Successful...and Legal Landlording

This information is coming from the April 2008 REALTOR magazine, published by the National Association of REALTORS.

Slower sales are compelling more home owners to rent their properties, at least for a while. If you fall into this situation, follow these tips from attorney Kenneth M. Roth.

1. Run renting like a business. Even if you are planning to lease only until your house sells, and even if the tenant is your second cousin, keep the leasing process on a professional basis. Establishing business rules and policies allow you to maintain objectivity if your tenant makes demands or is late with the rent payment.
2. Treat everyone equally. The federal fair housing law, which prohibits discrimination on the basis of race, color, religion, sex, national origin, family status or handicap, applies when you advertise or lease residential property. Although it's completely legal to ask questions about a prospective tenant's rental history, current employment and financial history, it's important to ask every applicant the same questions to avoid the appearance of discrimination. If you have a problem renting to anyone in a protected class, then don't rent your house at all.
3. Use the right forms. Although there are all-purpose leases available at office supply stores, it makes more sense to use a lease tailored to your specific property type and state laws, including the landlord-tenant law. Good sources are your local REALTOR association or state bar association.
4. Make your lease as specific as possible. Spell out exactly what is expected of your tenant and you, as the owner. Who's going to mow the lawn? How should emergency repairs be handled? Consider making tenants responsible for repairs of less than $100 and you cover the major repairs.
5. Write a roadmap for defaults. Your lease should identify the particulars and penalties of rent payments. It should state when the rent is due, where it must be paid, what late fees and interest you charge and at what point late payments will result in an eviction rate.
6. Don't treat security deposits as a potential for profit. Security deposits are intended to cover only repairs needed because of excessive damage to your property. They can't be used to cover routine cleaning of a property prior to releasing or to add upgrades. Also remember that in many states, security deposits must be kept in a separate account and you must pay interest to the tenant. Ask for the first and last month's rent plus a security deposit.
7. Don't be fooled by appearances. A fancy car and lots of bling do not necessarily a good tenant make. Run a credit check on every prospective tenant. Tenants must sign an authorization to permit you to check a tenant's credit and you can charge them for the cost. Also remember to keep credit information confidential. Don't disclose what you know to others.

Although not addressed by Mr. Roth, I recommend you consider hiring various professionals including a cleaning service, accountant, maintenance person and an attorney. These people would be part of your team and should be able to advise you on most issues and situations you will encounter.

Click here to see information on the Washington State Tenant-Landlord Act.