As the US housing market continues its slow recovery from the 2008 collapse, rental income property remains a solid, income building investment. And, as Jason Hartman recommends, buying as many properties as you can in diverse markets allows you to reap the maximum return on your investment from the rental income those properties generate. Finding and keeping the best tenants in your properties is a key factor in keeping a steady income flowing.
If you’ve purchased a property that has already been rented out, you will have inherited the existing tenants and their lease agreement. But purchasers of vacant properties will have to start the tenant search from scratch, and that means asking questions such as, how much rent can you charge? Will you hold tenants to a lease, rent month to month or follow some other arrangement? What’s the ideal tenant for this particular property, in this location?
Because the rental market continues to expand, and rents are rising, a fairly large pool of potential tenants exists in most areas. Finding those tenants depends on strategies such as advertising, word of mouth and working with local housing agencies.
Among the numerous tax breaks available to rental property owners are deductions for advertising. Paid ads in newspaper classifieds or online property listings, expenses for flyers, brochures and other publicity, and even travel to conduct the business of advertising your properties can all be considered legitimate expenses related to managing the investment. If you choose to establish a relationship with local Housing and Urban Development authorities to accept Section 8 and other kinds of housing assistance, you can deduct expenditures related to that, too.
Whatever avenues you choose to advertise your property’s availability, you’ll need to select the right tenants from the resulting applicants. Key factors in finding the right tenants for your property obviously include their ability to pay rent and maintain the property as stipulated in the lease or rental agreement.
In order to determine that, it’s legal to ask tenants about employment history or a criminal record, to run a credit check, or require references. You can deny housing to people for any reason that isn’t protected by law. These reasons can include smoking or pet ownership, and you can limit the number of people who can live in the house. You can also charge renters additional fees related to these things, such as pet deposits or cleaning fees.
But many ways to screen tenants are downright illegal. As a rental entrepreneur, you’re obligated to observe the guidelines of fair housing legislation and avoid discrimination in advertising and selecting tenants.
The US Fair Housing Act was first enacted in 1968 and prohibited landlords from using race, color, religion, sex or national origin as factors in denying or allowing the rental of housing. In 1988, additional prohibitions were added, protecting renters, except under certain circumstances, from discrimination on the basis of disability or family status such as having children under 18 in the house.
This means that you’re legally prohibited from stipulating n advertising that you have a no-children policy or that only people of a certain age can apply. You can’t ask screening questions related to those protected categories, either. Nor can you evict an existing tenant on those grounds.
The collapse in housing between 2088 and 2011, combined with an economic downturn, created a large pool of potential tenants in many markets. With increased demand for rental housing and support from tax laws on rental property, it’s possible to find the right tenants to sustain a long-term return on your investments.
The Jason Hartman Team