Juggling and staying on top of the frequently changing federal, state, and local laws that apply to rental housing is one of the trickiest tasks you’ll have to master as a property manager. At the top of the list of housing regulations you must abide by are equal housing rules and regulations as determined and enforced by the Office of Fair Housing and Equal Opportunity (FHEO). As always with rules and regulations, it’s imperative you stay on top of regulations as they’re subject to change. With that in mind, following are some basic equal opportunity housing rules and regulations that every landlord should be aware of.

The Civil Rights and Fair Housing Act mandate that landlords may not discriminate against potential tenants based on their race, color, familial status, or handicap. It’s important to note that, under the Fair Housing Act, it is illegal to refuse rent to families with small children, based on that fact. (For more information and tips for renting to families with kids, check out our previous blog post.)

The Equal Credit Opportunity Act also applies to landlords, as it makes discrimination unlawful “with respect to any aspects of a credit application on the basis of race, color, religion, national origin, sex, marital status, age, or because all or part of the applicant’s income derives from any public assistance program.”

Additional anti-discrimination rules apply to those properties that have received federal funding. For instance, under Title II of the Americans with Disabilities Act of 1990, HUD enforces anti-discrimination based on disabilities as it relates to “state and local public housing, housing assistance and housing referrals.”

Essentially, these laws all mean that you must offer people of all legal ages, races, creeds, nationalities, family types, and physical capabilities an equal shot at renting your units. This includes not establishing discriminatory terms or conditions for your rental units, denying that housing is available, or advertising that your property is only available for rent to certain types of people (for example, you cannot specify that you rent only to individuals 25 years or older). These laws also apply to third parties; for example, you may not instruct a rental agent to screen out tenants based on any of the above factors.  Also remember to check your state and local laws as they may have additional rules and regulations that must be adhered to when it comes to equal opportunity housing.

Being as clear as possible about what does and does not constitute discrimination is extremely important. It’s essential that all landlords are well versed on equal opportunity housing regulations to avoid making any sort of mistake that, despite the best of intentions, may actually constitute discriminatory behavior. Landlords that are suspected of discriminatory behavior are subject to investigation by the United States Department of Housing and Development (HUD). Should you be unclear on equal housing laws and how they apply to your situation, be sure to contact HUD for clarification.

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We’re still recovering from a great New Year and to help us stay up-to-date with the Buildium Blog we enlisted Bill Gray,  Tenant Debt Collection Specialist, to tell us what to expect when it comes to tenant debt collection in 2010.  Bill’s blog can be found at www.thelandlorddoctor.com.

The downturn in the economy has caused many landlords to lower their credit requirements for new tenants.  Of course, lowering credit requirements increases financial risk.  Renting to a tenant with little or poor credit increases the likelihood that the tenant will at some point leave owing the landlord money.

This change in rental criteria is understandable, considering the need to keep all units rented.  But know that when you lower your standards and in turn incur debt, this debt will be tougher to collect than if you had rented to a tenant with good or great credit.  If you use a collection agency to collect the debt, you should also lower your expectations about how much you feel they should collect.

Collection agencies are reporting that they are receiving many more files than two years ago.  The average amount of debt in these files has also increased.  Relaxed rental standards, coupled with the high unemployment rate, have put collection agencies in a tough spot.

The American Collectors Association reports that the collection industry debt recovery rate is down 30-40% over last year.  Angi Pusateri, National Sales Manager for RentDebt Automated Collections, confirmed that her company is experiencing a similar decline in debt recovery.  However, RentDebt Automated is weathering the storm well and has added employees in the last year at their offices, which are located in Nashville, Tennessee and Dallas, Texas.

Jeff Cronrod, the President of Rent Recovery Service, a national collection agency specializing in the collection of tenant debt, estimates that nearly 40% of the debtors his company is trying to collect from are unemployed.  “It is not that these debtors do not care about the debt or their credit. They simply have no means to pay the bill,” Cronrod explained.

Saul Wertzer, President of Rent Recover Solutions in Atlanta, Georgia (not to be confused with Cronrod’s Rent Recovery Service), told me that his company has also seen an increase, not only in the number of collection files, but also an increase in the average amount of each file.  I have heard this from every company I have spoken with, in every corner of the country.  Wertzer went on to say that it is important for landlords and property managers to think long-term about debt they are owed by previous tenants.  Over time a good percentage of tenant debt is collectible.

If your collection agency has served you well in the past, stick with them, even though recent recoveries may have dropped.  Trust me, every agency is experiencing a tough time collecting debt.  Don’t jump ship and hire another agency, because eventually the economy will improve and many of these tenants who owe previous landlords will get back on their feet.  When they do, they will work to clean up their credit and pay their debt. But don’t wait until then to do something about it.  Now is the time to make sure the debt you are owed is reported to all three major credit bureaus. Whether your collection agency reports the debt or you report it via an automated service, make sure every dollar you are owed is reported.

Doing so will greatly increase the odds that you will get paid the debt your previous tenant owes you.

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As we’ve stressed several times throughout the course of this blog, here at Buildium we’re huge proponents of tenant screening. While some situations can’t be avoided and there’s always an exception to every rule, tenant screening is certainly one of the most sure-fire ways to guarantee that tenants with the most potential to be problematic never make it to move-in day. For basic information on tenant screening, we hope you’ll check out this previous blog post. And now we’d like to get into some of the more specific tenant-screening topics, including who should pay for tenant screening and what you should do with the information once you’ve received it.

A couple things to keep in mind first, though. When seeking out the appropriate tenant screening solution for your property management business, you want a system that is both robust (in other words, it will provide you with a complete picture of potential tenants’ credit and criminal records) and secure.

Who pays?
This is one of those questions that doesn’t have a single answer. Ultimately, it is up to you whether you or your tenant pays for the screening process. The simple answer is to have tenants pay because, obviously, costs for screenings can add up quickly. Keep in mind, however, that because competing property managers may not have tenants pay for screening, you risk losing potentially good tenants who are looking to save a few bucks during the application process.

If you do opt to bear the costs of tenant screening on your own, it stands to reason that you will want the most thorough option available, without sacrificing accurate information. In our business, we’ve talked with a lot of property managers and know that smaller landlords can have a difficult time keeping up with more expensive resources larger property management companies have access to. Which is why we’ve formed a partnership with one of the nation’s top credit reporting companies, TransUnion. Property managers can access TransUnion services directly through Buildium software, enter in quick identifying information (such as an applicant’s Social Security Number), and receive all the credit and criminal record information necessary to make an informed decision. Best of all, there are no hefty monthly fees to contend with. This system allows you to pay only for the records you access, avoiding set-up charges and other hidden fees.

What do I do with the information?
There is both a literal and more figurative answer to this question. First the literal, which may sound obvious but bears repeating, nonetheless. Remember that the information you receive throughout the course of a credit check is personal, confidential information. It’s extremely important to protect potential tenants’ information, even if you do not end up renting to them. Make sure any credit check information obtained is either carefully stored in a tenant’s secured file (accessible only on a must-have basis) or, if you do not rent to the tenant, destroyed. Some landlords pass credit check information directly off to the potential tenant in question so that he may decide what to do with this information, whether that be destroying it or keeping it in his own personal records.

On a more figurative level, once you obtain tenant screening information, you should carefully consider it and weight it against other factors. For example, a tenant who has a clean credit and criminal record but questionable references from previous landlords may not be your best bet. On the other hand, a potential tenant who turns up a report with a mark or two against him from a few years back but receives a glowing recommendation from his current landlord may be someone you want in your rental.

Credit and criminal reports should always be obtained before renting to any tenant (no matter how great a first impression they make), but it’s also always important to weigh information obtained with personal and professional recommendations. You want to not only make sure you rent to someone who can pay their rent … but also someone you enjoy having in your property.

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Particularly if you own a property in an urban area or near a university or center of business, many specialized tenant markets are just waiting to be captured. Specialized property management may be just the solution you’ve been looking for to decrease vacancies and guarantee steady rental income. When considering just a few of your options below, be sure that you take your property, location, property management style, and goals into consideration.

Section 8 and low-income housing
Essentially, the Section 8 program provides low-income individuals with government-assisted rent. Generally, tenants pay approximately 30 percent of a unit’s rent and the government pays the remaining balance directly to the tenant’s landlord. In such a scenario, the Department of Housing & Urban Development (HUD) will determine the unit’s fair market rate (FMR) and the landlord is not allowed to charge the tenant anything over this amount.  While it is up to you to choose whether or not to participate in Section 8, keep the following points in mind:

• You will be subject to property inspection to ensure you meet HUD’s Housing Quality Standards.
• You will not be able to charge a Section 8 tenant more than FMR.
• Regardless of your state’s laws, you cannot evict a Section 8 tenant without judicial action for eviction.

While there may be some similarities, low-income housing is not the same as Section 8. Rather than receiving rental income from the government, property owners who run low-income properties are eligible for the Low-Income Housing Tax Credit (LIHTC). But it’s important to bear in mind that these tax credits apply only if you adhere to the rules and regulations that determine who can live in your building and how much they can be charged. Not abiding by the rules that are set forth can result in a whole lot of headaches, not to mention economic loss. Despite the red tape that can come with low-income housing property management, there is a large pool of renters in need of low-income housing. If your property is in an appropriate situation, low-income property management may be a good solution for you.

Student housing
College students can be a landlord’s best friend or worst enemy. The problems with renting to students are fairly straightforward. Generally speaking, you’re dealing with younger renters (many of whom may be living on their own for the first time). With this in mind, you may be more likely to experience noise and upkeep issues. Because of the school schedule, you may also find yourself turning apartments over annually or having to deal with sub-lets during the summer months.

But there are some very real positives when it comes to renting to students as well, most of which are financial. If you are living in an area that houses a college or university, chances are you will have a more dense renting population than you would otherwise. This means that—for at least nine months out of the year—students offer a very real way to keep your vacancy levels low. Also, while students may not inherently have a lot of income (or any at all), when a parent or guardian co-signs the lease, in most cases that monthly check is just as reliable as it would be under any other circumstances.

Sure, you may have to be a bit more hands-on than you would otherwise be when it comes to running student housing. But the bottom line is, they offer a nice steady flow of income.

Corporate housing
More likely than not, managing corporate housing is fairly different from any other kind of property management you’ve done to date. First of all, you’ll be dealing with a company rather than an individual tenant. In most corporate housing situations, a company will rent out one or more rooms in a property, with the understanding that one or more of their employees or clients will occupy this space over the duration of the rental term. The way this actually works out may vary from having one stable tenant for a year at a time to having a cast of different tenants in and out on as little as a daily or weekly basis.

The good news here is that signing a lease with a corporate entity allows property managers to feel relatively secure that payment issues will be avoided. There are not necessarily downsides to this scenario, just things to consider that make this situation different from renting to an individual such as: assuming the responsibility for furnishing the unit; the potential inability to build a relationship with the tenant or screen for undesirable tenant behavior; and, in some cases, the knowledge that you will not necessarily have a tenant occupying the unit at all times to immediately alert you when repair and upkeep issues crop up.

If you are looking for ways to decrease vacancy rates and generate more income, remember: There are always ways to think outside of the box when it comes to property management. Before you undertake one of these (or any other) specialized property management endeavors, just make sure you have carefully thought out the pros and cons and are well versed on any specific tax considerations or rules and  regulations that may apply.

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Chances are every landlord will encounter a problem tenant at one point or another in his career. Whether issues arise based on noise levels, delinquent rent payments, illegal roommates, or any number of other violations, dealing with problem tenants can be tricky. Following are some tried and true suggestions for dealing with issues as effectively as possible and—better yet—avoiding renting to problem tenants in the first place.

Prevent problem tenants from getting a foot in the door.
The importance of carefully screening tenants before locking yourself into a lease cannot be overstated. No matter how eager you are to occupy a unit, renting to an unqualified tenant is never worth it in the long run. In addition to checking credit and criminal records, be sure to call former landlords for applicant references.

Remember, some landlords may be unwilling to explicitly state that they do not recommend renting to a potential tenant for fear of litigation. Bear this in mind when speaking with references, and be sure to read between the lines when necessary. Sometimes what a reference doesn’t say is just as important as what she does say. Ask the applicant’s former landlord if she would rent to the tenant again. If the answer is “no,” think long and hard before handing over that lease.

Have a system in place.
Many leases neglect to cover behavioral expectations. Be meticulous and specific when it comes to setting forth your expectations, whether it be in your lease or as part of a lease addendum. Also, make sure you have a clear system for issuing warnings in place and that all tenants know how this system will work from the offset. For example, let tenants know that should problems arise, they will receive two written warnings for lease violations. On the third violation, they will be asked to vacate their unit. Finally, be sure that all tenants sign off on these guidelines before handing over the unit keys. This will ensure there is no room for dispute further down the line.

Follow through with your system.
Just as important as tenants abiding by your guidelines is that you abide by your guidelines. After all, if you don’t take your rules and regulations seriously, why should your tenants? In other words, if a tenant violates a building rule or regulation, make sure you follow up with the appropriate prescribed action as set forth in the lease agreement. Also be aware that an inconsistent system could cause problems down the line. It’s important that all tenants are treated equally. For example, if you neglect to write one tenant up for a noise violation, you can hardly write up another tenant for a similar violation.

Keep the lines of communication open with all tenants all the time.
When it comes to problem tenants, communication is critical. In cases where a landlord has developed a friendly relationship with tenants, it can be uncomfortable to put on the disciplinarian hat and issue a formal written warning. You have to maintain your role as the resident authority, but you don’t have to do so at the sacrifice of your relationships with tenants. Should such a case arise, keep the channels of communication open. Follow through with the prescribed warning, but take the time to talk openly with your tenant—listen to his side of the story and explain where you’re coming from. Also in terms of communication, if a tenant complains about a fellow resident, be sure to follow up and let the tenant know you’ve addressed the problem.

If tenant problems are serious and consistent enough that eviction is warranted, carefully check your state and local laws and take the steps necessary to begin the eviction process. Eviction is never ideal, but if you don’t address the problem tenant, you may inadvertently lose some of your good ones. And no landlord wants that to happen.

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Once again, it’s that time of year. While filing taxes may never be your favorite task, chances are tax season will be incrementally better the more deductions you make. The good news is that there are a lot of deductions available to property owners. But the question is: Are you taking advantage of them? According to legal publisher Nolo, “Every year, millions of landords pay more taxes on their rental income than they have to … because they fail to take advantage of all the tax deductions available.”

You don’t want to miss out on any of the deductions coming your way. To make sure you’re maximizing on deductions, be in the loop about these common deductions you can (and should!) be taking full advantage of.

Interest
This is a big one and it doesn’t apply just to the interest on your mortgage—you can also count interest on credit cards (for property-related purchases only) and on loans used to make property improvements.

Repairs
Both big and small repairs are fully tax-deductible for the year in which they are incurred. This represents a double-win for property owners—you’re simultaneously maintaining or improving the value of your property and earning a deduction while you’re at it. Just be sure that the repairs are “ordinary, necessary, and reasonable in amount.”

Contractor Work
If you needed another reason to keep careful track of your expenditures, here it is. Whenever someone performs a service to your property, his wages can be counted as a tax-deductible business expenditure.

Local Travel
This can represent a significant deduction for property owners when you consider the mileage racked up in the process of showing units to potential renters, driving around to pick up supplies, and checking in on properties. According to Nolo, you’re eligible for this deduction if you drive a car, SUV, van, pick-up, or panel truck.

You can claim this deduction by either: 1) adding up the actual expenses of gasoline, vehicle upkeep, and repairs, or 2) using the standard mileage rate (55 cents per mile for 2009, 58.5 cents per mile for July 1, 2008 through December 31, 2008, and 50.5 cents per mile for January 1, 2008 through June 30, 2008).

Enhancing Efficiency
According to the Energy Policy Act of 2005, improvements to the energy efficiency of interior lighting systems, heating, cooling, ventilation, and hot water systems are eligible for tax deductions. It’s important to note, however, that certification of energy efficiency and certain qualifications must be met in order to obtain this deduction. Specific information can be found on the IRS website.

Preserving History
If you happen to own an older building, you may just be eligible for a Rehabilitation Tax Credit. This provides a credit for 10 percent of the rehabilitation cost of buildings placed in service prior to 1936.

And if all of this still sounds a bit overwhelming, remember that your accountant’s fees count as a tax deduction as well. For more information on reporting income and expenses to the IRS, be sure to check out Real Estate Tax Tips provided by the IRS.

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A line from John Belushi’s character in the 1978 movie Animal House sums up the concerns many landlords have when it comes to renting to college students: “Food fight!”

While it’s true students can be hard on rental properties, many property managers’ fears are overstated. Sure, students can be demanding renters, but the disadvantages of renting to them are often outweighed by the fact that college students represent a large pool of potential rental income. And, often, they’ll pay top dollar to boot! Consider Steve Miller, a successful real estate investor who chose to rent to college students at the State University of New York at Cobleskill because “student rents are so lucrative.”

So how do you reconcile the potential for increased wear and tear with the promise of higher rents and fewer vacancies? The big shots on Wall Street call it risk management. Others call it common sense.

1. Ask for a guarantee
Forget about running a credit report on college students. Chances are they won’t have much credit history to look at. Instead, get a parent to sign the lease as a guarantor or co-signer and run the credit report on Mom or Dad.

2. Collect a larger deposit
Students aren’t inherently bad, but many of them do cause more damage than your average renter. That’s why many landlords ask college students for a larger security deposit than normal—one or even two months’ rent. But be careful. Some states limit the amount of security deposit you can collect so be sure you know the rules.

3. Stop by for a visit
Most leases have a provision that allows the landlord (or his agent) to inspect rental properties during the agreement term; however, many landlords never take advantage of this clause. This can be a mistake, especially when it comes to college students. You don’t need to bring the white glove with you, but stopping by on a regular basis will help you spot problems early on and keep your tenants honest.

4. Get some help
Though students will often pay top dollar for rent, they can also be a lot of work (think late night parties and calls to the police). Before you have them sign their lease, take a long look in the mirror and ask yourself if you’re up for the challenge. If not, consider getting some help by hiring a local property manager. Though they may charge as much as 10 percent of the rent, property managers can be worth their weight in gold, especially for those landlords who live out of town.

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