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New Warnings on Inaccurate Tenant Background Checks

By John Triplett

The Consumer Financial Protection Bureau (CFPB) has issued a new warning to consumer reporting companies to address inaccurate tenant background check reports as well as sloppy credit-filing sharing practices, according to a release.

Background checks often are critical factors when landlords and employers make rental and employment determinations. The information in the reports can cover a person’s credit history, rental history, employment, salary, professional licenses, criminal arrests and convictions, and driving records. However, as documented in earlier CFPB research on tenant screening, background check reports often contain false or misleading information about individuals.

The new warning has two primary ways it seeks to ensure that the consumer reporting system produces accurate and reliable information and does not keep people from accessing their personal data:

  • First, an advisory opinion on background check reports highlights that those reports must be complete, accurate, and free of information that is duplicative, outdated, expunged, sealed, or otherwise legally restricted from public access.
  • Second, an advisory opinion on file disclosure highlights that people are entitled to receive all information contained in their consumer file at the time they request it, along with the source or sources of the information contained within, including both the original and any intermediary or vendor source.

“Background-check and other consumer-reporting companies do not get to create flawed reputational dossiers that are then hidden from consumer view,” said CFPB Director Rohit Chopra in the release. “Background-check reports, and all other consumer reports, must be accurate, up to date, and available to the people that the reports are about.”

Criminal and credit system issues in housing decisions

The CFPB and Federal Trade Commission (FTC) launched a public inquiry in early 2023 and asked for people’s experiences with background checks used to screen potential tenants for rental housing. The CFPB and FTC received more than 600 comments. Most of the comments came from renters. They told the agencies about many problems they encounter, including not receiving adverse-action notices and finding inaccuracies and errors that are difficult to correct and that have a decades-long impact on housing opportunities.

Many described biases in criminal and credit systems transferring into housing decisions.


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The CFPB issued the advisory opinion on background screening to highlight that consumer reporting companies, covered by the Fair Credit Reporting Act, must maintain reasonable procedures to avoid producing reports with false or misleading information. Specifically, the procedures should:

  • Prevent the reporting of public-record information that has been expunged, sealed, or otherwise legally restricted from public access.
  • Ensure disposition information is reported for any arrests, criminal charges, eviction proceedings, or other court filings that are included in background check reports.
  • Prevent the reporting of duplicative information.

In addition, the advisory opinion on background screening reminds consumer reporting companies that they may not report outdated negative information—and that each negative item of information is subject to its own reporting period, the timing of which depends on the date of the negative item itself. For example, a criminal charge that does not result in a conviction generally cannot be reported by a consumer reporting company beyond the seven-year period that starts at the time of the charge.

Credit File Disclosure

People have the right to know what information consumer reporting companies keep about them as well as where the information originates. Disclosure of a person’s complete file, upon their request, is a critical component of a person’s right to dispute false or misleading information. Consumers must be provided with all sources for the information contained in their file, including both the originating sources and any intermediary or vendor sources, so they can correct any misinformation.

As explained in the advisory opinion on file disclosure, individuals requesting their files:

  • Only need to make a request for their report and provide proper identification – they do not need to use specific language or industry jargon to be provided their complete file.
  • Must be provided their complete file with clear and accurate information that is presented in a way an average person could understand.
  • Must be provided the information in a format that will assist them in identifying inaccuracies, exercising their rights to dispute any incomplete or inaccurate information, and understanding when they are being affected by adverse information.
  • Must be provided with the sources of the information in their file, including both the original and any intermediary or vendor source or sources.

In a January 2023 report, the CFPB noted improvements and continued challenges for the nationwide consumer-reporting companies. The CFPB has highlighted other consumer reporting problems and has reminded consumer-reporting companies of their obligations to consumers under the Fair Credit Reporting Act. For example, the CFPB issued guidance on permissible purposes for accessing consumer reports, identifying and eliminating obviously false and junk data, and resolving consumer disputes. Additionally, the CFPB has taken action against consumer-reporting companies when they have broken the law, as well as affirmed the ability of states to police credit reporting markets.

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New laws in 2024 that will affect Minnesota landlords and tenants

By Pauleen Le

The new laws taking effect in 2024 are some of the largest changes Minnesota has seen in decades. State lawmakers passed more than a dozen changes in the 2023 legislative session.

Among the top changes, landlords will be required to disclose any fees including administrative, cleaning or moving-in fees as part of the ‘total monthly rent’ on the first page of a lease and in advertisements.

Landlords will also required to maintain the minimum temperature in units at 68 degrees from October to the end of April.

They will also have to give tenants a 14-day written notice before they file for an eviction if the tenant didn’t pay their rent on time.

Landlords will also have to give a minimum of 24 hours’ notice before entering the property for things including maintenance, showings to future tenants or deliveries.

Rachael Sterling, a housing attorney and communications coordinator for HOME Line — a local nonprofit organization that helps tenants navigate Minnesota’s laws — said they’ve been championing these changes for years.

She said she’s hopeful the changes will improve the communication between tenants and landlords to provide a better experience overall for everyone.

“When we talk to tenants, that’s one of the biggest issues is when communication stops or it’s poor,” she said. “That’s when problems arise and that’s when people start calling us. A lot of these are just about clarifying communication and making sure that there’s no assumptions that folks know what they’re getting themselves into.”

Sterling said since 2020, phone calls to the nonprofit for help have skyrocketed and are now on track to set a new record surpassing 20,000 calls this year.

She said the majority of calls the last two years have been about concerns related to evictions. Before 2020, most calls were about repair issues.


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Since the laws passed, leaders at the Minnesota Multi-Housing Authority have been working hard to understand and train their members on the changes coming in the new year.

The organization represents 300,000 rental units or nearly half of the entire rental market in Minnesota.

Cecil Smith is the MMHA’s president and CEO. He said several of the changes were already standard practice for many of the owners and landlords a part of the organization long before they became law.

He said the biggest adjustment for landlords will be giving tenants 24-hours’ notice before entry.

“That’s going to cost,” he said. “That’s going to take a lot of time and energy and organization because there’s maintenance requests that come in, there’s deliveries that come in and saying it has to be at least 24 hours requires more energy and scheduling and coordination and that takes time and energy and money.”

Smith adds there’s also concern that the cost to make all the changes could ultimately trickle down to the tenants.

“It’s already added more costs because we’ve done lots and lots of training with our members and they’re doing in-house costs, and obviously that’s taken staff time and resources already to do that and that’s not free,” he said.

Smith notes another major change happening later in the summer of 2024 where landlords will no longer be able to evict a tenant for committing crimes that happened somewhere other than their property…

Smith said MMHA plans to raise their concerns about the law in the upcoming legislative session.

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7 Predictions For The 2024 Rental Market

By John Triplett

Here are 7 predictions for where the rental market is headed in 2024 from the economists at Apartment List as the once red-hot rental market of previous years has now cooled.

Here is a key topline summary for 2024:

  • 2024 will be the strongest year for new apartment construction in decades, giving renters more options and better opportunities to negotiate price and lease terms.
  • “We expect that year-over-year rent growth will crawl out of negative territory next year, but that it won’t rise above the low single-digits.”
  • Even though mortgage rates are expected to ease modestly, home prices will remain prohibitively high and continue to create more long-term renters.

No. 1 – 2024 will bring the most new apartments in decades

Construction data from the Census Bureau suggests that multifamily supply growth should remain strong through 2024. The number of new multifamily apartment units under construction hit one million for the first time ever in 2023, and completions are expected to peak in 2024. With so many units in the construction pipeline, 2024 should be the strongest year for new multifamily supply since the 1980s.

apartments under construction and implications for 2024 rental market

No. 2 – Low single-digit rent growth in 2024

2023 is set to have the second slowest rent growth of any year in the history of our estimates (going back to 2017), coming ahead of only 2020. Looking ahead to 2024, “we expect demand to bounce back slightly, but remain on the soft side. The labor market remains fairly strong and there is likely some pent-up demand for new household formation. However, affordability continues to be a major concern and sentiment data shows that Americans still lack confidence in the economy. Even in the most bullish scenario, it’s unlikely that demand will be strong enough to outstrip all of the new supply that we know is coming, likely resulting in our vacancy index rising modestly from its current level in 2024. We expect that rent growth will rise out of negative territory early next year, but that it won’t get above the low single digits in 2024.”

changes in median rent

No. 3- The changing rent vs. buy math will create more long-term renters

Many families are remaining renters longer than they may have in the past. Even those who can afford to buy in today’s market may find that renting now actually makes more financial sense. Although most Americans still aspire to own homes, more are now finding themselves renting later in life, and that trend is likely to continue. Consensus expectations are that mortgage rates will ease modestly next year, but likely not enough to significantly alter the prevailing dynamics of the for-sale market. As paths to homeownership fade for many, renting will increasingly be seen as the more practical housing option.

mortgage rates remain high into 2024

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No. 4- Hybrid work will cement itself as the new norm for office jobs

In 2023, the remote work narrative focused on return-to-office plans, but this focus obscures the fact the pendulum will never swing fully back to the pre-pandemic norm. According to the latest estimates, 28 percent of all work days are still from home, and that figure appears to be stabilizing at that level. 42 percent of American workers currently have some form of remote work flexibility, and hybrid arrangements are much more common than fully remote ones. The data shows that hybrid work is here to stay, driving demand for rentals that provide spaces and amenities that blend work and home life for today’s flexible workforce.

work from home and rentals in 2024

No. 5- Sun Belt markets will see more renters, but not necessarily higher rents

The nation’s fastest population growth in recent years has been taking place throughout the Sun Belt. But in many cases, Sun Belt markets have also been among the most accommodating of growth, allowing for new housing development to meet the growing demand. The key takeaway: fast-growing Sun Belt markets will continue to be renter magnets, but rent growth should be kept in check thanks to lots multifamily development.

work from home and rentals in 2024

No. 6- As the economy takes center stage in the presidential election, candidates will need to speak to housing concerns

As we head into a presidential election year, the question of whether the economy is good or bad has proven to be surprisingly complicated. Most of the key indicators of economic health are looking quite strong, but economic sentiment surveys show that confidence and satisfaction in the economy remain weak. It’s likely that at least some of this disconnect is being driven by waning housing affordability. As the election cycle continues to ramp up, candidates on both sides of the aisle will need to articulate housing plans and speak to what has become one of the most pressing concerns of the American electorate. 2024 could be the year where housing rises to the forefront of the political discourse.

renters in 2024 and presidential election

No. 7- More renters will use AI in their searches

“We expect 2024 to bring a new wave of AI-powered tools specifically for renters. It will soon become commonplace for renters to use AI in their apartment searches to search, compare, and coordinate actions. It will take time for these advancements to change macro market dynamics, but the next high-demand rental market cycle may look quite different with new power in renter’s pockets. And as adoption of AI-enabled rental search tools accelerates into 2024, both renters and property managers can seize opportunities from this new technological frontier.”

Conclusion

“2024 is certain to bring twists and turns no model can predict, as the new year always does. But we hope that by forewarning of what’s foreseeable—from new supply waves to persistent homeownership headwinds bolstering rental demand—we can help you prepare for what is ahead.”

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13 Ways to Increase Rent and Add Value to Your Rental Property

Written by Andrew Syrios, Provided by Bigger Pockets

I’m a big fan of buy and hold and the BRRRR method. That being said, if you’re going to go down this path, you will want to know how to increase the rent and the return from your rentals. Doing so encompasses all factors of property management. Leasing faster and to higher quality tenants will increase your return. Renting for a higher price and increasing the rent upon renewal will as well. And so will prevent maintenance problems before they come up, as well as increase tenant retention. But how do we achieve all of these ends?

Well, I’m glad you asked. Here are 13 of the best ways, in this humble author’s opinion, to do so.

1. Improve the Appearance of the Front of the Property

It’s often noted that people make up their minds about you in seven seconds. In other words, you don’t have long to make a first impression. Neither does your rental. As I noted in previously, simple aesthetic improvements such as window shutters, painting the front door, mowing the lawn, hedging any bushes or trees, replacing the mailbox or address numbers, and the like can be hugely important.

For one of my properties, all we did was mow the lawn, cut back the low-hanging branches on the tree in the front, add a window box beneath the windows, paint the front door red, and add some bark mulch in the flower bed. A total expense of maybe $500-$700. But that can make an incredible difference in both getting a property rented quickly and getting top dollar for it.

2. Quality Advertising

I’ve heard it said occasionally that “all we need to do to rent a house is put a sign in the yard.” I think this is the wrong approach. As my brother—who is our property manager—put it:

“If all you have is a sign in the yard, then you won’t have as much interest as if it was online everywhere. Fewer prospects means less demand, and when the supply stays the same, the only consequence is a lower price.”

That’s Economics 101 for you.

Put simply, renting a property with only a sign probably means you are under-renting it.

Furthermore, you want to take high-quality pictures. If you can afford to invest in a top-end camera, it will pay for itself and much more. Just compare these two photos of this rather awkward house we own. One was taken from my old cellphone, and the other from a high-end camera. Which do you think is more likely to get that person scrolling Craigslist to call you?

picture-5
picture-6

Also, make sure to take pictures at about a 30-degree angle. Head-on pictures makes properties look very small, as the following examples show:

picture-3
picture-4

3. Make Sure the Unit is Well Lit and Smells Good for Showings

It should go without saying that you should clean a unit before showing it. But also, make sure the lights are on, and blinds are open, so the unit is well-lit when the prospect comes to look at. Dark rooms look smaller and less welcoming.

Also, put some air fresheners in the unit to make it smell pleasant. As the site Fifth Sense notes, “The sense of smell is closely linked with memory, probably more so than any of our other senses.” In other words, if the property smells good, then when the prospect goes home to debate which unit they want of the many they’ve seen, yours will stick out in their memory.

I even heard of one person who baked cookies before prospects showed up. Now that’s an inviting smell sure to get a signature on the bottom line!

4. Don’t Just Show. Sell

If you’re just opening the door and hoping the prospect will like your unit (or if your property manager is), you’re doing it wrong.

There are three great methods for selling during a showing:

  1. Building Rapport
  2. Using Anchors
  3. Using Reciprocation

If you’re doing the showings (or have hired someone to do them), you should use at least the first two and maybe the third.

Building rapport just means that you are friendly and open with them. Be genuinely interested in them. Ask questions and just shoot the breeze with them a bit. At the same time, don’t oversell or be pushy. People want to rent from people they like.

In other words, if you say that you think the house is 1,200 square feet, you have anchored in the prospect’s mind that the house is around 1,200 square feet. If you ask them to guess what they think it is, they will likely guess between 1,100 and 1,300 (assuming your number is in the ballpark, of course). If, on the other hand, you say you think the same house is 900 square feet, they may know that sounds too small but will probably guess between 1,000 and 1,200 square feet. So their answer will change solely because of your anchor.

But anchors can be qualitative, too. So, when I was showing houses, I would often say something like “I love this house,” or “the kitchen in this house is amazing” before opening the door.

Finally, in some cases, particularly in hot markets, it might make sense to use the rule of reciprocation. As Wikipedia describes it, “By virtue of the rule of reciprocity, people are obligated to repay favors, gifts, invitations, etc.” Psychologically, this works by people wanting to return a kindness (say renting from you) if you do something nice for them.

This may feel manipulative, but you aren’t going to convince someone to rent a turd from you if you give them five bucks. If you are renting a good property, what the Rule of Reciprocation does is set you apart from your competition’s equally good property. Putting such offers in your advertising will also help elicit traffic to your properties.

So, for example, in Eugene, Oregon, there is an oversupply of student housing, which we have a lot of. So we started offering a free pizza coupon to a popular college pizza shop just for viewing one of our properties. One year, we even offered concert tickets to local events being put on by an EDM productions company a friend of mine were partners in. There are lots of possibilities like this. Let your mind go wild.

5. Don’t Start Your Price Too Low—Usually

The basic principle with apartment rents is that if you have low occupancy, you can’t raise your rent. But if your occupancy is around 90 to 95 percent, then it’s time to increase the rent.

With houses, though, it’s much harder to know what to rent a place for since there’s only one of them. Yes, you can comp it out on Craigslist or Zillow, or you can ask the neighbors, but you can’t be perfect.

My recommendation is to approach renting a house from the perspective that you can fix a property priced too high, but it’s hard to fix one priced too low. If you under-rent a property, you’re stuck with it. But if you set the price too high, you’ll know quickly it’s too expensive because you aren’t getting any calls. Then you can quickly adjust the price downward. So start near the top of the range you think it can rent for.

Of course, you don’t want to go crazy with this. Every day a unit sits on the market means rent that is lost forever. And if you have a lot of vacancies or it’s in the middle of the winter, and few people are looking for a rental, you should certainly be more aggressive. But in most cases, it’s better to start at the high range than the low.

6. Screen, Screen, Screen—Then Screen Some More

High rent is useless if you’re settling for bad tenants. Take these two scenarios with the same house. One tenant rents it for $600/month and stays there all year. The other rents are for $700, but you have to evict the tenant and lose two months of rent plus the costs above the deposit to turn over the unit and the cost of the eviction. Here’s how it turns out:

updated-chart-for-last-weeks-article

With any sort of loan on that property, it would almost certainly have been upside down with Tenant 2.

Remember, it’s better to have a property sit vacant than to rent to a bad tenant. More than once, we’ve had a tenant do over $10,000 in damage. That kind of thing will ruin your cash flow for quite some time.

Make sure to check for evictions, their criminal record, and credit, and get landlord and employment references. We don’t accept evictions, nor do we accept felonies unless they are very old. The tenants should also make more than three times the monthly rent in income.

Finally, I would recommend turning over your employment and landlord references to AAA or another such company. There’s an incentive to hear what you want to hear if you check yourself, and that can bias your evaluation when talking to landlords and employers. Then you push through marginal prospects you probably should have declined. Third-party companies couldn’t care less, so you don’t get a blurry image when getting landlord and employment references.


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7. Always Raise Rent Upon Lease Renewal

As I once heard Dave Lindahl put it, “Tenants expect you to raise their rent each year, so don’t disappoint them.” These increases will at least keep your rent the same in inflation-adjusted terms and will often improve your bottom line.

Remember, assuming you are cash flowing, every additional dollar you can get in rent is pure profit.

That being said, it’s also important to let tenants know it’s coming. We inform them there will almost certainly be a rent increase each year when we sign the original lease.

8. Charge More for Month-to-Month Rentals

We don’t rent month-to-month, to begin with, but we will allow tenants to switch over to a month-to-month arrangement once they have completed a year lease.

But we’re not going to do it for free.

BiggerPockets’ own Brandon Turner explains a great way to do this:

“When raising the rent, try this trick often used by marketers: Don’t tell them what the new rental price is going to be, but give them three price options to choose from. Think about it. Almost every big business offers three price tiers:

By offering three choices, individuals tend to compare the choices given, rather than comparing the price to other businesses. A coffee at Starbucks may be ridiculously priced, but by giving the customer options—the “Tall” for $3.25, the “Grande” for $3.75, or the “Venti” for $4.25—people rarely even consider the $0.99 cup of coffee they can get at the local diner across the street.”

Thus, Brandon gives tenants an option of month-to-month, a six-month lease, and a year lease. The shorter the lease, the higher the price.

9. Allow for Pets and Charge Pet Rent

Remember what my brother said: “Fewer prospects means less demand, and when the supply stays the same, the only consequence is a lower price.”

While I wouldn’t recommend renting to people with dogs in apartments (maybe I’d allow one cat). With houses, I absolutely recommend it. Opening up your property to people with pets increases the number of prospects—and therefore demand and therefore, price.

The reason is that many people want to rent houses in large part because they have pets. And Americans love, love, love their pets. One survey found that 62% of Americans have a pet, and of those who do, 95% considered their pets to be “members of the family.”

Pets do some damage, though. Luckily, you can cover that with a nonrefundable pet deposit (we charge $250) and pet rent (we charge $25 a pet per month). We usually set a limit of three pets and do not allow dangerous breeds of dogs.

We probably make more from pet rent than we lose in damages, but even if these charges are completely offset by more maintenance, you have dramatically increased the pool of potential renters, and with more demand comes a higher price. You’d also be smart to do some extra due diligence here and read up on the pet rent laws in your state, as they vary.

10. Maintenance and Preventative Maintenance

Some of the best ways to increase returns are to lower expenses. Preventive maintenance can do just that. You should not rely on tenants to replace furnace filters, clean off A/C compressors, or clean the gutters. But these small repairs can save you thousands of dollars in HVAC and foundation repairs.

Furthermore, some tenants won’t tell you about leaks for some unknown reason. If leaks fester for too long, they can cause major dry rot and water damage.

Regular inspections can find and address these issues. It’s preferable to do them semi-annually, but even once a year is better than nothing.

Furthermore, good maintenance is the key to tenant retention. After a tenant signs a lease, their only contact with you is paying rent and maintenance. Neither is pleasant. And if they’re late a month, there’s another unpleasant contact with property management.

But if you provide good maintenance, this will go a long way in keeping you in good favor with your tenants and increasing the odds of renewal. And turnover is often a landlord’s biggest expense, so anything you can do to mitigate it is a good thing for the bottom line.

11. Maintain Contact With Tenants in Other Ways

In a similar vein, if you can find a way to positively maintain contact with your tenants, this will also help with renewals. It could be something as simple as a monthly newsletter or a social media presence.

You could also combine this with your marketing strategy. In addition to offering a pizza coupon to each group that viewed a unit, our Oregon management company also offered pizza coupons each month for those who rented from us. Yes, this costs money, but it not only works as a good marketing ploy. It also means that each month, while those students sent rent in, they got something back. That makes you look more positive in their eyes.

My brother asks for a prospect’s favorite restaurant on the rental applications. Then, if there’s a bad maintenance issue or one we handled poorly, he sends them a gift card to that restaurant. It’s more personal (and thus more effective) than a rent discount—and it’s cheaper, too.

Or you could put every tenant who paid on time each month of the year into a raffle and give away a TV or something like that. There are all sorts of ways to maintain a positive line of communication with your tenants, and doing so will help substantially with tenant retention.

12. Charge for Amenities/Perks

Are there any other amenities you can charge for? My brother implemented a program where tenants can pay for us to mow their lawn each week during the summer months. Not many took us up on it, but it’s another stream of income that was easy to implement.

Jeffrey Taylor will charge more for amenities, such as adding a storm door or ceiling fan. While he doesn’t make money from this, he does improve his property for free. What other such opportunities are out there?

13. Increase Renewals With a Resident Program

Jeffrey Taylor (Mr. Landlord) is the master of this idea. Here’s how he describes his “3-Star Resident Program”:

“When residents move into one of my properties, I welcome them into my 3-Star Resident program. It doesn’t cost them anything, and they get perks by being a part of it. Their ‘anniversary’ becomes a time of celebration. Every year, I give them a choice of property upgrades (costing between $25 and $75 each) for paying rent on time.”

This bonus goes back to the rule of reciprocity mentioned above. It also can act as that gentle shove in the direction of “yes” when someone is sitting on the fence and needs a tiebreaker to decide on whether to renew or not.

And Taylor goes further:

“…in the third year, I announce a new program: the VIP program. Starting the fourth year, I return $100 of their deposit.”

These are by no means the only things you can put into such a program, but they’re a very good start.

Conclusion

You should approach the management side of your buy-and-hold business as not just “what you have to do to own properties,” but instead as a profit-making business in and of itself. The more you can raise rents, lower costs, and increase retention, the better your bottom line will be. Good management can save bad investments, and bad management can kill good ones. Be proactive in increasing your rental returns.

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Six New California Laws Impacting Housing in 2024 That You Should Know About

In 2024, property owners in participating California cities will be able to sell their granny units separately from the main residence under Assembly Bill 1033.  Embarcadero Media file photo by Veronica Weber.

Whether you’re a home buyer, seller, landlord or tenant, there are several new laws set to go into effect in California in 2024 that will impact housing.

Here are six laws you should know about:

The sale of accessory dwelling units

Accessory dwelling units, also known as ADUs, have often been rented out by homeowners in California. Assembly Bill 1033 will now allow ADUs to be sold, which could in effect create two- or three-unit condominiums on a given lot.

Effective in 2024, property owners in participating cities that decide to opt-in to the new program will be able to sell their ADUs separately from the main residence.

This also would mean covenants, conditions & restrictions (CC&Rs), the set of rules governing the use of a certain piece of real estate in a homeowners association, would need to be created for these condominiums.

Disclosures for flipped houses

Anyone who purchases a home and flips it within an 18-month period must disclose all repairs and renovations made to the property during that time under Assembly Bill 968. Photo courtesy PhotoSpin.

In an effort to mitigate the risks of shoddy renovations to buyers of flipped houses — those that are purchased, rehabbed and sold for a profit — Assembly Bill 968 expands existing sales disclosure laws.

Anyone who purchases a home and flips it within an 18-month period must disclose all repairs and renovations made to the property during that time. The name of each contractor who performed work and whether a permit was obtained for each renovation also must be disclosed.


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New fire hazard disclosures

An orange glow and smoke from the CZU Lightning Complex fires in the Santa Cruz Mountains in San Mateo County are seen from the Palo Alto Baylands on Aug. 20, 2020. Photo courtesy Brian Krippendorf.

Existing law requires a seller to disclose natural hazards, including whether a property is in a high or very high fire hazard severity zone, to a prospective buyer through the natural hazard disclosure statement.

Assembly Bill 1280 expands this criteria and establishes subcategories, including as to whether the property is located within a high fire hazard severity zone in a state responsibility area, very high fire hazard severity zone in a state responsibility area, or very high fire hazard severity zone in a local responsibility area.

If the property is located in any of these zones, the defensible space and (for properties built before 2010) fire hardening disclosures would then be required.

Tenants’ rights

The Oak Court Apartments complex in Palo Alto. Embarcadero Media file photo by Veronica Weber.

Three new laws aimed at protecting tenants are set to go into effect at the start of the year.

Assembly Bill 12 limits the amount landlords can require in security deposits to just one month’s rent in addition to the first month’s rent. California landlords also cannot discriminate on the basis of an applicant’s source of income, which means they must consider Section 8 applicants.

Assembly Bill 1418 prohibits cities and counties from enacting “crime-free” housing programs and nuisance ordinances that require landlords to evict or refuse to rent to those with prior criminal convictions.

Assembly Bill 1620 allows local jurisdictions to require landlords whose units don’t have elevators to allow physically disabled tenants to move into similar units on a ground floor and keep the same rent rate and lease terms.

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7 Tools to Deep Clean Rental Property Carpets

Written by David Bitton, provided by doorloop

Older carpets can devalue a rental property if they look work out and covered in stains. Looking new requires maintenance and deep cleaning.

The problem is carpet fibers seem to suck in and hold onto dirt and odors. There could be dust, animal fur, dirt, spills, soil, and even stains from furniture placement. These can make a carpet look like it needs to be replaced. Luckily, there are tools to deep clean rental property carpets that otherwise are going to the trash.

Carpets are the go-to flooring option for any landlord seeking to create and lease a warm, cozy, and homey feeling for their rental property. Incredibly versatile in design, textures, colors, and quality ensures that there are carpeting options to suit all types of tastes. Comparing carpet vs vinyl flooring, carpets are a cost-effective flooring solution for rental properties.

When to hire a professional cleaning company?

As a rental landlord, you probably experience high anxiety levels every time your rental units are empty. When an old tenant leaves, their security deposit is often not enough to cover significant renovations. If your apartment is beautifully maintained, your turnaround time between tenants should be low, thus ensuring you receive an income from your real estate investment.

A big part of taking responsibility for maintaining an apartment is ensuring that your rental unit is clean and in good condition. Without furniture in the unit, a potential renter may focus on the walls and floors, looking for any flaw or damages to bargain and bring down the price. There may be a small carpet stain, for example.

Choosing to clean the carpet is a solution any landlord can offer. However, a professional cleaning company should be the go-to option between tenants. These companies have the tools and know-how to deep clean and remove stains in the shortest possible time and safely without any damage to the carpet.

Deep clean rental property carpets

deep clean rental property carpet machine

There are three main ways to go about cleaning the carpet in a rental unit, all of which use the method of extracting dirt from the carpet with suction. A landlord’s preferred option will be based on various factors, including their budget, the carpets’ age, type of carpet stain, environmental concerns, and more. Look at these three examples and choose the one that suits you best.

Commercial grade carpet cleaners:

  1. Hot Water Extraction – The JaniLink portable carpet extractor machine is a potent tool to use when you want a deep clean carpet and get rid of debris, dust, and dirt. Hot water is an environmentally friendly option, and you can choose whether or not you want to add in any cleaning agents or chemicals. Water is pushed into the carpet at high pressure dislodging dirt, and then sucked back out with a strong vacuum. The final result is a reduction in odors and residue-free carpeting.  The only downside, of course, is the price.

    PRO TIP – Don’t confuse hot water extraction and utilizing a steam cleaner. Though they are similar, hot water extraction uses less water and offers excellent results. It also reduces shrinkage or visible damage to the carpet.
    ‍
  2. Cold Water Extraction – When a rental landlord chooses to deep clean carpets themselves, cold water extraction is a safe and effective option. One tool that always gets the job done is the CleanFreak ® Non-Heated Rug & Carpet Cleaning Machine. From a health perspective, there is no need to worry about inhaling chemicals, since there is no steam. Furthermore, drying time is cut down significantly, allowing the carpet to revert to its natural dry state faster.  They use less power, making them more cost-effective too. A cold water extraction is a fantastic option if a quick turnaround time between tenants is needed.

    PRO TIP – There is one primary instance when cold water extraction may be ineffective, and that is if there is a high soil load on the carpet. Cold water extraction is better suited to cleaning rather than deep stain removal.
    ‍
  3. Dry Extraction â€“ Sometimes, you do not need to do a deep clean on the entire carpet. When focusing on just one small area, then dry extraction is ideal. With dry extraction, a chemical-based cleaner in dry or crystal form is sprinkled over the area that you want to clean. It acts by absorbing grime, grease, and dirt. After a set time, these crystals are vacuumed, and all the dirt is extracted. The Von Schrader LMX Low Moisture Soil Extraction System an excellent heavy-duty option, ideal for large spaces. It’s also the most expensive on this list.

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Affordable cleaning options

Preventative care should always be your first line of defense against new stains. The second step is finding products and tools to remove stains. Removing carpet stains requires stain removal solutions that can permeate through dirt and eliminate it.

I personally own all the following tools I am going to recommend, and they do wonders for the numerous carpets and rugs I’ve maintained over the years. If you do any cleaning yourself, or hire your own cleaning crew, these items are a must.

Rental property carpet cleaning tools
  1. Stain Protector – Scotchgard Rug & Carpet Protector should be the first level of defense for any spills or stains on carpets. It protects carpets or rugs by creating an invisible layer of protection – making it easier to clean any spills when they happen. It can also be used together with Scotchgard Fabric Water Shield on expensive furniture, couches, curtains, and pillows. These two items are a must-have for costly carpets or furniture in your common areas.
    ‍
  2. Vinegar and Water â€“ Putting together one-part white vinegar and two parts water creates a fantastic cleaning solution. The vinegar causes a natural chemical reaction that draws out dirt from the carpet’s fibers. It is best applied using a spray bottle to direct the solution towards the stained area. Once you spray onto the carpet, leave it for thirty seconds to one minute. Combined with hot water extraction, this solution can eliminate even the most stubborn stains, including a red wine stain.
    ‍
  3. Vacuum – For common areas or units less than 4,500 sq feat, I use the Dyson Cyclone V10 cordless vacuum. It lasts at least 45 minutes on a single charge and cleans exceptionally well. The best part is – it’s cordless. Convenience makes it much easier to clean small messes more often. The Dyson may be overkill, but I highly recommend a cordless vacuum, at least for your common areas.

    PRO TIP – Buy the extended warranty or insurance protection from Amazon, Best Buy, Bed Bath & Beyond, Costco, or anywhere else with excellent protection or return policies. We’ve had to replace it once for a faulty battery after two years.
    ‍
  4. Carpet wash cleaner – Instead of hiring a costly carpet cleaning company, you can try doing it yourself. An affordable carpet cleaning machine will thoroughly clean your carpets with a combination of water and soap. Use the Hoover AH30925 Paws & Claws Deep Cleaning Carpet Shampoo with the Hoover FH52000 Smartwash carpet cleaner for great results. Other great options are any of these upright carpet cleaners reviewed by Wirecutter, mostly for residential use.

How to remove smells from carpet

smell and odor removal from carpets

Pungent smells can be a real turn-off for any tenant, leading to discomfort and, in rare cases, illness. When carrying out a deep clean, begin the process by making use of baking soda. Sprinkle the baking soda over the entire carpet and lightly brush it into the carpet using a brush or broom. Once it’s spread, allow the baking soda to stay in place for at least 36 hours. Finish off the process by vacuuming up the baking soda and finishing off with cold or hot extraction.

This solution should work well with most odors, though sometimes, a faint hint of the smell still lingers. For a total deep odor extraction, create a solution that includes one part isopropyl alcohol, one part vinegar, and one part carpet shampoo. Top up this mix with water and use it with a hot water extractor or carpet steamer.

PRO TIP – Add a few drops of essential oils into your deep odor extraction mixture, and in addition to getting rid of an offensive odor, you will introduce a calming or fresh scent to the carpets. Excellent options are orange, lemon, or lavender essential oils. You can also try an ozone generator which is an all-purpose mold and odor removal tool I personally use. Just make sure to vacate the area during and after the machine is on.

Buying vs. Renting a Carpet Cleaning Machine

Finding ways to save is always top of mind for the landlord or property manager.

Buying a carpet cleaning machine allows you to get the job done yourself, saving you thousands of dollars in the long term. Although it takes time away from you or your staff, it’s an excellent option for cleaning rental property carpets in multiple units. Expect to spend up to $3,000 on a top-of-the-line carpet cleaner. This usually makes sense if you have the time, and the cleaning machine will be used regularly by you or your staff.

Renting, on the other hand, allows you to get the very best carpet cleaner whenever needed. It’s more affordable in the short run, but it most likely will be more expensive in the long run, depending on how often you need it. The primary benefit is – you never need to worry about the machine breaking since you can always rent another one.

Another great option is to rent different carpet cleaning machines a few times and then buy your favorite one now that you’ve compared all the options.

Summary

The decision is ultimately yours – whether you choose to do it yourself and buy or rent your carpet cleaners or hire a professional cleaning company, it all comes down to 3 factors:

  1. Time
  2. Money
  3. Convenience

If you’re cleaning carpets weekly in your rental properties, you may want to invest in a good carpet cleaner and train your staff how to use it. Otherwise, it may be best to bring in a pro every once in a while and not have to deal with it.

Either way, regular maintenance and upkeep could extend the life of your carpets and keep them looking new for longer.

You also want to make sure your next tenant has no complaints or negotiating leverage because of a stained carpet.

Before taking in your next tenant, you should conduct detailed tenant screening with background checks to ensure that they hopefully won’t cause any trouble or damages to your beautifully cleaned carpets! And if they do, you might be able to charge them for cleaning or damages.

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Landlord’s Guide to Intestate Property

Author: Cyrus Vanover, Provided by Bigger Pockets

When someone passes away without leaving a will, the estate must go through the probate process to determine heirs, settle outstanding debts, and distribute any remaining assets. The laws on how intestate properties are handled vary by state.

As a landlord, it’s important to make sure estate planning is a part of your financial and legal strategy. It may prevent your heirs from experiencing legal difficulties, and it may also give you peace of mind knowing that your assets will be distributed according to your wishes.

What Is Intestate Property?

Intestate property refers to the property of someone who dies without a valid will. Intestate is sometimes also referred to as intestacy. For example, if someone says “he died in intestacy,” it means the person died without leaving a valid will to determine who receives the estate’s assets.

When someone dies in intestacy, the assets and debts are referred to as an intestate estate. Common assets may include:

  • Bank accounts
  • Business interests 
  • Debts and liabilities
  • Investment accounts
  • Life insurance
  • Personal property 
  • Real estate
  • Retirement accounts
  • Vehicles

When someone dies intestate, the deceased person’s estate goes through intestate succession. This is a process that is used to pay off the estate’s debts and determine its heirs.

Key terms to understand

Here are three common legal terms that will help you understand intestate property:

  • Decedent: A deceased person whose estate is being administered in probate proceedings.
  • Heir: Someone who is legally entitled to an estate’s assets after someone passes away. Heirs are usually relatives.
  • Estate: Everything that was owned by a deceased person. It also includes the decedent’s debts and other legal obligations. The estate is a legal entity that must go through the probate process to determine the heirs, pay off debts, and distribute the assets.

How intestacy occurs

Intestacy occurs when someone dies without a valid will or other legal documents that state who should receive that person’s assets. Intestacy may also occur if a will only covers part of an estate. For an estate to be intestate, the value of the property must be more than the outstanding debts.


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How Intestate Succession Works

Intestate succession is when a probate court determines the beneficiaries of an intestate estate. The property is distributed to heirs based on state law, which varies by state.

With intestate succession, a court-appointed administrator will first make a list of the deceased person’s assets and debts. The administrator then uses the estate’s assets to pay off any debts, such as credit card and mortgage debt. A probate court, through its appointed administrator, will then determine the intestate estate’s heirs, who are usually family members.

With intestate succession, the decedent’s surviving spouse may inherit half of the intestate estate if there are other heirs. If there are any surviving children or grandchildren, the administrator may split the remaining assets equally among them.

If there are no children or grandchildren, the surviving spouse may inherit the entire estate. The estate’s grandchildren will inherit the assets if their parents are deceased at the time of intestacy.

The probate court administrator often determines inheritance based on family order. If no spouse, children, or grandchildren survive, next in line is usually parents and siblings. Nieces, nephews, aunts, uncles, and cousins come next.

The intestate succession process doesn’t include unmarried partners or friends of the deceased person. That’s why estate planning with a will is important to make sure your loved ones are taken care of after you pass away.

Intestate Properties and State Laws

Intestate properties are handled differently by each state, which each have their own intestate property laws. In some states, such as Texas, an intestate estate is divided among heirs according to community property law.

With community property law, a married couple jointly owns the assets they acquired during their marriage. If a spouse dies, the survivor inherits the assets. If both spouses die, survivorship, or inheritance, passes to their surviving children.

Some states dictate that an intestate estate must be managed based on where the decedent lived. Others handle it based on where the decedent’s property is located.

Different states also handle “separate property” differently. Separate property is when a spouse owns property that the other spouse does not have a legal claim to. This may involve real estate that someone buys before getting married, for example.

In California, for example, separate property goes to the spouse if there are no other heirs. If there are heirs, the separate property is divided between the spouse and the other heirs.

Because intestacy laws differ by state, you should work with a probate attorney for your estate planning. These legal professionals have expertise in wills and estates and should know the intestate succession laws where you and your property are located.

Identifying Intestate Property

To help you identify intestate property, it’s important to understand what’s included in the decedent’s estate and whether it is probate or non-probate. The estate’s executor also has an important role in identifying intestate property and initiating the probate process.

Understanding the decedent’s estate

When you think of someone’s estate, you may think of real estate. Someone’s home or investment properties may just be a small part of the estate, however. An estate can include anything that someone owns, such as furniture, vehicles, and even virtual assets like domain names, websites, and royalties from creative works.

In addition to assets, someone’s estate may also include its debts and unsettled legal claims. An estate may have unpaid credit cards, mortgages, personal loans, taxes, and other outstanding bills, for example. It may be necessary in some cases to sell property to pay off the debts.

An unsettled legal claim—such as a lawsuit, divorce settlement claim, or challenge to the validity of the will—could delay the probate process. The administrator will have to settle the disputes, which could substantially reduce the remaining assets to be distributed to heirs—or wind up leaving nothing to them.

Probate and non-probate assets

When someone dies, that person’s assets become either probate or non-probate assets. The asset type will determine how the ownership is transferred.

If something is a probate asset, it means it must go through the probate process. A court will oversee its distribution. If there is a will, for example, the court will appoint an estate administrator, who will pay off any outstanding debts and distribute the asset to heirs.

If something is a non-probate asset, it means it will bypass the probate process and go directly to a co-owner or beneficiary. An example of a non-probate asset is a home where someone is designated as having a “right of survivorship” on the deed. When the owner dies, the ownership of the home automatically transfers to the beneficiary and avoids the probate process.

The role of the executor in identifying intestate property

An estate’s executor has an important role in identifying intestate property. When someone dies, the court will appoint an administrator (also known as an executor) to pay off any outstanding debts and distribute the assets to heirs. In the management of the estate, the executor must determine whether there is a will. If there isn’t a will, the property is intestate.

If a property is intestate, the executor will initiate the probate process by first filing a petition with the probate court. The assets will then be identified, secured, and appraised if necessary. All debts, including taxes, will then be paid. Any remaining assets will then be distributed to beneficiaries. The executor will then file a petition with the probate court to close the estate.

Final Thoughts

As a real estate investor, it’s vitally important to plan your estate so you will know who will receive your assets. You don’t want to leave it up to a court-appointed administrator to decide for you. At the very least, you should have a will. You may also want to consider having “right of survivorship” on the deeds to your properties.

In addition to including all of your long-term assets in your estate planning, like multifamily properties and mobile homes, you should also consider including your short-term investment properties. Although you may have to frequently amend your estate planning documents if using such strategies as fix-and-flip and BRRRR, it may be worth it to make sure your loved ones are taken care of.

Because estate planning can be confusing and complicated, consider hiring an attorney to help you. This is something you don’t want to risk getting wrong by doing it yourself. A professional can make recommendations and take care of the paperwork for you to make sure it’s done correctly.

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TAX CREDITS AND DEDUCTIONS TO MAXIMIZE RENTAL PROPERTY PROFITS

Article written by Tom WheelwrightÂŽ, CPA

Growing up, I watched my mom and dad manage a small rental portfolio alongside their primary business. The properties were close enough to our house that my dad handled most of the upkeep, and I got an early lesson in what it means to be a landlord.

When I became a CPA, I learned the full beauty of owning rental properties and am now on a mission to help investors of all sizes unlock the power of tax-free wealth.

In almost every country, the government strongly encourages investing in real estate by offering tax credits and deductions. Investors who use these incentives reduce their taxes, freeing up cash to invest and build wealth.

Here are the top ten tax credits and deductions that can help you maximize rental property profits.

  • TAKE THE HOME OFFICE DEDUCTION
    Unlike W-2 employees who burn the midnight oil from home, business owners may deduct the expenses associated with having a home office from their taxes. Yet far too many people fail to take this deduction. Work with a CPA who will help you use and document your home office expenses correctly so you don’t miss out.
  • DEDUCT YOUR TRAVEL EXPENSES
    Once you’ve established that your primary office is at home, your deductible travel expenses will increase significantly. Whether you’re driving locally to meet with tenants, check on properties, oversee maintenance, or flying across the country to manage a far-flung portfolio and/or search for a new property, business travel is a significant deduction.
  • INCLUDE ALL OF YOUR VEHICLE EXPENSES
    This category is a little complex, so it deserves a place on the list separate from travel expenses. If you use your vehicle for rental activities, such as driving to your properties or picking up supplies, you can claim either the standard mileage rate or actual expenses like gas, maintenance and depreciation. Work with your CPA to determine which is better for you.
  • DON’T SKIMP ON PROPERTY MARKETING
    Advertising is crucial to attracting tenants. Any money you spend on marketing your rental properties, such as online listings, brochures, etc., is fully deductible.
  • DEDUCT ANY MANAGEMENT FEES
    If you hire a property manager to handle day-to-day operations, their fees can be deducted. This also applies to fees paid to attorneys, accountants and other professionals related to your rental business.

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  • DEDUCT YOUR PASSIVE LOSSES While no one likes losses, losses on an apartment rental can offset other income, reducing your overall tax bill. Typically, rental real estate losses are considered passive and must offset other passive income. If your only other sources of income are active, don’t throw in the towel on this item. Work with your tax advisor to see how to restructure your active income to create passive income.
  • USE COST SEGREGATION AND BONUS DEPRECIATIONI speak with a lot of real estate investors every year, and I continue to be shocked by how many people avoid a cost segregation analysis because someone told them it would get them flagged for an IRS audit. This is terrible advice (and often a sign the investor needs a new CPA). Cost segregation, coupled with bonus depreciation, is the correct way to depreciate your investment — saving you aton on taxes.
  • ADD ELECTRIC VEHICLE CHARGING
    STATIONS

    Governments offer substantial incentives to people willing to help build infrastructure to support switching from gas to electric vehicles. If you qualify for these tax credits, it’s an excellent opportunity to get the government to help pay for an upgrade to your property that will help you appeal to tenants who drive EVs.
  • INSTALL A SOLAR POWER SYSTEM
    Like charging stations, solar systems come with great tax incentives right now. The federal
    investment tax credit for solar systems is 30% through 2032, and bonus depreciation is still available. Use these incentives to get the government to help pay for another property upgrade.
  • HIRE YOUR KIDS
    Rental properties need a lot of regular, unskilled maintenance. Hiring your teenage children to handle basic landscaping, snow removal and other tasks can be a great solution. You’ll deduct the expense of the wages you pay them, and they’ll earn money that’s taxed at a lower rate than yours. Who knows? You could inspire your kids with a love of real estate, just like my mom and dad did.
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No Guns in My Apartments: Can A Landlord Say That and Put It in A Lease?

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“No guns in my apartments” is again a point of discussion as the country struggles with gun violence in schools and other public places. How are landlords to decide whether to prohibit or allow tenants to have firearms in their apartments or single-family dwellings?

In some cases, it is a matter of what state law provides. In other cases, it is a matter of either personal preference that a landlord wants to say, “no guns in my apartments.”  However, a more logical, legal analysis of negligence and case law, is important, according to Denny Dobbins, general legal counsel and vice president of Crimshield  and RentPerfect.

By John Triplett

State laws vary on the issue of what landlords can mandate regarding saying, “no guns in my apartments,” and on gun possession in general by tenants in privately owned rental properties.

Landlords and property managers need to be aware of whether their state and/or local governments have specific laws, Dobbins said in an interview with Rental Housing Journal.

Only four states have specific laws regarding landlords and guns at rental properties.

  • Minnesota: A landlord cannot restrict the lawful carry or possession of firearms by tenants or their guests. Minnesota Statute 624.714
  • Tennessee: A private landlord can prohibit tenants, including those who hold handgun carry permits, from possessing firearms within a leased premises. Such a prohibition may be imposed through a clause in the lease. Tennessee Statute 39-17-1307(b).
  • Virginia: Public housing prohibits landlords from restrictions on gun possession for tenants – Virginia Rental Housing Act 1974 Tennessee 55-248.9.6.
  • Wisconsin: This state has a complicated maze of where a weapon can or cannot be possessed. W Stat. § 175.60(21)(b).

All other states are generally silent on the issue, Dobbins said, meaning that private housing providers can choose what they want to do on the issue and say no guns my apartments. California, Arizona, Colorado, Oregon, Utah, and Washington are six of the states that are silent on the issue.

For instance, Virginia law says public landlords cannot use a prohibition clause in their lease, and it does not require that a gun-free zone sign be applied or present on the property.

“Now in Minnesota, they have a different law. Generally, private landlords may not restrict the lawful carry of firearms by tenants,” Dobbins said. “All the other states are silent on whether private landlords can prohibit tenants from carrying weapons or possessing weapons on the property.”

Unless your landlord is a government entity, like a city or state agency or public housing, or receives state or federal funding for rental assistance on the property, the Second Amendment is unlikely to apply.  However, private housing providers saying no guns in my apartments and prohibiting tenants from possessing firearms in a residential rental unit raises other constitutional and insurance issues.

Can a landlord say no guns in my apartments?
“You can stop that kind of behavior cold in the common areas altogether, so go ahead and put something in your lease to stop it in the common areas.”

Can a landlord say, “no guns in my apartments” and implement a “no-firearms” provision in a lease agreement?

“Generally, the answer is yes. But I think we need to take the most practical approaches we can for all the issues surrounding the question,” Dobbins said.

“I would simply say to private housing landlords that you have more issues to be concerned about than just whether or not you can implement such a “no firearm” policy.  Look, the real issue that you want to protect against is tenants having guns willy-nilly, or just being carried around and shown off on the property common area.

“You can stop that kind of behavior cold in the common areas altogether, so go ahead and put something in your lease to stop it in the common areas.  Prohibiting the display of weapons in the common area, or even in the unit where handling or showing of a weapon that can be seen on the inside from the outside, will help protect against liability issues and insurance/liability issues and help avoid possible Second Amendment challenges.”

What about telling tenants no guns in my apartments and prohibiting tenants from having firearms in their apartment unit?

“Generally, a private landlord can do that too, but there are a wide variety of issues to think about when you do so,” Dobbins said.

“Most states have not made a decision whether or not to attempt to prohibit the constitutional rights of a citizen who wants to have a weapon in their rental unit for their own protection. What that means is that leaves it up to the private landlord to make a decision about their own property,” he said.

“Yes, a private landlord can say, ‘We prohibit all tenants from possessing a weapon anywhere on the property.’ The private landlord can make that decision because there hasn’t been a case yet that draws the Second Amendment into the private-landlord decision-making process on the issue, as has happened with Fair Housing issues like race, color, national origin, familial status, religion, gender, age, military status and Americans with disabilities.”  Therefore, government assisted housing must respect a tenant’s constitutional right to bear a firearm.  However, the housing authority can still prohibit firearms in common areas.


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But non-governmental landlords, with no applicable state or local laws, have the right to do want they want on their own property regarding firearms. “So, a private landlord can say, ‘No guns in my apartments or any weapon possession in the rented apartment unit’.  But a non-government tenant can also say, ‘Well, I have a constitutional right to a weapon to protect myself.’  However, that case has not been heard yet,” Dobbins said. He believes the issue will eventually be heard because “someone is going to finally get that case to the Supreme Court.”

The predicament for any landlord on this issue is this:” If I allow firearms and someone on the property gets hurt, am I liable?” The answer is “Maybe.” And “If I prohibit a tenant from having a firearm on the property and that tenant or his family, occupant or invitee is hurt; and had that tenant had a firearm, they may not have been hurt, am I liable?”  Again, the answer is “maybe.”  Every situation is fact specific.

“From a practical point of view on the liability issue, let’s say a landlord says, ‘No guns in my apartments’ or ‘No weapons possession in the rented apartment unit.’ The tenant moves in, and he wants to possess a weapon in the rented apartment unit, but he decides to live there without possessing a weapon. Now somebody breaks into his home and kills his wife and his kids, and he didn’t have a weapon to protect himself and his family. I don’t want to be that landlord who says, ‘No guns in my apartments’ because I don’t want to get sued because I took that personal constitutional right away,” Dobbins said.

“The landlord is going to say, ‘He agreed to it, and he moved in.’ Of course, the person who had their family killed is going to say, ‘Yeah, but I still had a right and you made me not have a gun and took away my Second Amendment constitutional rights to protect my family.’

“I don’t want to be that landlord,” Dobbins said.  On the other side, if weapons are allowed on the property and someone gets killed or injured by a tenant intentionally, or even negligently, from a discharge of a weapon on the property, even while inside their own apartment unit, you know the attorney for the injured person is going to go after the deep pockets of the landlord, manager and their insurance money.  By the way, you better check your insurance policy and find out what is and is not covered regarding this issue.

Saying no guns in my apartments is “an ugly Catch 22,” Dobbins said.

“It is possible that if a landlord has a no-weapons policy in the lease that the landlord will immediately become a target by a victim of a tenant shooting injury claiming the landlord should have known about the tenant’s possession of the weapon and should have taken steps to remedy the possession, although not at all practical.  If there is no prohibition for tenants having weapons, then all tenants know of the ‘no-prohibition’ standard, and in my opinion, the risk to the landlord diminishes not just for injuries to others, but for constitutional claims.”

No guns in my apartments can a landlord say that and put it in a lease?
Dobbins suggested looking at two Second Amendment cases that he thinks make the tenant’s right to a weapon in the tenant’s apartment unit a personal right, and thus, a protected class.

Issues on how ‘no guns in my apartments’ would be applied.

“You run into a few issues in terms of how the prohibition can be applied in actual practice. For instance, where you have a law that says, ‘landlords can prohibit gun possession in an apartment unit in a lease,’ well, how are you possibly going to enforce that? You don’t know what a tenant brings into the property,” Dobbins said.

“You don’t know what a tenant is going to have in their home. You don’t know if they have weapons in their apartment unit. You can’t really go in and inspect for weapons. If they have a safe, you can’t go look in the safe to see if they have weapons. Even if a state has a rule that says you can prohibit weapons, there’s no practical way to enforce that prohibition.

“The second issue then becomes really important: ‘Do you really want to be the case of first impression?’ Meaning, do you really want to be the landlord who takes on some attorney and a Second Amendments rights issue because the landlord says you can’t have a gun in your own apartment unit to protect yourself? We have all seen lately that mentally ill people, criminals, and terrorists can get guns. Look at Chicago, which arguably has the toughest gun laws in the U.S.  Simply put, bad guys still get guns and cause havoc,” Dobbins said.   No one is going to stop a mental ill person, or an evil person from bringing a gun anywhere.

“So, why should a private landlord have a such a prohibition where concerned tenants cannot possess a gun in their rented apartment unit? A private landlord does not want to become that trial case for a tenant who says, ‘Wait a second. I have a Second Amendment right to carry and to have weapons to protect myself and my family.’

“The landlord says, ‘Well, having a weapon on a private property is not a protected class like the protected classes listed above. Having a right to possess a weapon in one’s apartment unit is not a current enumerated protected class,” Dobbins said.

“But I tend to disagree with those people who say it’s not a protected class, because it is clear that there is a constitutional “personal right” to bear arms – period.  The protected classes in the housing arena listed above are all federal mandates.  Well, an enumerated constitutional right in my mind is the same thing.  A court case will determine that issue in a landlord-tenant relationship at some point.”

Let’s back up and look at the issue of no guns in my apartments.

Dobbins suggested looking at two Second Amendment cases that he thinks make the tenant’s right to a weapon in the tenant’s apartment unit a personal right, and thus, a protected class.

“Here’s what we know. The federal government can impose some restrictions on gun possession. There have been a lot of debates over time as to what the Second Amendment means because it has a phrase in it regarding militias and it also talks about ‘the people’s right’ as opposed to a ‘person’s right.’ There’s been this idea that the ability or the right to bear arms is not a personal right. Rather, that it is a right of the people for a prepared militia.

“This issue came up in a case in the U.S. Supreme Court in 2008. It’s called the Heller Case. It dealt with individual rights to possess weapons. The Heller case made it very clear that there is an “individual right” to possess weapons as opposed to just a right of the people for the purposes of maintaining a militia,” Dobbins said.

“Heller goes on to say that the government can impose some possession restriction such as when dealing felons and the mentally ill. Such people have no personal rights because those rights are stripped for the mentally ill and felons. There still remained a question after Heller. The question after Heller was, ‘Well, that’s great, but what about the states? How does the federal law impact state laws on the subject?’

“In 2010, the McDonald case went before the Supreme Court and that dealt with the 14th Amendment, which forbids states from passing rules to the contrary of federal law. There were basically four elements in McDonald that they dealt with: whether there could be a state prohibition against handgun ownership, whether a state could force an annual gun registration and impose a fee for annual registration, whether it could be required that guns be registered prior to acquisition, and whether a gun could be forever unable to be registered if the registration lapsed.  Those state laws were struck down in the McDonald case. Basically, the opinion stated that the 14th Amendment applies as to the individual right to possess guns and that states cannot pass laws that infringe upon that federal constitutional right.

“So, it seems to me that private landlords forbidding tenants from possessing firearms in their apartment unit could be successfully challenged based on the Second Amendment and Fourteenth Amendment, I think, because Heller and McDonald make possession of a weapon a personal right, which I think makes it a protected class,” Dobbins said.

“I guess the simple answer is in those six states that we mentioned … private landlords in those states can choose what they want to do, but when a private landlord chooses to ban tenants’ ability to possess a firearm in their apartment unit, they face the ugly music of liability issues and constitutional infringement issues,” he said.

A proposed lease clause on how landlords might walk the fine line of dealing with tenants’ possession of guns in their apartment units and homes.

Dobbins said he would propose the following lease clauses for landlords to consider.

  1. “This is a landlord-tenant relationship, and the landlord has no control over your unit or the home. Tenant has sole control of the dwelling unit.

In a sad 2006 Kansas City case where a landlord rented a single-family home the lease agreement expressly gave the tenant the right to sole possession of the premises, prohibited any member of the household from engaging in any illegal activity on or near the premises, and prohibited the unlawful discharge or unauthorized possession of firearms, the tenant minor child accidentally discharged a loaded gun, killing a visitor.  The tenant and the landlord were sued for damages.  The court indicated that because there was a landlord-tenant relationship where the landlord had no control over the property, the landlord was found NOT liable.  Thompson v. Tuggle, 183 S.W.3d 611 (Mo. App., 2006).

However, in a multifamily setting, when the landlord is aware of, or should be aware, that tenant has a weapon, and the tenant acts erratically, then the landlord must analyze the landlord’s duty to the tenants for reasonable safety and make a determination with legal counsel if the tenant’s action make it foreseeable that the tenant may cause harm to another person on the property.  If so, then the landlord must take reasonable steps to remedy the situation.  Lozano v. Awi Mgmt. Corp. (Cal. App., 2016). When weapons are allowed on the premises, it is imperative that the landlord always monitor the property to see that the weapons are not misused, brandished, or unnecessarily displayed.  Rosales v. Stewart, 169 Cal.Rptr. 660, 113 Cal.App.3d 130 (Cal. App., 1980).

  1. “If you have any firearms, you must keep your weapons inside your unit at all times and out of view of open windows and doors, absent legitimate self-defense or the defense of others.”
  2. “If you openly bring a firearm onto the common areas, you will be evicted. You must keep your weapon to yourself, safely tucked away in the private confines of your apartment unit or home and not visible to other tenants, neighbors or staff.”
  3. “As a landlord, I say, ‘No weapons in the common area.’ This is something that I put in my leases and in my client leases. It provides reason, accountability and protections for the landlord, the tenants and staff. It’s a section called ‘Weapons’ for the lease and this is what it says:

“Weapons of any kind, including, but not limited to, dart guns, air guns, BB guns, slingshots, handguns, rifles, or any mechanism that could be used to propel an object that could cause harm to person or property, are not allowed in the common areas, are not allowed in the office, are not allowed anywhere on the premises outside of the actual unit, and are not allowed to be displayed, shown, exposed, demonstrated, or exhibited anywhere in the community premises, except in case of self-defense or the need for imminent and immediate protection of residents’ life or property, or for self-defense or immediate and imminent protection of resident, resident’s occupants, guests or invitees’ life, or property.  If a resident desires to possess a legal weapon in resident’s unit, in that case the resident must safely and inconspicuously carry said legal weapon to and from the resident’s unit in a manner that resident ensures other residents and staff do not see said weapon. Illegal weapons are never allowed visibly on the property outside of the unit. If resident or resident’s occupants do possess a legal weapon in the unit, resident shall be responsible for the proper and safe possession, handling and storage of said weapon. Landlord is not and shall not be responsible in any way to resident, occupants, guests, or invitees for any accidental, negligent, or intentional act involving any weapon or discharge thereof on, near, or off the property.”

“That’s my clause,” Dobbins said. “It covers a lot of ground because I don’t want to take away tenants’ right under after the Heller and McDonald cases, yet we need to make sure that tenants understand, in the common areas especially, if they brandish or show a weapon they will be evicted. However, I do not think it is a good idea to take away a tenant’s right to possession in their own apartment unit or home.  That is just how I personally look at it.  Each private landlord has to make a decision on this subject based on an analysis of all the factors set forth in this article.  I suggest you talk to your attorney and your insurance broker to make your own decision on the subject is sound,” Dobbins said.

What about restrictions on ammunition in apartments?

In addition to no guns in my apartments can the private sector and private landlords say you can only have so much ammunition? Or no ammunition at all?

“Yeah, private landlords can if they want to, but the same factors are at issue as for gun possession in a tenant-rented unit,” Dobbins said.

ammunition or ammunition boxes can a landlord say none of these in a lease?
Can landlords restrict ammunition or ammunition boxes in apartments?

“Here’s another issue to think about. Let’s say a private landlord prohibits the possession of firearms and the private landlord calls their property now a ‘gun-free zone’ or a ‘weapon-free zone.’ In my mind, they’ve done exactly what the schools have done when you call a school a gun-free zone. You’ve just opened it up to the crazy people and you’ve said, ‘Hey, nobody here has weapons. Come over here and break in or come over here and cause havoc to our property because no one is allowed to have weapons here and cannot defend themselves. Come in and steal from them, rob them, do whatever you want to do with them.’

“I think that sets a very bad precedent and as a premises-liability expert, I would say that by doing that you’ve now opened yourself up to say you called yourself a gun-free zone, when it is just not true. You’ve invited bad guys to your property and you intentionally, unknowingly maybe, but still intentionally put your residents at risk of harm. That’s how I look at it.

“Once you invade someone’s privacy in their home for their own protection and their own desires regarding the Second Amendment, now you’re creating some issues that you don’t really need to create. Even if a landlord has a prohibition for tenants regarding guns or ammo, it’s not going to stop someone from having weapons if they want them in their apartment unit.  So why have the rule at all? Why take on extra liability and extra problems when we know that possessing a weapon in one’s apartment unit or home is practically unenforceable? A tenant should be able to possess a firearm if they want one, but if the tenant goes around bragging about it, or showing it off, that tenant needs to go.

“Now if a management company maintenance employee goes in and he sees a stockpile of ammunition or weapons, I would immediately contact the authorities and let them deal with it as they will,” Dobbins said.

Should property managers have guns?

Two property managers in Portland were shot by a tenant following an eviction.

Should property managers have guns?

“Well, I think we’re getting into that debate a little bit with one of the remedies that’s been brought up about possibly arming teachers.  For many years no in Israel the government trains and allows trained teachers to be armed. Israel has no problem with gun violence in schools because everyone knows the teachers are not only armed, but they’re trained,” Dobbins said.

“Now that’s something for management companies to decide because they’re put in bad situation, for example: ‘Okay, if my managers and staff have a weapon and they use it, am I going to be sued? If they don’t have a weapon and can’t use it, am I going to be sued?’ If they have a weapon and don’t use it, am I going to get sued?  They’re in a real pickle because if they do allow staff to carry they need to make sure those staff members are very well-trained, use the weapon when they need to and don’t misuse that weapon.  I do not know of any management company that wants to tackle that giant,” he said.

“For me as a property owner I would not mandate my staff to possess weapons.  However, I would not take my staff’s constitutional right to protection away either. If the staff lawfully carries a concealed weapon, that is their choice.  However, I would not want them to carry openly.  Again, you have to decide as a landlord how to handle this issue after consultation with your attorney and your insurance carrier,” Dobbins said.

Summary Of No Guns In My Apartments

“There’s something to the deterrent factor, whether you have a liberal slant on guns or a conservative slant on guns. The facts are the facts,” Dobbins said.

“We just have to deal with them in a practical way. There are no easy answers to what private landlords should do about whether or not they allow their tenants to possess a legal firearm in their own apartment unit or home in the face of constitutional rights, liability issues, insurance coverage and individual feelings about weapon possession.  But, it is an issue that needs deep thought and consultation with professionals.

“I think we need to take the most practical approaches we can for all of these issues, having something in our lease that says, ‘keep your weapons inside’ and ‘if you bring a weapon in the common area, we’re going to evict you.’ Or ‘no weapon possession allowed period’ and ‘if we learn you possess a weapon on the property, we are going to evict you.’  Whatever your choice, make sure that it is in writing and cannot be misunderstood. Have something in your lease on the subject and make it crystal clear,” Dobbins said.

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Investing in Mobile Homes: What Investors Need to Know

Investing in Mobile Homes: What Investors Need to Know

Did you know real estate investing doesn’t only refer to single-family homes? When done right, investing in mobile homes can be a profitable way to add to your real estate portfolio. Check out everything you must know about mobile home investing to see if it’s right for you.

What Is a Mobile Home?

A mobile home, or manufactured home, is a home built in a factory. They usually measure 14 to 18 feet wide and 66 to 88 feet long. To be placed on the land, they must be transported by a truck fit for oversized loads. 

The term “mobile” in the name is a little deceiving, since the homes can’t be moved once placed. The home must be permanently affixed to the land to secure mortgage financing. 

The “mobile” part refers to the prefabrication that occurs in the factory, and then the home is moved to its permanent location, versus a traditional home built on-site.

The Appeal of Mobile Home Investing 

Investing in mobile homes can help you diversify your portfolio. This is especially important if you can’t invest out-of-state, taking advantage of different real estate markets. Adding mobile homes to your portfolio gives you access to a different renter’s market, giving you more opportunities for profits.

Different Approaches to Mobile Home Investing

Just like investing in traditional homes, there are different ways to approach mobile home investing.

Purchasing and renting out individual mobile homes

The most common method of investing in mobile homes is to purchase and rent them out to tenants. You become the landlord, just like you would for any other home you rent to tenants. You’re responsible for the maintenance and repairs, as well as vetting tenants, collecting rent, and managing leases.

The risks of renting out mobile homes include vacancies and selecting bad tenants, but these are risks with any type of real estate investment.

Buying a mobile home park and leasing land to homeowners

When individuals purchase mobile homes, they purchase just the home, not the land. This differs from traditional single-family homes. 

But if you don’t want the hassle of acting as a landlord to the mobile homes themselves, you can purchase the mobile home park and lease the land to people who purchase the mobile homes. You’re still a landlord of sorts, but with much less responsibility for maintenance and repairs.

Flipping mobile homes

You can also flip mobile homes, much like you can flip traditional homes. When you flip mobile homes, the idea is to find undervalued homes and sell them for a profit. Look for foreclosed mobile homes or owners about to go into default who desperately need to sell them.

Like traditional home flipping, you should renovate the home, keeping your costs as low as possible, and then sell the property for a profit.

The Benefits of Investing in Mobile Homes

Investing in mobile homes can be a good way to enter the real estate market or diversify your portfolio. Here are some of the benefits you may enjoy.

Lower cost per unit compared to traditional real estate

Buying traditional real estate, especially for investment, usually requires 20% to 30% down, plus you’ll have a much higher monthly mortgage payment. Mobile homes cost much less than traditional homes and typically don’t require a down payment as large as that of a traditional home.

Even if you finance a large part of the purchase, your payment will likely only be a few hundred dollars, making it an affordable investment.

Demand for affordable housing

Depending on where you invest, there may be a large demand for affordable housing. Twenty million Americans live in mobile homes, and not all of them can afford to purchase one. If you invest in mobile homes, you give this large market somewhere to live and increase your chances of earning a profit.

Affordable maintenance

Since mobile homes are smaller than traditional homes and have fewer features, maintenance costs are lower. This helps keep your profits up and puts less stress on you when handling properties, especially if you own multiple ones.


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Downsides of Mobile Home Investing

Like any real estate investment, there are downsides to investing in mobile homes to consider.

Density restrictions 

If you’re considering purchasing an entire mobile home park, not just a single property, pay close attention to zoning restrictions. 

Most mobile home parks have limits as to the number of units that can exist on the land. If the number is less than you anticipated, your investment may not be worth it.

Less appreciation compared to traditional homes 

Mobile homes typically don’t appreciate at the same rate traditional homes do. It comes down to the amenities and care the owner gives the property. 

It also depends on the area’s zoning restrictions and overall demand for mobile homes. There’s always the risk the property won’t appreciate or could depreciate.

Vulnerability to natural disasters

Mobile homes are naturally more prone to natural disasters, such as earthquakes, tornadoes, or even strong storms. This puts you at risk of higher costs and lower profits. If the disaster is bad enough, it could even wipe out an entire mobile park.

Tips for Getting Started

Investing in mobile homes requires the same effort and strategies as investing in other real estate assets. The key is to have a strategy and to do your research, as mobile homes have some different nuances to consider.

Jumping in headfirst without understanding local rental demand, mobile home appreciation, and zoning requirements could lead to a bad investment. The more time you spend strategizing and choosing the right area, the higher your chances of having a profitable investment.

It may take a little longer to find a willing lender if you need funding, since not all lenders offer financing on mobile homes, especially those purchased as an investment. When considering investing in mobile homes, be sure to use the SMARTER strategy.

Final Thoughts 

Investing in mobile homes may be a good option if you’re considering adding to your real estate portfolio. Understanding the market, creating a strategy, and determining how much involvement you want in the rental property are the keys to choosing the right mobile home investing strategy.

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