Here is a posting from the NWCLA October 2007 newsletter. It also has a blurb about insurance. I am focusing these past few blogs on insurance because it is probably where our largest risk lies in the buy & hold strategies. You want to have enough for the unexpected, but you don't want to pay too much for it. I hope you enjoy this article.

By Paul Bannister • Bankrate.com

Being a landlord is not a job for the faint of heart, say the experts, but there are several rules you can follow to protect yourself and your rental property from the “Tenants From Hell.”

Rule one: Screen the applicants
Rule two: Get it in writing
Rule three: Insure yourself
Rule four: Protect your tenant
Rule five: Keep it up
Rule six: Get help
Rule seven: Don’t say no to pets
Rule eight: Mediate disputes

Have you had a frightful experience with a tenant? Share your nightmares by sending your story to: Landlordhorrors@bankrate.com.

Rule one: Screen the applicants
“You have to find out whom you’re renting to, and a credit check will turn up any criminal or eviction history, too,” says Brian F. Edwards, a University of Connecticut real estate lecturer, past president of the state’s property owners’ association and co-author of “The Complete Idiot’s Guide to Being a Smart Landlord.”

The check will cost the applicant about $20, but he’ll probably agree it’s worth it when you explain that everyone in the building gets screened – good protection for every tenant.

Of course, even a thorough credit check won’t tell you everything.

A Florida couple that had transplanted to California was delighted when the agent who handled the rental of their home reported that the respectable new tenant was a keen gardener who’d surrounded the pool with leafy plants.

Only when Boynton Beach, Fla., police called did they learn that the tenant was dealing marijuana out of the garage and had been busted with 37 bales of the stuff.

But that wasn’t as bad as the Texas duplex tenant who kept a pet bobcat in the guest bedroom. The cat was not housebroken and ate its raw chicken dinners off the reeking carpet that doubled as its kitty litter.

The tenant moved out by moonlight, leaving the landlord a bone-yard cleanup that required new pad and carpet, fumigation, redecoration and repairs that kept the place empty for three months.

Another unlucky landlord found his tenant had dismantled his motorcycle on the living room rug, which had absorbed generous amounts of grease, oil and gasoline.

Sometimes, warns Mike Lee, of Jo Tipton Realty, in Valley Ranch, Texas, “You have to be alert to the scam artist. It’s rare, but it happens.”

Lee relates details of a case in which a professional-looking gent leased a home from an owner who reviewed a glowing background check before signing a three-year lease. The lessee even paid six months’ rent in advance. But once he had control of the house, he advertised it for sale, at a very low price.

He convinced 30 eager home seekers to hand over deposits of $2,000 each before he disappeared, leaving behind 30 contracts to sell and a giant headache for the homeowner and title company.

Rule two: Get it in writing
A verbal agreement isn’t enough. You have to have a clear, thorough and legal agreement on paper for everyone to understand -- and sign. Make sure the agreement specifies:

* The name of every adult who lives in the rental, making each responsible for all the terms. If one roommate skips or can’t pay, the other will be responsible for the full rent.
* That the property is the residence only of those who have signed the lease. This lets you screen residents and gives you legal right to evict a tenant who adds someone without your permission.
* How and when complaints will be handled; when rent is due; what, if any, repairs or alterations are permitted; the amount of security deposit, how it may be used and just how it will be returned, as well as how any deductions will be accounted for.
* Any forbidden illegal activities, excessive noise or disruptive behavior on the premises, and the landlord’s right of access.

Go over a pre-occupancy inspection checklist. It’s a good idea to photograph or videotape the property, in case you need to prove damage later.

Rule three: Insure yourself
Take out special rental insurance that covers liability and property insurance, because your homeowners policy usually will not cover you for renters.

You’ll need protection against damage, such as that created by a Tennessee tenant when he heard a call from a divine source to light a fire in the living room. You’ll also have coverage if your tenant somehow injures himself and claims it’s your fault.

Rule four: Protect your tenant
You should offer reasonable safeguards against crime and other dangers, ensuring that your property is secure and safe. Most states have strict regulations about smoke detectors and their locations. “For six bucks, it’s worth protecting your investment and your tenant’s life,” says Edwards. Also, you must reveal any hazards, including potential lead-poisoning sources, to applicants.

Rule five: Keep it up
Protect yourself against losing good tenants or attracting lawsuits by keeping your property maintained. Substandard conditions can lead to injury or illness. Remember, landlords are the most frequently sued of any business group. Letting your property decline can lead to tenants withholding rent, disputes over who is responsible for what and even result in the tenant legally moving out without notice.

Rule six: Get help
If you aren’t comfortable dealing with people, or are a long-distance landlord, get a professional property manager to handle emergencies and prevent problems by visiting the property regularly. What’s more, tenants appreciate a manager who schedules appointments, asks about problems and follows up on repairs.

Rule seven: Don’t say no to pets
At least, don’t do so automatically. Pets are not always a negative factor, and by considering tenants with pets you’ll increase your occupancy rate. One survey showed, ironically, that the dogs apartment managers favor -- those 20 pounds or less -- often are dogs with attitudes and are not inclined to please their owners.

Nine of the top 10 dogs for apartment living were bigger than 20 pounds. One author rated a golden retriever the top dog for apartment living, even though these dogs typically weight about 70 pounds. Retrievers and other similar breeds are bred to please and are easily trained to being “crated” while their owners are away.

Rule eight: Mediate disputes
Mediation has achieved astounding acceptance by both landlords and tenants as a way to resolve disputes, and you often don’t even need an attorney, explains Edwards. “Many states have local housing courts, and you’ll first see a housing specialist who will hear the facts before a judge does. Both sides air their grievances and in almost all cases, the mediator works it out before it gets to court. It’s inexpensive, it’s confidential and it works.”


I hope you found this blog entry to be entertaining and useful. Please rate it if it helped you and pass it along to anyone who can benefit from this post. Thanks again.

Brian Lucier

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