Rental business can be profitable but it can require a great deal of work
By Deborah Jeanne Sergeant
You have residential property or could buy some. People need to rent houses and apartments. What could be a simpler way to make money?
While investing in real estate can represent a sound financial move, it’s vital to understand what it takes to be a landlord.
For one thing, it’s not a hands-off investment.
Would-be landlords need to understand the market in the area where they hope to rent out a property to ensure they will receive enough rent to cover the purchase. If the going rate for a rental is less than what you need to cover the mortgage, taxes, repairs upkeep and occasional vacancy periods, it’s not a sound investment.
Landlords are also responsible for getting properties up to code and seeking and dealing with tenants legally. Rental laws include federal, state and municipality laws — saying, “I didn’t know” is no excuse.
Carlotta Brown, president of Onondaga County Real Estate Investors Club in North Syracuse, advises potential landlords to get in touch with a real estate attorney to ensure they have a legally binding lease that corresponds with their municipality as well as state and federal laws.
Starting with a solid lease can prevent issues and help when problems arise. Brown said that evictions that in the past took 21 days may now take two to three months, thanks to the Housing Stability and Tenant Protection Act of 2019, a state provision.
“Tenants are protected more,” Brown said. “New York feels they have to protect everyone, but they’re protecting the one who’s breaking everything. If I borrowed a car and tore the seats, you could sue me and get it back. With the new law, I can only sue for damages to the rental property in small claims court, not add the damages to the lease.”
Winning in small claims court doesn’t guarantee payment.
Brown also stated that screening applicants is absolutely vital. Of course, landlords cannot discriminate based upon protected statuses and are responsible for understanding what they may or may not ask when screening applicants. Landlords can charge up to a $20 fee for an applicant’s background check, but nothing else.
Gut reaction also matters to Brown.
“If you don’t feel comfortable with that person, you won’t be comfortable as their landlord,” she said.
Inside the house, extra items like garbage disposals and new carpeting are likely to become damaged. Brown said it’s better to keep any renovations basic and to avoid laying carpeting.
Landlords should also plan how they’ll maintain their properties: hire a pro, contract with a property management company or do it themselves. Of course, DIY is the least expensive; however, it’s very time consuming and the landlord must have a wide array of skills. Hiring professionals as needed will cost more, but not as much as a property management company. That option takes care of most of the headaches, but also nabs a good share of the property’s income.
Consulting with the local code enforcement office and building inspector about what it takes to get a certificate of occupancy can help landlords better understand the process. For example, stipulations include requirements on fire escapes, smoke detectors and fire extinguishers. The office should have a checklist available to help landlords get their property in compliance.
Curt Miller, director of code enforcement and plumbing coordinator for the city of Oswego, said that landlords need to apply for a rental permit to make sure it’s allowed in their zone, have a water meter on their property and make sure that all the basic life items are in place.
Landlords should also make sure they have adequate parking for the families living in their rentals.
Winging it without the rental permit in Oswego is borrowing trouble.
“We would start by asking for rental permit and if they didn’t have it, the next step is we would ask them to get one and then an order to remedy which gives them 30 days,” Miller said. “If they still don’t have it, we issue an appearance ticket.”
Code differs for rentals from private residences because the onus is on landlords to make their properties safe for renters.
“Seek your local code office and see what they do require,” Miller said.