Rental Property

When it comes to rental property, knowledge is power and planning ahead is a must when deciding whether to rent your property to provide an income for the future or sell it for a fixed profit today.

If you decide to hold on to a property to take advantage of capital appreciation and tax breaks, you would do well to consider both the potential upsides as well as the downsides of renting.

Above and beyond all of the normal costs of property ownership - mortgage payments, insurance, taxes, etc., you are also obligated to pay for any repairs not caused by willful damage or negligent renters. Leaving or delaying any major repairs will provide incentive to tenants to forgo rent payments or cause them to become lax in other ways that can hurt you. Having angry tenants, especially if justified, is not in your best interest.

Plan ahead before you get to this stage.

There are also tax consequences to consider when deciding to keep a rental property as opposed to selling it. Study the current market, past trends and interest rates and make an educated decision about where the prices are heading. Once you've made the decision to rent, learn about your legal obligations and rights.

Provide an application for all prospective tenants to fill out. This will provide you with the information you need to do a thorough background check on each tenant. Take this information and actually do one. Check their credit history, late payment history and verification of employment. Also make a point to contact previous landlords.

Write a contract in plain language that clearly defines the rights and responsibilities of both parties. Include the amount of damage deposit required, how much notice is given for landlord inspections, which party is responsible for certain kinds of maintenance, and so on.

Be sure to uphold your end of the agreement and even go beyond what is required. Respond quickly to any reasonable request for repairs. Happy tenants are less likely to complain and more likely to pay their rent on time.

Obtain adequate insurance for any major repairs, unless you can do them yourself.

Keep accurate and up to date records of all payment amounts and dates. When a tenant is late making their rent payment, don't delay finding out why. Occasional delays of a day or two are not normally a reason to get excited — unexpected expenses occur from time to time. But tenants who are perpetually late are cause for concern.

Call and discuss the issue calmly and professionally. Make it clear that, as stated in the contract, you have the legal right to levy a fee on late payments. You can use this as a bargaining chip to encourage prompt payments. Know the law or get good legal advice before it's required.

Talk with the neighbors on occasion, without displaying suspicion, and ask them whether the tenant is behaving like a good neighbor. They don't need to be a friend to all, but if they are damaging property, making excessive noise, leaving trash lying around, etc — this can affect the value of your rental property. Neighbors can provide valuable and perhaps uncomfortable information for future tenants and prospective buyers.

Try opting for arbitration if legal action is required. Usually, all parties will be happier with the outcome and issues get settled faster and cheaper.

Keeping your property well maintained will provide the best protection for your investment. This will help insure that your rental property becomes a beneficial investment as opposed to a liability.




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