Step #6: Lower the Risk of Crime at Your Property
In recent years, courts have increasingly found landlords partially responsible for crimes on their properties because they didn't provide adequate security.
To prevent problems and keep your property and tenants safe, comply with state and local laws concerning security measures on rental properties. Screen your applicants and employees carefully -- don't just look for experience and know-how when it comes to filling a position on your staff. Adopt a smart key policy so that keys don't fall into the wrong hands, and make sure your intercom system doesn't link tenants to their apartment numbers. Answer prospects' questions about security candidly, and deliver on any promise you make to increase security.
Step #7: Avoid Fair Housing Complaints When Choosing Tenants
If a prospective tenant believes you violated her civil rights, she may take legal action against you. Even if you win, defending yourself takes time, money, and energy.
To avoid problems, learn the basics of fair housing laws. The key to compliance is treating everyone the same. Some ways to do this include:
- putting your screening criteria into a written tenant selection plan and giving a copy to applicants
- rejecting applicants for legitimate business reasons, such as poor credit or negative references from prior landlords, and letting applicants know your reasons for rejecting them, and
- keeping an updated log of apartment availability, and granting prospects' requests for reasonable accommodations. For example, if you have a "no pets" policy and a prospect needs a guide dog to accommodate his disability, let him keep the dog as an accommodation.
Step #8: Adopt Careful and Consistent Business Practices
Many landlords create risks just by the way they go about their business. Be a careful and consistent landlord by using a written lease or rental agreement with tenants and by enforcing lease clauses consistently. Create house rules for tenants to follow (for example, regarding pets or children's health and safety) and enforce them. Don't let a friendship with a tenant interfere with your professional relationship. Also, to prevent identity theft, don't use tenants' Social Security numbers any more than needed.
Step #9: Avoid Problems When Hiring Help
Hiring help brings the promise of efficiency, savings, peace of mind, and profitability to your business -- but it also brings risk. To lower your risk, determine whether you must classify a helper as an employee or an independent contractor.
For employees, be sure to withhold the appropriate payroll taxes and create a zero-tolerance policy against sexual harassment. (To learn more about your duties as an employer, see Nolo's Human Resources area.)
When using contractors, make sure they have insurance and sign a written contract with you. (To learn more, see Nolo's Using Independent Contractors & Freelancers area.)
If you're considering hiring a management company or need to hire a lawyer, ask questions until you're satisfied you're choosing the right one.
Step #10: Taxes: Stay on Good Terms with Uncle Sam
Take steps to avoid a tax audit and to maximize your deductions. For example,
- Establish a recordkeeping system for your business so that you keep track of every document that will substantiate your claimed income and expenses.
- Understand how your choice of business structure and tax year affect your taxes.
- Find out what deductions you're entitled to claim, and then claim them. (See Nolo's article Top Ten Tax Deductions for Landlords.)
- Finally, hire the right type of tax pro for your business, and review your past returns for evidence of trends or problems.
For more in-depth information on the steps outlined above, plus practical advice to help landlords and property managers, see Every Landlord's Property Protection Guide: 10 Ways to Cut Your Risk Now, by Ron Leshnower (Nolo).
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