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Antonio Cardenas' Blog

By Antonio Cardenas | Agent in San Leandro, CA

7 Golden Rules for First Time Investors.

Becoming a landlord and owning a rental property provides great tax breaks and potentially good financial returns, but also exposes the individual to major legal liabilities.

Here is a quick lesson in Landlording 101. Based on my experience as a Professional Realtor and an as investor myself.  Follow these rules, study them, practice them, because they will help you become a good law-abiding landlord and a savvy investor.

  • Educate yourself about your duties, responsibilities and liabilities of a landlord. It is a business in which ignorance is NOT a defensible argument. If you have to go to court to either collect your rents, evict somebody, or even worse; being sued by one of your tenants, you better know your job very well and be prepared, it could cost you the entire investment property and more, if you are not.
  • Join a group of "Apartment Owners Associations." Become a subscriber and get involved in their discussions.  These people will be your best allies. The AOA group provides professional guidance and will help and support you in making your business of providing housing for others more profitable, easier and more enjoyable. They will have real time alerts on new laws and local proposals that can affect the business of apartment owners.
  • Chose your tenants carefully! Be fair and color blind when interviewing potential tenants. There are strict rules about discrimination of any kind. Your own personal beliefs should not dictate who you rent to. Develop a consistent and clear procedure to always use when choosing your tenants. Tests are regularly conducted by the Fair Housing authorities and the penalties are severe.
  • Maintain your rental properties! Landlords who do not spend money in maintenance or repairs, will invariably spend much more money defending their actions or lack off in court when a tenant gets injured or harmed because of lack of maintenance. The value of a rental property is based on income and overall physical condition. A clean, safe and well maintained property will always provide high rental values with less tenant turnover.
  • Do not get personal, seek legal advise when dealing with trouble tenants. There is a set of steps that must be followed exactly when enforcing a lease or rental agreement. The correct forms must be used, the timing must be absolute, and even the wording on the document must be specific and appropriate for each situation. If it is not done right, the entire process must start all over again. Let the professionals handle these situations.
  • Know Thy Limits...! Even if you consider yourself a "handyman," and know how to swing a hammer or use a power tool, know when to call the professionals. Can you really tackle a plumbing or an electrical problem? Hiring the right professional could shield you not only from personal injuries to yourself or your tenants but from legal liability. The key here is to do it right; do not think "expenses" think instead "tax deductions."
  • Put together a team to help you run your business. Do not wait until you need an attorney to look for one. Begin by asking other landlords in the area if they know someone locally. If possible, get to meet them, find out what their fees are, their work schedules, where are they located etc. Do this for everybody. You will need a good plumber, electrician, roofer, flooring specialist and painter. If you do your homework, you will know exactly who to call when an emergency arises. 

A rental property pays back at least in 3 different ways: Appreciation: in a healthy real estate market, properties go up in price. Depreciation: When you own a rental property you can deduct the improvement (the value of the building) one 27th of its value every year for 27.5 years. And finally, Income: the rent paid by the tenant, minus expenses.

Taking care of tenants problems right away is a good solid block in which to build a strong relationship with the most valuable partner you will have in your rental business: YOUR Tenant.

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