Doing any sort of business is about reducing risk and increasing your return. When it comes to managing properties, things can fall between the cracks and strategies go by the wayside. You can do simple things to streamline every process so you can enjoy more rewards with less of a hassle.

First, Food For Thought

New landlords assume falsely that security deposits are adequate protection against having to pay big bucks for tenant-caused damages. The truth is, it will barely cover minor damages. And, major damages to property can cost landlords tens of thousands of dollars.

Another factor to consider is that while the security deposit might cover normal wear and tear, they can appeal that decision if a tenant disagrees. Courts tend to take the side of the renter if there is even a little question about damage. 

Even though security deposits offer marginal protection, they are important. The trick is to know how to manage them in such a way that it does not make you want to pull your hair out or stop taking them altogether.

Tenant-Proofing Property

Landlords can take steps towards making properties tenant-proof. Reducing the chances of property damage works out better for both the renter and the landlord.

• Vinyl Plank Flooring vs. Carpet — Carpet was once the most popular flooring. But, it stains and wears out rather quickly. Vinyl plank flooring lasts far longer and typically does not require replacing between tenants.

 

• Glossy Paint — Paint is one of those things that have changed over the years, too. It is not unusual to have to repaint between renters. When using glossy paint, the risk is less because it is far easier to simply wipe down.
• Door Stoppers — One of the cheapest remedies can save a landlord the most money. Door stoppers save walls by preventing holes in drywall.
• Garbage Disposal — Garbage disposal-related problems cause some of the greatest headaches. Removing them will help reduce late-night phone calls and expensive repair bills.

Normal Wear and Tear

The entire point of a security deposit is to cover minor property damage. Wear and tear happen, and it comes with the territory. But, it is always the best policy to explain to a possible tenant what you consider wear and tear. 

Different states have different definitions, but remember that the law tends to lean towards the tenant. It is important to research so you can lay out in a lease agreement what you consider wear and tear versus excessive damage. It will make your position clear and help reduce confusion.

Move-In Inspection

Performing a detailed move-in inspection is likely already on your checklist. But, do you do the walk-through with your tenant? If you do it together, you both can make notes of the property’s condition. Recording it using audio, video, or both will help if a former renter challenges a security deposit return. 

Move-Out Inspection

A move-out inspection is just as crucial as the move-in inspection. It is best if you perform it with the tenant. Retrace your steps and compare notes with the former occupant. It makes it easier to cross-reference and make a decision about the security deposit. Transparency goes a long way to making the process less stressful.

Applicant Red Flags

Interviewing potential tenants does a number of things. You can see how they interact and what they say. A huge warning sign is if they start to complain about security deposits. It likely means one of two things — the candidate does not have the money for the deposit or fears they will lose the money. Both are glaring red flags that should not go ignored.

If you can inspect where the potential tenant lived prior, you can get a better idea of who you are dealing with. It goes a long way towards drawing up the lease and deciding if they are more a liability than a respectful renter.

Security Deposit Alternatives

Alternatives to security deposits exist to help fill vacancies faster. Our Lease Insurance Guarantee is one such option helping tenants put out less cash upfront while providing the landlord with more protection against evictions and property damage. Landlords of all sizes, even one property, can benefit from this type of service.

Landlords can ask their tenants to purchase LeaseGuarantee instead of handing over a security deposit. They offer rental income protection up to $10k to cover legal fees, rental losses, and damages. It covers way more than a security deposit and reduces your overall stress and concern.

Wrap-Up

Sometimes little things make all the difference. Security deposits are sometimes more of a hassle than not. However, they are important to hold tenants accountable and help cover any property damage. 

You want to maximize your return and minimize your risk. You can do this through straightforward renovations, a property management service, or both. The important part is streamlining the security deposit process to make it easier for you and more transparent for your tenant.  

Position Realty
Office: 480-213-5251

Self-employed renters naturally strike fear in a landlord’s heart. Sure, we admire their moxie. But what about paying the rent? What about the ebbs and flows of business? How can you be sure a dip in sales won’t leave them weeks or months behind on paying up?

The same goes for freelancers, gig workers, and all those other professionals without standard, 9-to-5 jobs. They’re worrisome.

Fortunately, you don’t have to take a leap of faith when these tenants come calling to your rental property. There are many ways to both evaluate a self-employed renter’s income and ensure they’re a good fit for your rental all in one fell swoop. Here are five of them.

1. Ask questions

Get to know the prospective tenant. Ask them about the nature of their business, how long they’ve been operating, what types of clients they work with, and more.

You should also find out about the tenant’s credentials, past employment, and education history. How qualified are they to be doing what they’re doing? How likely is it they have the connections and skills to keep their business afloat?

You can also special order a business credit report from AAOA for $59.95 to find out if their business has good credit, high debt, lawsuits, violations, or high risk of default. Call (866) 579-2262 to request a comprehensive business credit report.

2. Research the business

You should also research the business. Do they have a website? Are they registered with your state? Are they licensed and insured? These are all indications a self-employed person is legitimate. (You might even be able to check out their pricing if you find their website!)

I had to rent a home a few years after I transitioned into freelancing, and my portfolio and published links (like those right here at Millionacres) were just a few of the items that helped prove my business’ legitimacy and success.

3. Request bank statements

If you want the most accurate depiction of the tenant’s income, ask for recent bank statements (business ones, if they have a business account). Pay careful attention to the deposits — how much they are, the consistency/cadence of them, etc. — and make sure the expenditures don’t outweigh the incoming cash.

Tax returns can work for verifying income, too, but these often don’t reflect the person’s full earnings — nor are they the most updated picture of their cash flow (they are annual, after all).

4. Pay special attention to their credit report

You’ll also want to pay special attention to the tenant’s credit. Look at the balances on any credit cards, loans, or other accounts they have out, as well as the monthly payment those come with.

You should also look carefully at payment history: Have they had any problems paying bills on time or in full? Are there any collection efforts or derogatory notes in their name? Have they had any bankruptcies or foreclosures? These can all give you insights into the tenant’s financial health — as well as any struggles they may be having.

5. Talk to past landlords

Finally, be sure to ask for the contact information for any past landlords the tenant has had. Call them up, ask about their payment history and, most importantly: Find out whether the landlord would be willing to rent to them again. Typically, if a landlord says “no” here, you’re best off moving to the next candidate. (Just make sure you’re abiding by fair housing laws and not discriminating!)
One last tip

If you’re not sure whether the tenant is a good fit, you can always consider requiring a cosigner, also known as a guarantor. This is someone who agrees to vouch for the tenant financially, as well as cover the rent if they’re unable to down the line. You can also have the tenant pay for a LeaseGuarantee policy which can cover future rental losses.

Position Realty
Office: 480-213-5251

Earlier this year, the Eastern District of Texas invalidated — commerce clause grounds — the Centers for Disease Control and Prevention’s (CDC’s) ability to halt residential evictions during the COVID-19 pandemic. Subsequently, in Tiger Lily, LLC v. U.S. Dept. of Housing & Urban Development, the Sixth Circuit Court of Appeals granted another win to landlords in Tennessee, who argued the agency’s order exceeded its authority.

On March 29th, the court denied the government’s emergency motion to stay a lower court’s order barring enforcement of the CDC’s Halt Order, which extended the moratorium on residential evictions until December 31, 2020. The Sixth Circuit found the government could not show a likelihood of success on the merits of its appeal such that enforcement of the lower court’s order should be stayed.

The decision turns on questions of statutory authority and whether Congress granted the CDC the power to extend the moratorium on residential evictions past the date set out in the CARES Act. After the act’s congressionally authorized moratorium expired on July 25, 2020, the CDC unilaterally issued the Halt Order, extending the eviction ban until December 31, 2020. The CDC based its ability to do so based on Section 361 of the Public Health Service Act, which allows the secretary of Health and Human Services to issue regulations necessary to prevent the introduction, transmission or spread of communicable diseases and allows the secretary to provide for “inspection, fumigation, disinfection, sanitation, pest extermination, destruction of animals or articles found to be so infected or contaminated as to be sources of dangerous infection to human beings, and other measures, as in his judgment may be necessary.” The government argued that a nationwide moratorium on evictions is among the “other measures” for disease control covered by Section 361.

The Sixth Circuit disagreed, finding the Halt Order to be outside the scope of the statute. The court reasoned that the residual phrase “and other measures” was controlled by reference to the enumerated categories before it, and that “[p]lainly, government intrusion on property to sanitize and dispose of infected matter is different in nature from a moratorium on evictions.” According to the court, regulation of the landlord-tenant relationship is historically the province of the states, and, if Congress intended to alter the usual constitutional balance between the states and federal government, it would have done so in “unmistakably clear” language. The absence of such language in the Public Health Service Act was dispositive in the court’s opinion. Notably, the constitutionality of government intrusion onto typically state-dominated areas concerned the Eastern District of Texas case as well.

Given the success of the recent challenges to the CDC’s authority, more lawsuits are sure to come. And, while the public health effects of COVID-19 will diminish as more Americans are vaccinated, the economic effects on both landlords and tenants are sure to endure. It remains to be seen whether Congress will issue a new eviction ban, or whether President Biden will address the issue via executive order.

Position Realty
Office: 480-213-5251