An investment property could be your ticket to financial freedom, and real estate is one of the best investments you can make. Renting is among the more popular forms of making money through a real estate investment.
“Landlords grow rich in their sleep without working, risking or economizing,” says John Stuart Mill, a political economist who made his fortune in real estate investments. The rent payment pays your mortgage, insurance, property taxes, and a little extra so you can bank a little extra cash each month. Meanwhile, tenants are paying your mortgage and building equity into the property so that when you sell it in the future, you make a pretty profit on your investment.
It’s important to research the market well before investing in a rental property. Landlords should also be aware of the following legal issues of rental property ownership.
According to legislation, tenants have a right to live in a safe and habitable property. Essentially, this means that the landlord must keep the property in good condition and free from hazards. However, you might not always avoid accidents on your property, and that can lead to a personal injury suit against you.
For example, according to the Toronto personal injury firm, Preszler Law Firm, your city may mandate that you remove snow and ice from sidewalks on behalf of your residents. However, if you don’t remove the snow in a timely manner, your tenant may fall and break a hip. You can be held responsible in court for this accident because you didn’t keep up your end of the bargain.
Having adequate liability coverage is absolutely vital to protecting your investment. Network with real estate attorneys or legal consultants just in case you need legal advice or representation in this matter. Evaluate the liability coverage in your homeowner’s insurance policy as well. Some policies don’t cover renters, requiring you to take out an additional policy. Just make sure you’re fully covered so that you have the funds to pay for an accident and a potential lawsuit without losing your property.
Every time you accept a new renter, they sign a lease agreement or contract. This is a legally binding document that outlines both your responsibilities and those of the tenant. When writing this contract, it’s important to keep it airtight and accurate in order to protect your interests.
The most important thing is to make sure the law is well represented and that the writing is clear so that tenants don’t misinterpret the requirements. You can find rental contract templates online, but it’s better to have an attorney look it over before signing. That way, you know it’s strong and doesn’t contain obvious loopholes that could lead to trouble.
If you want your tenant to keep their end of the contract, be thorough with the tenant screening. Run a tenant credit check, background check, and ask for references when interviewing a new tenant. This will minimize the problems you have with them and help keep legal consequences out of it.
You have the right to deny a tenant application based on things like a bad background check or credit report. If references from past landlords turn up negative evidence, you may also deny their application. However, keep discrimination laws in mind. It’s illegal according to the Fair Housing Act to deny a tenant application based on certain discriminatory criteria such as race, ethnicity, religion, sex, sexual orientation, familial status, or disability.
It’s vital that you understand discriminatory laws to avoid breaking this law. The tenant has grounds to sue you if you don’t, and if their claim is valid, you’ll have a hard time winning. Put aside all biases when filling your rental units. You’re running a business, and you risk losing it if you don’t consider this and other legal issues that could potentially take your property away.