The market is ever changing and in our current market, many homeowners have chosen to rent out their properties rather than sell.
The business of renting out your real estate properties is often confused as simply being an aspect of the business of investing in real estate. But make no mistake, when you buy a property and rent it out you are now effectively running a business and in order to protect you and your asset you'd better know the law.
Treating rental property, especially residential, on your own as an investment is like handling your own stocks and bonds. You really run a huge risk for liability that could cost you your entire investment.
Landlords frequently ask about the best way to screen tenants. Any legal expert will warn you that this is an area that is fraught with potential liability because on top of having to watch out for violating federal laws, every state also has regulations that apply to screening tenants.
There are three basic areas that landlords need to check: credit history, past tenant behavior and criminal history. But there are federal acts and various state laws that protect the person being investigated, without having this knowledge, a landlord could easily violate them and end up owing a lot of money. Fines and Penalties that could be as high as $10,000 per incident for some violations.
Some of the greatest risks involve violating federal acts such as the Federal Fair Housing Act which identifies seven protected classes: religion, national origin, race, ancestry, sex, familial status and disability. There is also the Federal Credit Reporting Act which states things such as if you turn potential tenants down you must give notice in writing to them explaining why they were turned down if it was fully or partially based on their credit report. You must also let them know that they can dispute the information that is on the report with the credit reporting company that produced the report and you must provide name, address and phone number of the credit reporting agency.
Violating the Federal Fair Housing Act could happen with just a tenant claiming that you're using different standards for them from those for someone else.
Let's say, that you bring in a tenant who is not a member of a protected class, but the one you turned down is a member of a protected class and is also just as qualified, on paper, as the person you accepted. The one you turned down may claim illegal discrimination as the reason for not being accepted.
The best way to get good tenants for your property and protect your assets is to use a property management company. But if you not interested in doing that, at least, hire an objective, third party to handle the screening of your tenants. This way when a credit check is being done you have a standard already in place.
The [screening companies] that work best are the ones that actually give you a credit score. So you decide what level [score] you want to qualify and if the [prospective tenants] score above that level, then you accept them. If they don't [score above that level] then you don't accept them.
The bottom line, is that in order to protect your bottom line you'd better hire professionals who know the laws to handle this area of your business.
Copyright © 2006 Realty Times. All Rights Reserved.
The business of renting out your real estate properties is often confused as simply being an aspect of the business of investing in real estate. But make no mistake, when you buy a property and rent it out you are now effectively running a business and in order to protect you and your asset you'd better know the law.
Treating rental property, especially residential, on your own as an investment is like handling your own stocks and bonds. You really run a huge risk for liability that could cost you your entire investment.
Landlords frequently ask about the best way to screen tenants. Any legal expert will warn you that this is an area that is fraught with potential liability because on top of having to watch out for violating federal laws, every state also has regulations that apply to screening tenants.
There are three basic areas that landlords need to check: credit history, past tenant behavior and criminal history. But there are federal acts and various state laws that protect the person being investigated, without having this knowledge, a landlord could easily violate them and end up owing a lot of money. Fines and Penalties that could be as high as $10,000 per incident for some violations.
Some of the greatest risks involve violating federal acts such as the Federal Fair Housing Act which identifies seven protected classes: religion, national origin, race, ancestry, sex, familial status and disability. There is also the Federal Credit Reporting Act which states things such as if you turn potential tenants down you must give notice in writing to them explaining why they were turned down if it was fully or partially based on their credit report. You must also let them know that they can dispute the information that is on the report with the credit reporting company that produced the report and you must provide name, address and phone number of the credit reporting agency.
Violating the Federal Fair Housing Act could happen with just a tenant claiming that you're using different standards for them from those for someone else.
Let's say, that you bring in a tenant who is not a member of a protected class, but the one you turned down is a member of a protected class and is also just as qualified, on paper, as the person you accepted. The one you turned down may claim illegal discrimination as the reason for not being accepted.
The best way to get good tenants for your property and protect your assets is to use a property management company. But if you not interested in doing that, at least, hire an objective, third party to handle the screening of your tenants. This way when a credit check is being done you have a standard already in place.
The [screening companies] that work best are the ones that actually give you a credit score. So you decide what level [score] you want to qualify and if the [prospective tenants] score above that level, then you accept them. If they don't [score above that level] then you don't accept them.
The bottom line, is that in order to protect your bottom line you'd better hire professionals who know the laws to handle this area of your business.
Copyright © 2006 Realty Times. All Rights Reserved.
