Owning rental property can be a rewarding part-time or full-time business for many families. ‘s a traditional way many American families have gotten ahead. We recommend it. We enjoy it. But watch out “ if you don’t avoid the pitfalls, you can have some bad nightmares. What you don’t know can hurt you. Here are some of the worst mistakes a small property owner can make.
Accepting a New Tenant Without Careful, Thorough Screening
The most serious and costly danger to a landlord is having a tenant who stops paying rent and uses completely legal tactics to delay eviction.
To screen prospective tenants, you can use a tenant selection service, a rental agent, or you can do background checks yourself. You need to check with former landlords, but not the applicant’s current landlord, who may give a positive recommendation in order to get rid of a problem tenant. You need to verify income with applicant’s employer. Use a rental application form to make sure you cover everything important to screen for. If someone else does the screening, make sure you double-check their work.
Discriminating When You Select a New Tenant
If a prospective tenant thinks you have discriminated against him or her for illegal reasons (race, sex, age, marital status, family status, religion, nationality, ethnicity, sexual preference, gender identity, disability), the cost of defending yourself against such a suit or the cost of settlement, can be very high. It is acceptable, however, to decline to rent to someone who can’t afford the rent or with a background of trouble with landlords. Just be sure to apply the same standards for screening consistently to ALL of your applicants.
Not Having a Lease or Rental Agreement or Using One Not City-Specific
Written leases or tenancy-at-will agreements give you more rights as a landlord than do oral agreements. But make sure you use a rental agreement that is specific to San Francisco if your rental is there.
Taking Security Deposits Without Following Legal Requirements
Owners who don’t follow the legal rules exactly on security deposits risk paying triple damages and legal fees in a dispute. If you take a security deposit, check the law carefully and follow all the rules. And don’t call a security deposit a last month’s rent or allow tenants to apply it in this way when they give you notice that they plan to vacate. ‘s called a security deposit for a very good reason. If you call it last month’s rent, you will have contractually determined the final month’s rent in advance, regardless of how much the rent may have increased in the interim. Even more importantly, you’ll have nothing to hold back should you find that the vacating tenant has damaged the unit or left it in a mess.
Not Responding to a Tenant’s Repair Request
Maintaining good relations with your tenants can make all the difference in the world. So even though repairs are often a nuisance (and some tenants can be especially annoying), it is good practice to always respond to every tenant request and fix the problem promptly. Failure to do a repair only aggravates tenants and may cause them to turn to the local health inspector, at which point the whole relationship becomes needlessly contentious, legalistic and ultimately very expensive.
Not Acting Promptly When a Tenant Stops Paying Rent
You are entitled to the rent. You should call or notify your tenants if they are more than a few days late in making their monthly payment and give them an official, legal, 3-day notice. It is extremely rare that landlords ever get paid the back rent they are owed in an eviction, so act promptly to reduce your period of lost rent.
Losing Your Temper With a Tenant
It is best always to be professional and courteous with your tenants, even when they are being absolutely unreasonable. If you cannot keep your cool, it may be time to hire a lawyer to help solve your problem. Losing your temper may cause your tenant to turn to legal remedies, which are always harsh on landlords.
Not Thinking Twice Before You Refuse to Settle a Dispute With a Tenant
It is almost always better to settle a dispute with a tenant (even if it’s not the best deal for you) than to fight out a dispute in court. Landlord-tenant laws are simply not fair to landlords and tenants usually have access to free legal service lawyers who will fight their case against you with the tax and charity dollars for as long as they want with all the laws on their side. In the end, it may cost you tens of thousands of dollars. ‘s not worth it just to win a point of pride. Usually, the only time it is really important to fight to the end is to get rid of a non-paying tenant. Even then, a settlement where you pay the tenant to leave may be cheaper than paying even more to your own lawyer to fight to the bitter end.
Not Using a Lawyer When You Get Into Trouble With a Tenant
Some landlords say they have good luck doing their own evictions. And that’s just what it is “ luck. The technicalities are rampant. You don’t know them. Your tenant’s free lawyer knows every one of those technicalities backwards and forwards. You need to find a lawyer who has experience in landlord-tenant law. If you start without a lawyer, you may end up hiring one anyway, which will ultimately cost you more.
Reprinted with permission of the Small Property Owners of San Francisco Institute (SPOSFI) News. For more information on becoming a member of SPOSFI or to send a tax-deductible donation, please visit their website at www.smallprop.org or call (415) 647-2419.