Owning property for the purpose of renting has many benefits. You can make a relatively passive income while paying off your mortgage. In addition, real estate is one of the most stable investments you can make, so you will be adding value to your portfolio at the same time. While there is definitely work involved, it’s mostly not a full-time job unless you own and manage an apartment complex or several properties. You can choose how much work you want it to be.
That said, it’s not as simple as buying a property and bringing in renters. You do have responsibilities that you must be aware of. Failure to manage these responsibilities could find you at the end of a lawsuit or seeing your expenses skyrocket due to unresolved problems. On the other hand, as long as you keep up with them, and provide quality properties for your renters, then you can earn a high income. Here are six landlord obligations that you should know.
Zoning Laws
This obligation is not necessarily to your tenants but to the jurisdiction in which you own the property. If you are not aware of your local zoning laws, you could find yourself in violation and face legal repercussions. These laws keep residential and commercial property separate. This is because residents do not want noise and air pollution in their neighborhoods if they can avoid it. These laws may also apply to apartment buildings. Make sure that your potential rental property meets all zoning requirements to fully comply with your local by-laws.
Property Taxes and Mortgage
Like any other property, the landlord must pay all applicable property taxes and the mortgage. If these are left delinquent for too long, then the building may face foreclosure. If that happens, the owner will have to vacate the premises, but the renters will not for at least 90 days. As a property owner, the best thing you can do is be up to date on all of your payments at all times in order to avoid issues.
Property Maintenance
A landlord is responsible for keeping the property in acceptable condition for people to live or for a business to operate. This means that the HVAC system, plumbing, and electrical must always be in good order. There is some leeway if there is an honest effort to make repairs, but there is a delay of some kind. You can agree with the tenants on certain tasks, such as taking out the garbage, or a commercial tenant can manage their dumpster. Tenants are also responsible for ensuring that the rented space is in the same condition when they leave as when they took possession.
If a landlord gets a notice that something requires repairs, then they must respond as soon as possible. They must then show that they are taking steps to rectify the problem so that the tenants can be comfortable or fully use their spaces as soon as possible. Landlords may also offer to handle maintenance tasks such as mowing the lawn or shoveling snow, but whoever does it must be prompt and safe.
Insurance
As a property owner, you need to take every necessary and appropriate step to protect your assets. Property is a big asset, and if you are renting it out, many people may come and go at any time. That means there is a lot of risk, and without insurance, you might find yourself shelling out big dollars for repairs.
When considering commercial real estate insurance, also look for coverage for the entire replacement cost of the building. Otherwise, you will only be covered for the current value, which will automatically have 15 years of depreciation.
This type of insurance can cover several possible risks. For example, it will cover damage caused by tenants, theft, vandalism, and fire. If a tenant or visitor is injured due to your negligence with the property, you will be covered for that as well. If there is damage to your building that causes a tenant to vacate their unit, you can get compensation for the loss of rent because of it. On top of these coverages, you can also get additional protection for appliances, the HVAC system, or machinery breakdowns that require repairs. Your insurance will not cover any possessions of renters unless you cause damage to them in some way.
Safety
Of course, even if you have insurance, you are required to make sure that the property is as safe as possible for tenants and visitors. This means attending to any safety issues promptly, and following all of your local safety codes. There are many things that could be a safety hazard. Frayed carpets and wet floors can lead to trips and slips. Exposed wiring can lead to electrocution and fires. Mold and mildew can pose a health hazard.
Most states also require landlords to install smoke detectors and carbon monoxide detectors in every unit. You may have to install more than one in some units, depending on their size. You will need to check with your local fire authority to make sure that you are up to code and providing as safe a space as possible.
Pest Control
When there are a lot of people around, they generate a lot of garbage, which can lead to pests. That means that you have a garbage removal service and have some pest control in place, such as ant and rodent traps. If there is an infestation based on something you have or haven’t done, then you will be responsible for paying for extermination. However, you may be able to charge a tenant for it if their actions caused the infestation, such as leaving a door open or not removing food waste from their unit.
Being a landlord is a great way to earn income. Plus, it’s one of the best investments you can make. However, while you can earn passive income, it doesn’t mean that there is no work involved. Make sure that you meet these obligations so that you have happy tenants and a healthy rental portfolio.
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