So you’ve done your research, found funding, and purchased your first rental investment property. You’re on your way to creating a stable income stream for retirement – just the type Jason Hartman advises. But what appears to be “passive” rental income is anything but. Getting a good return on your investment and attracting the quality tenants you need will require ongoing attention to maintaining the property and keeping it in prime condition.
The state and local ordinances in most communities place the responsibility for the upkeep and maintenance of rental properties squarely on the landlord, with steep fines to prevent the “slumlord” type of owner who allows the property to become a rundown eyesore. Before you buy, or soon after, it’s wise to acquaint yourself with the laws in your community in order to avoid problems later.
Rental property owners are responsible for making sure that the property complies with all the building, housing and health codes set forth by the city, and for ensuring that the dwelling is safe and habitable. This means purchasing essential appliances such as coolers and furnaces, making sure electrical wiring and gas lines are safe, patching roofs and so forth. Although you can outsource the work, ultimately as the property’s owner, you’ll be responsible for making sure requirements are met.
The task of maintaining one or more rental income properties may make the prospect of investing less appealing. But as we’ve discussed in previous posts on this topic, most, if not all, expenditures related to the repair and upkeep of rental properties can be deducted from taxes, either in the current tax year or over time in the form of depreciation. Not only that, but other expenses related to administering the property, such as travel and even home office costs, can also be tax-deductible.
Not all repairs and maintenance need to be shouldered by the owner, either. Tenants can assume some of the responsibility for property upkeep as well. A lease between owner and tenant is a legally binding document, which should spell out the responsibilities of both sides, and establish the consequences for non-compliance. Generally, though, the tenant must inform you of situations that need attention, and you must take the necessary steps to keep the property habitable and safe.
Both you and your tenant have legal recourse if the property isn’t maintained as required. If tenants fail to keep the property in a reasonable condition or cause actual damage, owners can initiate proceedings to evict them. And if, after repeated requests from tenants, the owner fails to perform reasonable and necessary repairs, tenants can file a complaint with code enforcement authorities and local housing agencies.
Although the prospect of assuming the responsibility for maintaining a rental income property may seem daunting, this aspect of ownership offers significant benefits. A well-kept property increases in value, invites quality tenants, and creates tax breaks – providing an even greater, long-term return on your investment. (Top image: Flickr | umjanedoan)
The Heroic Investing Team