the best protection.

Kevin Perk is the founder and publisher of Smarterlandlording.com.  He is the author of Advice From Experience To New Real Estate Investors.  Subscribe to Smarterlandlording here.  Contact Kevin here.

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Landlords, Understand No Fault Evictions

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No fault evictions are making headlines .  Laws are being considered or enacted recently that either ban or restrict the practice in California, Oregon and New York.  Therefore now would be a good time for landlords to understand no fault evictions, why they might be used and offer some suggestions before doing so.

Understanding No Fault Evictions

A no fault eviction is a legal proceeding during which the landlord attempts to regain legal possession of a property from a tenant.  The tenant is being asked to move, due to no fault of their own.  Most tenants facing no fault eviction are often current on their rent and may otherwise be a good steward of the property where they reside.  In lay terms one party to the lease contract, the landlord, is deciding to end the relationship.  The legal process for a nor fault eviction is however generally the same as if the tenant had not paid the rent.  There are legal notices, court dates, judges and judgments.

Why Use A No Fault Eviction?

A landlord might use a no fault eviction for many reasons.  First, upon purchasing a property, a landlord may want to have a clean slate. Inherited tenants will not have been through the new landlord’s screening process and that may cause some unease on their part.

Second, a landlord may want to rehab and upgrade a property.  I can tell you from experience that a major rehab is impossible to do with a tenant living in the property.  Having a vacant property allows for the gutting of kitchens, bathrooms and the replacement of walls, windows, etc.

Third, a property owner may want to move into the property.  I myself moved into one of the first properties I purchased.

Why The Backlash?

In short, there is a backlash because people are being kicked out of their homes even if they have diligently paid the rent and otherwise done nothing wrong.  Some simply do not like that.  They may have lived in the same place for years and developed an attachment to the neighborhood.  Their rent may be under market and they worry about finding a new place of similar quality to live for the same price.  They may not have the money to move.  They may be older or even sick and moving will be difficult.

Taken together, these reasons have produced a backlash resulting in various w or proposed new laws across the country.

What Know About No Fault Evictions

I myself have purchased buildings with existing tenants which I intend to gut, fully rehab and bring back on the market.  Believe me, they needed it and unfortunately the tenants had to go.  Understanding that this can upset the inherited tenants, I strove to ensure that I was in compliance with existing laws, understood existing leases and was as accommodating as I could be.  A bit of tactfulness can go a long way in these situations.

The first thing that any landlord, and tenant for that matter, must understand is that a lease is a contract.  That contract specifies who is a part of the contract, what property the contract applies to, the consideration between the two contract parties aka rent, and the duration of the contract.  Either party can end the contract by providing appropriate notice.  Tenants can move of their own volition and landlords can ask tenants to move.  When tenants refuse, then the landlord is forced to evict.

Secondly, landlords cannot just cannot arbitrarily kick people out of their homes.  Even if they are a new owner and have recently purchased the property proper steps must be taken.  Tenants have rights to the property they live in and their lease runs with the property, not the owner.  Not having a written lease does not matter, tenant rights will still apply.  You as a party to that lease contract have to uphold those rights.  If a year long lease was signed two months before your property purchase, it means you will have to wait another ten months before you can file to regain possession of the property.

People Need Time

Most folks cannot just up and move tomorrow.  They need time to find a new place to live and get their stuff together.  If you intend to empty a property of its existing tenants, you can soften the blow with time.  Give as much time as you can give.  At a minimum, there will likely be contractual time obligations contained in the lease, or there may be legal time requirements.

When purchasing a property, be sure you understand the time constraints you will be under.  Carefully review existing leases.  Use an estoppel agreement to further clarify your new landlord/tenant relationship.

Cash For Keys

Another possibility to soften the blow is to offer some type of incentive for tenants to move.  A little cash or help with a move might go a long way towards getting you the keys.  It sure can be easier and less confrontational than eviction court.

If They Will Not Go

If tenants refuse to go, or drag their feet too long, you have no other option than an eviction.  Evictions can be ugly in the first place, but add an angry tenant who feels that they have been wronged and it can get nasty.  So nasty that it leads to calls for bans on no fault evictions.  And while I can understand and sympathize with tenants, it is wrong to force one side to stay in a contract they no longer wish to be a part of. Landlords can hopefully minimize the issue by understanding what they are getting into and using some of the advice outlined above.

Kevin Perk is the founder and publisher of Smarterlandlording.com.  He is the author of Advice From Experience To New Real Estate Investors.  Subscribe to Smarterlandlording here.  Contact Kevin here.

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5 Questions To Always Ask Your Tenants

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One of the first presentations I heard when I started going to MIG over 15 years ago was by Don Beck.  In it, he had a set of laws for landlords.  One of those laws was “no matter what the question, your tenant will have an answer.”  Some of these answers are true, some are not.  Many are attempts to deflect or redirect.

Some questions always seem to bring out the bring out interesting answers from tenants, especially prospective tenants.  These are questions however that you must always ask.  What are these questions?  Here are 5 questions to always ask your tenants.

What about this gap in your residential living arrangements?

When a prospective tenant does not show a continuous line of residency, you must ask this question.  When here is a gap, often of a year or more, that is unexplained you need to find out why.  Where was the applicant living during this time?  Why have the chosen not to tell you about that gap?

This residential gap could be completely innocent and explainable.  The applicant may have had to move back home to care for a sick relative or they could have moved in with someone and the relationship turned sour.  These are items your applicant might not think matters or they are embarrassed to admit.

On the other hand, they may have been evicted.  Or, they may not be able to get a good reference from that landlord and hoped you would not notice the gap.  Either way you need to explore the reasons for the gap.

What about this gap in your work history?

This is another common question that has to be asked.  Again, the answer could be something completely innocent.  It include such things as simply taking time off, going back to school or caring for that sick relative.  Or they could be trying to hide the fact that they were fired for theft.  You will never know until you ask.

What about this account in collections?

Finding tenants who will pay, stay and respect our properties is the name of the game.  That is why you have to ask these questions.  Yes, the account may be old and they may have been embarrassed to put such things on your application.  Few of us are ever perfect.  But, as landlords we simply have to dig deeper to find out what is really going on.  Was this a past mistake or is there a pattern that continues to the present?

Who will be living with you?

This is a question that needs to be asked so you can document the answer.  Make sure you make a note when your prospective tenant answers “no one.” or “just my daughter.”  On more than one occasion we have found evidence that someone other than what we were told by the tenant has moved in with them.

Do you have any pets?

Some folks will be honest with this question, others will not.  We love pets and allow cats and smaller dogs, but many will try to get around the pet fees.  Thing is, we always tend to find out because we will be going in the property at some point (often for maintenance) and the evidence will be there.  Again, it is best to have things documented from the very beginning.

Not everyone that you meet and applies to live in one of your properties is going to lie, but enough do that we have to ask these questions. Landlords often have to do some detective work to flush out the lies and the potentially bad tenants before they move in.  And while tenants may always have an answer, sometimes it will be pretty easy to see through them.

Have a question you always ask your tenants?  Ever get an interesting answer?  Please share with a comment below.

Kevin Perk is the founder and publisher of Smarterlandlording.com.  He is the author of Advice From Experience To New Real Estate Investors.  Subscribe to Smarterlandlording here.  Contact Kevin here.

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Uncover Lies By Using Rental Standards

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My book, Advice From Experience To New Real Estate Investors, has a chapter on what newbies should know before they become a landlord. In that chapter I note that lying is a widespread and uncovering lies is part of the landlording business.  One way to uncover lies is by using rental standards.

Be warned, no matter how good someone appears on the surface, you just cannot trust them.  People lie and try to cover up their past deeds all the time.  Some, are simply embarrassed.  Some, such as professional tenants, are purposefully trying to deceive you.  Others, tell little white lies and hope you will not notice.  No matter who is doing the lying or why, it is your job to uncover the lies before you let an applicant move in to your property.  The best way to do this is with consistently applied rental standards.

Two Key Rental Standards

Rental standards are comprised of many parts.  But two key parts to any set of rental standards are a rental application and credit history. Requiring every applicant to fully complete a well structured rental application provides the landlord with a basis to uncover dishonest answers.  On your application, always ask questions about an applicant’s rental and credit history.  These questions should include:

  • Where did the applicant live?
  • How long did they live there?
  • What was the amount of their rent?
  • How often did they pay the rent late?
  • Have they ever been evicted?
  • Have they ever filed bankruptcy or had a judgement against them?

Not everyone is going to lie on their application when answering these questions, but some will.

Pulling a credit report is the second key part of this process.  Reviewing a credit report on every adult who wants to live in one of your properties is an absolute must.  Credit reports show many items, including:

  • Late payments
  • Bankruptcies
  • Charge offs (when a creditor has given up trying to collect debt)
  • Closed accounts
  • Judgments
  • Accounts in collection.

Compare The Two Keys

By comparing the application against the credit report, any inconsistencies should appear.  If you find that an applicant has outright lied, best to let them find somewhere else to live.

On the other hand, give an applicant some consideration if they tell you the truth about past issues.  After all, none of us are perfect and it is hard to tell the truth when you know it might hurt you.  Look for signs that the applicant really is trying to improve or get back on their feet.

You Set Your Standards

Remember, as the landlord you can set your own rental standards and you do not have to reject applicants who are honest yet have a bit of a checkered past.  You can instead adopt rental standards that reward improving behavior.  These standards could include:

  • No bankruptcies within the past X years.
  • No judgments within the past X years.
  • Less than X late payments within the past X years.
  • No accounts in collection.

As the landlord, the standards you use are up to you and the market you serve.  There is often a lot of flexibility (other than legally protected classes) on what your rental standards can be.  I would even say that your standards should evolve as you learn and grow your business.  Just be sure to apply whatever standards you use consistently.

Uncovered any big lies as a landlord?  Please share with a comment.

Kevin Perk is the founder and publisher of Smarterlandlording.com.  He is the author of Advice From Experience To New Real Estate Investors.  Contact Kevin here.

Subscribe to Smarterlandlording and receive a Free Report: 21 Tenant Screening Red Flags

Unintended Discrimination

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Landlording can at times be like walking in a minefield.  One small, unintended misstep and boom!  It blows up in your face.  No one intends to step on a landmine, and the majority of landlords I know do not intend to discriminate.  But small missteps can lead to unintended discrimination and potential legal trouble.  Here is how.

Most People Want To Be Helpful

Most people, by their basic human nature, want to be helpful towards others.  Many will hold a door, give directions when asked and offer helpful advice.  Being helpful is one way we all function together in society.  Being nice to each other helps us all get along.  Unfortunately, anti-discrimination laws can cause landlords to trip and step on that proverbial mine if they are not too careful with their “helpful” advice.  And being accused of discrimination is a serious landmine.

To help explain, let’s pretend that you have made it past that first phone call with a prospective tenant.   They did some checking and have called you back to further discuss what you have available.  What are some things you might say that could lead to inadvertent and unintentional discrimination charge?

This One Has More Bedrooms

Your prospective tenant might tell you that she has a child or two that will be living with her, or she may mention that her elderly father or mother may be moving in.  While looking at a one bedroom apartment, you begin to suggest two and three bedroom properties you have available. You suggest them because you honestly believe they might be a better fit.  Unfortunately, that advice may be misconstrued as attempting to drive someone away or towards a specific property because they have children or of their familial status.

This Apartment Might Be Quieter

You might think that by suggesting an apartment at the end of the hall, or on the top floor, or in the back may be helpful to your prospective tenant.  And it could be.  But, it could also be interpreted in a negative manner.  They might think that you are trying to keep them and their kids out of the way or out of sight.

The Units I Have In This Particular Neighborhood Might Be More Too Your Liking

You might be completely right.  Your tenant may favor a unit in a particular neighborhood.  Again however such a suggestion can easily be misinterpreted.   It may appear to your prospective tenant that you are trying to steer them away or towards a particular area.  “Why would they want to steer me towards that particular area?” they might ask themselves.  They might think that it is because they are black or lower income or have kids.

This Apartment May Be Closer To Your Price Range

Yes, one of the screening questions you should ask on that first call is about income, but offering advice or suggestions could be misconstrued as steering someone towards a location, especially if you have multiple units in multiple locations.  We all know that location, location, location affects the rental price.  Thus rents will vary depending on location.  Again do not appear that you are trying to steer.

Keep Your Advice To Yourself

As I said in the intro, most people just want to be helpful.  Most landlords are the same way.  They often have the best of intentions.   They may really believe that a particular unit in a particular building or a particular location is best for their prospective tenant.  But good intentions can have negative consequences.

Landlords should avoid making these types of suggestions to prospective tenants.  Instead, tell them about every property you have available.  Then, let them know about your rental standards and criteria and leave it at that.  Let them then decide on their own, which properties are best for them.  Then let them apply.  It seems sort of wrong not to be able to make informed suggestions to help someone, but that is just the world we live in today.  One person’s helpful suggestion, can and will be interpreted as unintended discrimination.

Kevin Perk is the founder and publisher of Smarterlandlording.com.  He is the author of Advice From Experience To New Real Estate Investors.  Contact Kevin here.

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Rental Standards

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Once you have gotten past that first phone call from a prospective tenant, you need to then think about how you will determine whether or not that person will make an acceptable tenant.  To make that determination, you need rental standards that measure a potential tenant’s qualifications.  What are some rental standards that a smarter landlord should and should not use?

Landlords Have Got to Have Their Standards, But…

There are some standards that you cannot and should not use.  Using them can get you in a lot of hot water.  Avoid using any sort of rental standards that are based upon a person’s physical or cultural characteristics.  Using such standards is wrong and often illegal.

What are these types of standards?   Standards that are based upon a person’s race, sex, religion, national origin, children, marital status, sexual orientation and disability are a few.  The fact that someone is black, or female, or unmarried or has three kids does not have any bearing on that person’s ability to be a good tenant.  Therefore rental standards that are based upon such criteria just do not make good policy and can end up costing you expensive fines and legal fees.

Rental Standards to Use

Landlords need to focus their rental standards on criteria that will actually affect their landlording business.  Such standards that do not limit your applicant base and reflect a person’s ability to pay, stay and respect your property.  These standards are not set in stone, and can be tweaked and refined to reflect your business and market conditions.  Here are some suggestions.

Income

If a potential tenant does not make any money, how are they going to pay you rent?  Going further, it is not just about making money, but about making enough money to afford your property.  The thing to understand is that people not only need housing, but that they also need to eat, stay warm and have a bit of fun.  All of that costs money.  You as a landlord do not want a tenant that has to make a decision between food and rent.  So you need to verify that they have enough income to afford both your rent and other necessities.  It does not matter where their income comes from (unless it is from an illegal source), just that they have it.  Making two to three times the amount of your rent is often a good standard to use.  For example, if your rent is $1,000 per month, your rental standard might be a gross income of $2,000 to $3,000 per month.

Rental History

Does your potential tenant have a rental history? If so, what does it show?  Did they pay their rent in full and on time?  How often were they late with payments?  Do they move every year or do they tend to stay put for a while?  We like to see stability and promptness.  Of course what exactly “stability and promptness” means to you will vary depending on your market and business style.  A college town may tend to have a lot of turnover and thus such a standard will be different from mine.  Something along the lines of one late payment every two years and not moving every year may work for you.

Evictions

This is an item you absolutely must check.  Has the person applying ever been evicted?  A recent eviction is often a standard for immediate disqualification.  But an older one with a demonstrated and improving rental history can be different.  Again the exact standard will vary depending on your business and market.

Criminal History

Violent offenders are out.  If an applicant has been in jail for a violent offense, then the answer from us is no thanks.  Not all criminal convictions are the same however and you may not want to give them all equal weight.  Does possession of a few joints equal spousal abuse?  It is up to you.  You can come up with your own standards here as again they will vary depending on the market you serve.

Attitude and Appearance

Attitude means a lot.  Being rude and disrespectful often means instant disqualification.  If they are going to be rude to you now, imagine what they will be like once they move in.  Again, no thanks.  Appearance counts as well.  A car filled with trash or people with food spilled all over them are major red flags.  That filth will move in with them and eventually become your problem.  Define standards regarding rudeness, lateness and cleanliness.

Advice From Experience

The above is not an exhaustive list.  You as the landlord can add additional standards, such as work history, as you see fit.  The key again is to use standards that will demonstrate the ability of a potential tenant to pay, stay and respect your property.  Whatever rental standards you decide to use, write them down and keep them handy.  Every once in a while someone from the government may want to see them.  You will need to be able to show them.  Want more great advice like this?  Order the book, Advice From Experience today!

What rental standards have you used?  Please share with your comments.

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