Landlording Checklist
by John Adams,
author of The Landlord Survival Guide
__Treat Landlording as a Business - Renting your house to another individual is not a hobby. Most small landlords get into trouble when they let their tenants treat them as friends and not as business acquaintances. If you don’t treat the rental as a business, tenants will feel free to delay paying rent due to their personal problems. If you can’t handle the rental as a business, pay for professional management.
__Get The House Ready to Rent - A house in poor condition is only attractive to bad tenants who can’t rent anywhere else. You become desperate enough to accept applicants that you otherwise would not even consider. Then you end up with tenants who don’t pay, and they trash your house when you finally evict them. A smarter approach is to have the house in acceptable condition when it is first shown. If the average person looking at your house won’t want to live there, you shouldn’t be offering it for rent in the first place.
__Use The Magic Number - That is a phone number you have exclusively for the tenants to call you, the property manager. Have an additional residential line installed at your home and hook up an answering machine to it. Better yet, use electronic voice mail with pager notification. Never, never, never give a tenant or a prospect your home phone. Never give a neighbor your home phone. Never give anybody related to the rental property your home phone. If you do, you will regret it soon and forever. Once the tenant finds he can call you at home in the evenings and on weekends, your life will never be the same. Trust me - just say no.
__Selecting Your Renter - Have an outgoing recorded message tell prospective tenants how to find the property and when the open house will be. I suggest Sunday from 2 to 5. At the property, hand out information sheets explaining your rental program and policies. Also have plenty of blank applications. Only accept applications that are accompanied by a money order for the first month’s rent. Otherwise, the prospective renter will make application and then decide later if they really want to live there. With my method, you only accept serious applicants. You can also charge an application fee in cash, but I like my way better. Have applications screened by a credit reporting agency. I recommend "Qualified Renter" in Atlanta. They are in the white pages.
__The Rental Agreement - This is the most important part of renting your property. If your lease does not comply with Georgia law, it’s worse than if you have no lease at all. A well written lease protects you and your property from deadbeats and their roommates. It allows you to be really nice to your good tenants, and really tough on people who try to take advantage of you and your good nature. Most leases I have seen are written generically for all parts of the country. Unfortunately, they do not comply with Georgia law regarding security deposits and lease extensions. Even the standard lease used by Georgia Realtors does not, in my opinion, provide adequate protection for owners. If you can’t find a strong lease that complies with Georgia law, you should hire an attorney with landlord tenant experience to help you draft one. It is well worth your investment.
__Collecting Your Rent - Do not go to the property to pick up the rent. And please don’t allow the tenant to bring the rent to you. In keeping with the business nature of your relationship, always require that the rent be mailed to a post office box. Have bill paying envelopes printed up with the address already in place and give these to your tenant when they sign the lease. Blue works best. Tell the tenant they can deliver the rent to their post office twenty four hours a day, any day of the year. And insist on strict compliance with rent deadlines. Do not accept postmarks as a delivery date. Send late notices on the day the rent is due. And keep a copy in their file so you can collect late fees later if you want to. Send demand notices quickly and file for eviction promptly.
__Understand the Georgia Landlord Tenant Law. The truth is that Georgia law protects owners so long as the owners jump through the right hoops. The law sets specific deadlines for certain actions that must be performed. If you meet the deadlines, you are in great shape. But if you miss them, you are punished severely. The best example is the required move-in and move-out inspection. If you fail to perform these in a timely manner, you lose all rights to retain any portion of the security deposit. You might as well not have one. Keep the deposit anyway and you are subject to triple damages as punishment. And that’s just one example. Also, don’t forget the new Federal lead-based paint disclosure requirements. The law looks to you for enforcement, not the tenant. You can get a free lead information package by calling 1-800-LEAD-FYI. It contains all the forms you need.
__Incorporating Your Business - Find a way to separate yourself from the ownership of the property. Probably the easiest thing to do is to form a corporation to own each property. This can be accomplished in Georgia for as little as $100 per entity. Consult your CPA for tax impact if you incorporate. Another method involves creating an inter-vivos trust to hold title to each property while you retain beneficial interest in the trust. Your goal here is to set up some level of asset protection and privacy while still keeping things as simple as possible. If you hold title to the rental house personally, you are asking for a lawsuit.
__Your Team of Professionals should include a good accountant familiar with real estate taxation, an attorney skilled in landlord tenant issues, and a credit reporting agency wiling to process applications and obtain credit reports for you. Landlords have a tendency to be penny wise and pound foolish. Don’t be afraid to pay for professional expertise in your rental business. If a consultation costs you a hundred bucks and results in saving you one month’s rent, you are way ahead on the deal. Don’t be a cheapskate. Remember that this is a business that you need to run professionally.
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John Adams is author of The Landlords Survival Guide for Georgia. As a broker and investor, he publishes the Georgia Real Estate Report, a monthly bulletin of interest to real property owners. His website is www.money99.com and his phone is 404-373-6000.
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