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Is Being a Landlord Worth It? Managing The Drama And Expense

At some point in your life, you’re probably going to have the opportunity to be a landlord–rent a house you own to a tenant. You could inherit a home, or keep an older house when you buy a new one–however you come by that empty house, it’s hard not to see dollar signs blinking over it. Before you put a “For Rent” sign in the front yard, you need to know your responsibilities as a landlord, and your prospective tenants’ rights.  Knowing this could impact your choice between being a landlord and selling your rental property and getting cash for something else – retirement, college financing for your children, or investment opportunities.

Responsibilities

The minutiae of landlord duties differ among states, but according laws in every state except Arkansas, there is an implied warranty of habitability. Here’s what that means in practice.

  • Basic structural elements (roof, walls, floors, stairs) are solid and intact
  • Mechanicals–heat, air conditioning, water, electrical, and plumbing have to be operating safely
  • Extermination of pests and rodents
  • Provide for trash removal and receptacles
  • Disclose any environmental hazards–mold, radon, asbestos and lead paint–and manage against any danger to the tenant
  • Provide safety against criminal intrusion

The remedies for some of these requirements are quite simple. The county or city will usually provide trash bins (it’s what you pay taxes for); leave asbestos alone, new paint over old lead based paint, and good ventilation and landscape plants take care of most radon concerns. Change the locks before a new tenant comes in and put locks on the windows and you’re providing safety.

If there is any mold in the house, you need to confirm it’s not a health hazard.

This is actually the easy part, since all you’re required to do is provide a safe and habitable house. It gets complicated when you look at other rental properties to figure out what they offer and what they charge in rent and fees–you’ve got to keep up with the market to attract a tenant.

Shopping List

These are some of the things that you will expected to provide in most markets across the US.

Kitchen Appliances–range or cooktop and oven, refrigerator and freezer, dishwasher, and disposal.

Washer and Dryer

Water Heater

Central Heat and Air Conditioning

Access to Internet and Cable

Repair Responsibilities

If you’ve owned a home before, you are all too aware of the costs to maintain it. If you’ve inherited a house and haven’t had to fix a leaky roof before, you’re in for a bit of a surprise.

When it’s your house, you can let stuff go for awhile of it’s not a major thing–until you hardly notice the missing cabinet door and hinges. When you’ve got other people paying to live in the house, you’re required to maintain the house just like it was when they moved in. The time frame is fluid–that broken hinge doesn’t have quite the urgency of a burst pipe–but you should have repairs done within a week.

Major mechanical issues go back to the implied warranty, so things like burst pipes, non-functioning furnaces or a broken banister have to be fixed immediately. Major issues are not necessarily expensive; the part to fix the furnace or the banister could be a $50 trip to the home improvement store.

Managing The Money

Every state is different in the way landlords are required to maintain security deposits, fees, and rents. One thing to remember is that a security deposit does not belong to you; you are holding for the tenant. In light of that, those monies should be deposited in an interest-bearing savings account against the day you have to return it.

Open a separate checking account for rent payments and other non-refundable fees (credit check, administration, application). While it’s not illegal in some states to use your personal accounts for business purposes, it’s just not a good idea and you’ll need detailed records and bank statements for the IRS.

When There’s Disagreement

Being a landlord is not for those who can’t handle conflict. If you’re a pushover or too hot tempered, find someone else to manage the property. There will be disagreements between you and your tenants, and you should be aware of your and their legal rights, as well as penalties, when disputes arise.

The lease should be clear and concise, and you should have an attorney either draw it up or review it for you before you present it to the tenant. Any state laws supersede a clause in the lease that conflicts with the law–if state law says you’re responsible for pest extermination and your lease says it’s the tenant’s job, you’ll lose that argument every time because you can’t dispute a statute and it will cost you a lot more than the Orkin guy to try.

Conflicts usually arise over repairs–the tenant wants a state of the art washer and dryer and you want to install something you found on Craigslist. Or their lamps and small appliances keep shorting out, and they want you to get an electrical inspection. Clearly one of these is a disagreement, and the other is a huge safety hazard.

The implied warranty is clear on the appliance–you must replace it with a similar item (like iPhones, when a model is discontinued you’re stuck with the newer and more expensive one). You can’t warrant a secondhand appliance works the same as the one that broke, but you also don’t have to spend a fortune. You also don’t want to have to replace the replacement in two months. If you’re in disagreement over a possible safety issue, deal with it and if the tenant is crying wolf, send them the bill or deduct it from the security deposit; refer to the lease terms for this resolution. The last thing you want is a burned out house because you didn’t address a problem.

Keep records of communication with the tenant–usually you have an email or text chain, and if they threaten you at all make a note. Most disputes can be resolved without an attorney.

Or, You Can Avoid All The Hassle And Sell The House

If you’ve got the fortitude to be a landlord, it’s a nice way to make a little extra money. If you’re going in that direction because you’ve got a white elephant of a house on your hands, let Seller’s Advantage take it off your hands. They’ll not only pay cash for the house as-is, but close within a couple of weeks. So instead of trying to turn Great-Uncle Fred’s ramshackle ranch into a cash cow, go ahead and get the milk–call Seller’s Advantage today.

 

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