Some landlords view real estate investing as a simple matter of cashing a check at the end of each month. Becoming a landlord has its rewards, no doubt! But the rewards do not come without a reasonable amount of hard work. If you are looking to become a landlord, consider the responsibilities involved. Between acting as a human resources department for their tenants, and ensuring compliance with federal, state, and city code, landlords perform all of the basic functions of a small business, all by themselves.
Landlords Are Their Own Realtors
Landlords are responsible to fill the role of a traditional realtor for their property, including:
- Advertisement of the rental property through websites, social media, bulletin boards, signage, and word-of-mouth.
- Selling the benefits and features of the property to prospective tenants through appointments and onsite showings.
- Interviews with prospective tenants to screen for character and fit, including criminal background and credit checks. Sometimes landlords interview former landlords as references.
Landlords Act As Human Resources for Their Tenants
As a small business has its human resources department, a rental community has its landlord. Landlords must tactfully manage domestic issues, disputes with tenants, and more.
- Tenants may not know that their personal belongings are not covered by their landlord’s insurance policy. Landlords should encourage tenants to purchase renters insurance for the tenant’s protection and the landlord’s peace of mind. Doing so can prevent frustrating interactions if flooding or fire occurs.
- Landlords must collect rent and manage tenants who are not paying. Many times, a tenant’s refusal to pay is not due to their stubbornness, but life circumstances, such as a break-up or the departure of a co-tenant. Under such circumstances, landlords have been known to counsel tenants through the situation to restore regular payment so that the tenants can keep their housing.
- Landlords and tenants occasionally get into disputes over matters such as upkeep and repair (the landlord’s responsibility) and the payment of rent and respect for the property (the tenant’s responsibility). The responsibility of handling these disputes falls first on the landlord if they wish to keep their tenants’ business, although both parties have rights and responsibilities to maintain their side of the agreement under law. If the landlord wishes to evict, they must do so in accordance with the law for their state.
Landlords Pay Out-of-Pocket
The rent a landlord receives is not pure profit. Landlords are responsible for the following expenses:
- Tax on the rent income they receive.
- Mortgage payments and property tax, however, these can be worked into rent.
- Utilities, unless the tenant is paying.
- Maintenance and repair expenses.
Landlords Know the Law
The rental housing industry is heavily regulated. Landlords are responsible to do the following under law:
- Screen tenants without discrimination based on race, gender, or other matters.
- Disclose certain information about themselves and the property in accordance with state law.
- Properly store their tenants’ security deposits in accordance with state law.
- Provide written notices to tenants in cases such as rent delinquency, a broken agreement, or an eviction.
- Give advance notice to tenants before entering the property, with the exception of emergencies, in accordance with state law.
- Notify the authorities if their tenants are engaging in illegal activity on their property, such as drug dealing.
- Although landlord insurance is not required by law, it is prudent to maintain proper insurance to protect landlords against liability claims.
In our next blog, The Responsibilities of a Landlord Part 2, we will discuss additional responsibilities that have legal ramifications. If you would like to become a landlord, but you don’t appreciate the hassle of these responsibilities, consider hiring a property management company!