General Question

andrew's avatar

I'm about to become a landlord; what should I know?

Asked by andrew (16346points) June 5th, 2009 from IM

I’m leasing to a friend, so how informal of a lease should I create? Any stories you’ve had? Any warnings? Unforeseen things you should warn me about?

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16 Answers

SuperMouse's avatar

I have had rentals on and off for several years now. My only suggestion would be to make the lease formal. You can probably download a template and fill in the blanks.

Kayak8's avatar

Been there, did that! Do a real lease with a real deposit like a real landlord. Expect to have $$$ set aside for the plumber, electrician, etc. like a real landlord.

I rented a house to a friend. I had lived there for about 15 years before I leased it. She found things wrong that I had NEVER IMAGINED someone could complain about.

The lease is of benefit to both of you. I would not lease to anyone (including my own mother) without a lease.

Be clear about who (you or your tenant) has responsibility for things like yard work, cutting the grass, shovelling snow, whether or not you are ok with them repainting in a color of their choosing. If they have pets, get a pet deposit.

Also, check to see if you have a local landlord/tenant union that can tell you the local laws (where I live, the landlord has to pay for the water).

ram201pa's avatar

You should know the name of an excellent real estate lawyer. Dealing with friends and family can be the worst.

skfinkel's avatar

I would also recommend a real lease and a real deposit and real expectations that the rent will be paid on time. Make it clear how you want your renter to care for your apartment.

It’s like, good fences make good neighbors.

chyna's avatar

Love your topic, becoming the man, hehe

andrew's avatar

@ram201pa Would that be for any particular disputes that would come up?

cak's avatar

Oh, Andrew. (shaking head)

My last experience was the exact reason I just sold our last rental house. Three…now gone and headaches, now gone!

You must do a formal lease and make sure you know the rental laws in your area. (Is your state more pro-landlord or pro-tenant…some states make it very easy for the tenant to take over property – extreme cases, of course.) Really understand those laws, or have an attorney help you with the lease. Like late fees, most have limits on that fee – know little things like that, it’s very important.

Do a walk-through, with a camera in-hand, take pictures of each room, as you both view the location…and yard, if there is one. Have him sign a document and list any issues, make sure it is dated!

Be prepared for repairs! Refrigerators, washers (if you provide them), dishwashers….toilets. Have the money, or a reserve line of credit, on hand, ready for those repairs. Agree, upfront, about tenant repairs. Will it be okay with you if your tenant repair something and you reimburse them or they deduct it from the rent. If so, make sure you agree that you must approval the repair price and materials being used. I had such an agreement, but my last tenant decided not to adhere to that policy…it became a huge mess.

Friends or not, when you are dealing with the house, you are Landlord Andrew, not friend Andrew. Just keep a clear line between the two. Oh, don’t make a rookie landlord mistake and spend the deposit money. I’ve known a lot of people that do just that…smart people, bad news!

There is a lot more, I could go on forever. Feel free to PM me, if you have any questions.

It’s not all bad, really. I just had three terrors, in a row.

dynamicduo's avatar

I can’t give you any real advice about becoming a landlord, but I sure can give you advice about doing business with friends…. don’t, if you can avoid it. Bringing business, and with it money/responsibilities, changes the dynamic of the relationship between the two of you, and oftentimes this can start causing friction, which occasionally results in a gradual erosion of the friendship.

If you decide to go on with it, I would make it as legit as possible, but I would also include an air of friendliness to it. I would make it very clear what the dates and requirements of paying rent are, what the penalties are for if it’s late and what # of days this penalty starts applying at. Get a deposit and put into the highest % safe savings account you have. But as long as the rent was turned in on time and there were no real problems, I would try not to be the landlord as much as possible and try to be the friend. Unfortunately, It is exactly when you make a loose lease that the friendship is at jeopardy the most, as you could be waiting for the rent anxiously at day 15 but don’t want to ask for it forcefully because the lease is loose, etc. To avoid strife in the future, it is always advantageous to make the terms and requirements as clear as possible.

You’re a smart guy so I’m sure I don’t need to tell you to look up the laws in your state and city regarding landlord and tenant rights. Things like paying interest on the deposit, for instance, or knowing how long you have to return it, what you are required or not required to do in regards to maintenance, how to best approach disputes, et cetera. I also highly support the video walk-through on move-in and move-out to clearly and unbiasedly observe and tabulate any damages.

hungryhungryhortence's avatar

What everyone else says so far about drawing up a lease that includes a deposit if they are going to bring in pets. Also clarify in advance who you want to allow to live there because sometimes people bring in new roomies or guests and don’t tell you and if rents go into arrears then they want to blame someone you’ve never drawn up an agreement with. If your home has a/c filters then buy a supply of them and have the tenant agree to put a new one in month because that’s an expensive repair. Utilities, unless you’re prepared in case of default, ask your tenant to agree to put the utilities in their own name. Give neighbors a phone number you can reached by if they see suspicious behavior or an emergency. We were very lucky with our tenants in a house but had to go through a few duds to get them.

YARNLADY's avatar

Get a copy of the Landlords rights and the Tenants rights in the state of the rental. They are available online, and an absolute requirement.

Do not be kind and allow the rent to slide a few days, or any such thing. Stick to the penalty as set up in the lease agreement.

Judi's avatar

YIKES! Leasing to a friend can be a disaster, especially if it is your only rental.
1. Remember, a tenant will never treat it the same as you would, no matter how much you like them. Understand that now, or risk loosing your friendship.
2. De-personalize the property. Treat it as an investment. Forget about sentiment. When you see the nail holes (or maybe a fist hole) in the wall you worked so hard to paint, or nicks in the baseboard that you measured and cut so carefully with your miter saw, remember that it’s just a cost of doing business.
4. Get a good lease. It is not that expensive to join the California Apartment Association where, as a member you can download all the forms you could possibly need, and find every bit of practical advice available about Residential Landlord Tenant Law in California. Most of the members are small owners like you and the small fee gives you resources usually only available to large property management companies with a fleet of attorneys
The Bay area has a few laws that are quirky so joining CAA will also give you access to the local Apartment Association who can help you understand issues like rent control and let you know if they will effect this particular property.
4. Finally, before you go any further, rent the movie Pacific Heights

robmandu's avatar

Engage the services of a professional property management company. They’ll:
– list your property with MLS (a.k.a. advertise)
– screen candidates with background and credit checks
– provide contract paperwork
– provide 24 hour “facing”... if something breaks at midnite, they answer the call
– negotiate repairs on your behalf
– collect late payments
– handle evictions
– etc.

Around here, the initial fee is 1 month’s rent and then once a renter is in, their maintenance fee is usually 10% of the month’s rent.

Obviously some companies are better than others. Get references from people you trust.

If you have a tenant already, you can often get them to waive the initial fee, and you just pay that 10%/month. When you need a new renter, it starts all over.

Judi's avatar

If you do hire a property management, check to see if they have any CPM’s (Certified Property manager’s) working for them. It is the Gold Standard in property management excellence. It is not an easy designation to achieve and it shows that the person is dedicated to doing things right.

Lupin's avatar

The market here is a little different from anywhere else. By that I mean “pretty laid back”. We priced our place a little below market and were able to choose tenants after doing credit checks. We left the rent at that initial price for 5 years so they had incentive to stay. I rarely raise rent but when I do, I use the CPI numbers to justify the increase.
I made one big mistake. Five years ago I introduced the divorcee tenant to a friend of mine. It clicked and now they are both happier than they’ve ever been. I can never raise her rent. Damn.

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YARNLADY's avatar

Are you aware of the new regulation that the landlord must prepare an inspection report and send a copy to the state once a year? Be sure to keep current on the laws, which are subject to change every year.

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