I don't want to be a slumlord, I swear!
May 2, 2011 5:30 PM Subscribe
About to become a landlord in NJ, would like some advice from the HiveMind.
Basic situation is as follows: I own a condo in Central NJ. Wife and I feel like now is a good time to buy a house (between the market being what it is and having kids soon). Now since it might be a good time to buy, but it is def. not a great time to sell (condo lost about 15% of it's value based on the latest appraisal, not to mention all the improvements) we want to rent out the condo. Condo was renovated when we bought it (wood floors, new paint, granite counters, and I will be replacing the furnace/heating/washer/drier before tenants move in).
Since I've only ever rented, but have never been a landlord (nor do I know any) I have some questions:
1. How do I best protect myself from bad tenants (there's horror stories aplenty)?
2. Is it reasonable to ask if I can inspect the unit quarterly (by appointment of course) to make sure it's being maintained properly?
3. Any good resources for first time landlords (esp. in NJ)?
4. How would I go about crafting a solid lease agreement. Do I need a lawyer or are there some boilerplate type leases out there that will cover me well?
5. What are my responsibilities to the tenants besides heat/AC/water/electricity (for example, if they have plumbing issues is that always/sometimes my responsibility, or pest extermination)?
6. Any other advice/cautions/recommendations?
Thanks much all.
Basic situation is as follows: I own a condo in Central NJ. Wife and I feel like now is a good time to buy a house (between the market being what it is and having kids soon). Now since it might be a good time to buy, but it is def. not a great time to sell (condo lost about 15% of it's value based on the latest appraisal, not to mention all the improvements) we want to rent out the condo. Condo was renovated when we bought it (wood floors, new paint, granite counters, and I will be replacing the furnace/heating/washer/drier before tenants move in).
Since I've only ever rented, but have never been a landlord (nor do I know any) I have some questions:
1. How do I best protect myself from bad tenants (there's horror stories aplenty)?
2. Is it reasonable to ask if I can inspect the unit quarterly (by appointment of course) to make sure it's being maintained properly?
3. Any good resources for first time landlords (esp. in NJ)?
4. How would I go about crafting a solid lease agreement. Do I need a lawyer or are there some boilerplate type leases out there that will cover me well?
5. What are my responsibilities to the tenants besides heat/AC/water/electricity (for example, if they have plumbing issues is that always/sometimes my responsibility, or pest extermination)?
6. Any other advice/cautions/recommendations?
Thanks much all.
Best answer: Oh, should add that there is some gray area in regard to negligence. We had a plumbing problem that caused water to leak into our downstairs apartment. This was through no fault of ours, so our landlord's- and downstairs neighbor's- respective insurance companies dealt with it. Had it been something we let go for weeks, we might have been held responsible, I guess.
Pest extermination within the unit- I'm really not sure at all. If it could be ruled a preexisting problem, I think you'd have to pay for it. Slobby tenants being the cause, I'd think not.
posted by tremspeed at 5:53 PM on May 2, 2011
Pest extermination within the unit- I'm really not sure at all. If it could be ruled a preexisting problem, I think you'd have to pay for it. Slobby tenants being the cause, I'd think not.
posted by tremspeed at 5:53 PM on May 2, 2011
Best answer: I am a landlord in California and Minnesota.
In both states I found tenants through Craigslist, and required an application that I processed through a local tenant scanning company, which provided me with credit, rental history, and job verification information. I charged the prospective tenants the fee I was charged.
I was able to interview my own tenants because I am a dilettante freelancer; if you work full time and do not have a flexible schedule you may find you have more of a range of applicants to choose from if you hire a leasing agent to handle the process for you (or find a friend who does have a flexible day, and arrange to make it worth their while to show the place for you when you can't).
I use standard leases, which in my two states can be found via the attorney general's website. You can usually find a wealth of landlord-tenant legal information there, it will probably be a very useful resource for you for local-specific regulations. In my boilerplate leases it states that I may enter the property with a certain amount of notice. I honestly have never felt need to do this on a proactive basis but have had cause to enter them from time to time.
You'll want to check in your city/county/state to see if you need to get a license to rent your property, which may require an inspection, and you may have to pay a fee.
posted by padraigin at 5:58 PM on May 2, 2011
In both states I found tenants through Craigslist, and required an application that I processed through a local tenant scanning company, which provided me with credit, rental history, and job verification information. I charged the prospective tenants the fee I was charged.
I was able to interview my own tenants because I am a dilettante freelancer; if you work full time and do not have a flexible schedule you may find you have more of a range of applicants to choose from if you hire a leasing agent to handle the process for you (or find a friend who does have a flexible day, and arrange to make it worth their while to show the place for you when you can't).
I use standard leases, which in my two states can be found via the attorney general's website. You can usually find a wealth of landlord-tenant legal information there, it will probably be a very useful resource for you for local-specific regulations. In my boilerplate leases it states that I may enter the property with a certain amount of notice. I honestly have never felt need to do this on a proactive basis but have had cause to enter them from time to time.
You'll want to check in your city/county/state to see if you need to get a license to rent your property, which may require an inspection, and you may have to pay a fee.
posted by padraigin at 5:58 PM on May 2, 2011
Best answer: My husband is a landlord, with many rental properties.
1. He is a "people person" and uses that to screen his tenants. His personal trick is to find a reason to walk by the potential tenant's car when they come to view the property. If their car is clean and neat inside, that bodes well for their standards. He also pays close attention to their small children if they tag along. Well behaved children are a good sign.
2. He does not inspect quarterly, but I think it would be a great idea and would head off a lot of potential problems.
3. When he first started, he joined a real estate investor group. The resources they provided were invaluable, but we always knew we would have more than just one property. Here's a list of NJ clubs.
4. We used a boilerplate lease form from a lawyer friend of ours to start with, and have modifed it based on our own experiences. You could start with LegalZoom.
5. Maintaining your property is your responsibility, period. This includes HVAC, plumbing, pest control. In our experience, changing the filters is the #1 cause of HVAC issues, so we leave filters next to the unit and explain how to use them when the lease is signed. We do not provide stoves, refrigerators, or washer/dryers. I would suggest that you do not, because the repairs will then become your responsibility. For the long term, you need to look at maintenance costs as the way you protect your investment instead of a headache caused by your tenant.
6. Cash flow is very important and you need to bank the excess for a year. Service calls are expensive and come right off the top. You are looking for a tenant that will stay in your unit for several years because if they move after the lease is up in a year, your cost to renovate for a new tenant is HIGH. You need to build a team of a supporting cast to be successful. A CPA to explain the tax benefits will pay back his fee ten-fold.
If you have specific questions moving forward, please feel free to memail me and I will ask my husband, as we have over 70 properties now and he's pretty much seen everything!
posted by raisingsand at 7:06 PM on May 2, 2011
1. He is a "people person" and uses that to screen his tenants. His personal trick is to find a reason to walk by the potential tenant's car when they come to view the property. If their car is clean and neat inside, that bodes well for their standards. He also pays close attention to their small children if they tag along. Well behaved children are a good sign.
2. He does not inspect quarterly, but I think it would be a great idea and would head off a lot of potential problems.
3. When he first started, he joined a real estate investor group. The resources they provided were invaluable, but we always knew we would have more than just one property. Here's a list of NJ clubs.
4. We used a boilerplate lease form from a lawyer friend of ours to start with, and have modifed it based on our own experiences. You could start with LegalZoom.
5. Maintaining your property is your responsibility, period. This includes HVAC, plumbing, pest control. In our experience, changing the filters is the #1 cause of HVAC issues, so we leave filters next to the unit and explain how to use them when the lease is signed. We do not provide stoves, refrigerators, or washer/dryers. I would suggest that you do not, because the repairs will then become your responsibility. For the long term, you need to look at maintenance costs as the way you protect your investment instead of a headache caused by your tenant.
6. Cash flow is very important and you need to bank the excess for a year. Service calls are expensive and come right off the top. You are looking for a tenant that will stay in your unit for several years because if they move after the lease is up in a year, your cost to renovate for a new tenant is HIGH. You need to build a team of a supporting cast to be successful. A CPA to explain the tax benefits will pay back his fee ten-fold.
If you have specific questions moving forward, please feel free to memail me and I will ask my husband, as we have over 70 properties now and he's pretty much seen everything!
posted by raisingsand at 7:06 PM on May 2, 2011
Best answer: My father was a landlord and I got involved with screening tenants in my late teens. There is one big must-do for getting good tenants: References.
Always get a reference from a previous landlord.
In cases where the prospective tenant doesn't have such a reference, know that renting to that tenant exposes you to a higher level of risk.
We rented to over a hundred tenants across several decades. *All* of the tenants that came with good references were fine tenants. We had three or four bad tenants (a couple couldn't make rent and one left us with property damage). *All* of these bad tenants had no references.
posted by storybored at 8:52 PM on May 2, 2011
Always get a reference from a previous landlord.
In cases where the prospective tenant doesn't have such a reference, know that renting to that tenant exposes you to a higher level of risk.
We rented to over a hundred tenants across several decades. *All* of the tenants that came with good references were fine tenants. We had three or four bad tenants (a couple couldn't make rent and one left us with property damage). *All* of these bad tenants had no references.
posted by storybored at 8:52 PM on May 2, 2011
Best answer: I've been a landlord for seven years and got into in a similar way. I'm not based in NJ so I'll offer up general advice.
* Work with a realtor for your first tenant acquisition. They will have the lease paperwork already. Arrange to get a few blank copies on the premise that you will share them with any prospective applicants that you come upon. Keep these. If NJ is anything like Virginia, every lease has pretty much the same language.
* Write an addendum to the lease that states dates that you will have quarterly inspections. It is much easier to get agreement on this at signing than later. It helps to give tenants an expectation to straighten up a few times a year because there are some who won't do it all until the end of the lease.
* In the addendum list typical replacement costs for appliances and damage to the property in the event that the damage is caused by the tenant. In many cases you can't prove fault, but it is good form to state up front that both parties know the estimated costs the could be borne by the tenant if they are careless with the property.
* If you don't use the realtor to get a tenant, use a background check service to help screen applicants. I'm fond of Tenant Verification Services, Inc. Create an application where tenants give you authorization for the background check and include an application fee to cover the cost. The fee is nominal but the peace of mind is worth it. If this scares off applicants, consider yourself lucky.
* Finally, just be a decent and fair person and let people know that this is your standard. You need to have some rigor and legalese, but assure tenants that you want to give back their deposit and that you want to provide a good living space for them. Most people are good natured and will return the kindness.
-- shoot me a private mefi message if you want copies of my addenda.
posted by dgran at 6:26 AM on May 3, 2011
* Work with a realtor for your first tenant acquisition. They will have the lease paperwork already. Arrange to get a few blank copies on the premise that you will share them with any prospective applicants that you come upon. Keep these. If NJ is anything like Virginia, every lease has pretty much the same language.
* Write an addendum to the lease that states dates that you will have quarterly inspections. It is much easier to get agreement on this at signing than later. It helps to give tenants an expectation to straighten up a few times a year because there are some who won't do it all until the end of the lease.
* In the addendum list typical replacement costs for appliances and damage to the property in the event that the damage is caused by the tenant. In many cases you can't prove fault, but it is good form to state up front that both parties know the estimated costs the could be borne by the tenant if they are careless with the property.
* If you don't use the realtor to get a tenant, use a background check service to help screen applicants. I'm fond of Tenant Verification Services, Inc. Create an application where tenants give you authorization for the background check and include an application fee to cover the cost. The fee is nominal but the peace of mind is worth it. If this scares off applicants, consider yourself lucky.
* Finally, just be a decent and fair person and let people know that this is your standard. You need to have some rigor and legalese, but assure tenants that you want to give back their deposit and that you want to provide a good living space for them. Most people are good natured and will return the kindness.
-- shoot me a private mefi message if you want copies of my addenda.
posted by dgran at 6:26 AM on May 3, 2011
Response by poster: Great advice, I'm off to follow it. Thanks all!
posted by pyro979 at 10:13 AM on May 6, 2011
posted by pyro979 at 10:13 AM on May 6, 2011
This thread is closed to new comments.
1. Our landlord went through a leasing agent. Presumably, they took a cut, but we were pretty far into the process before we met him or even knew his name. This included a credit check, probably a background check as well. Our landlord REQUIRED renters' insurance. This is something you really should consider.
2. He's been here more than 4 times in the last year (but not many). I'm not sure what the law specifically in NJ says about inspections, but you should look into it. Most leases that I've had say something about this with advance notice, but it would be unusual to specify set intervals.
4. Our landlord definitely had a lawyer go over the lease and to consult for any changes (such as when we went month-to-month). It seems like a smart thing to do. Ours' has had bad experiences in the past, so he might have been overprotective- which is probably smart as a new landlord.
5. Any appliances that are provided in the dwelling are subject to your repair. When our W/D broke, for example, replacements were delivered at no cost to us within a week. Should the AC break, that'd be on you. There is specific wording in tenant law about these things being replaced in a reasonable amount of time. I'm not sure what you mean by heat/water/electric - it's our responsibilities to cover those utilities and they are in our name. The only utility that is in our landlord's care is Sewer, and we make quarterly payments to him for that.
posted by tremspeed at 5:46 PM on May 2, 2011