One important section is worth exploring in more depth.  There were many shady things happening with screening fees and how tenant applications were being reviewed prior to this law being enacted.  This law cleans up any areas for abuse or discrimination against the tenants.  Here are some of the major points (these only apply when a landlord charges an application fee):

• A landlord may not collect or hold a tenants’ application fee without providing a written receipt for the fee if the tenant’s asks for it.  This seems pretty easy and obvious.
• The landlord may not cash, use, or deposit the application fee until all prior applicants have either been screened and rejected or they have been offered the unit and they have declined to take the unit (did not sign a lease).  This is a significant change as it was a previous unwritten rule to screen one applicant and only take that money until you have exhausted all options with that applicant, then move onto the second application.  Some landlords were cashing all the application fees, running all the tenant applications and picking the best one.
• A landlord must return the application fee if the prior applicant is offer the unit and accepts; subsequently entering into a lease agreement.  You can’t keep the application fee.
• You must disclose to the tenant, in writing, prior to taking the application or fee the criteria that your rental decision will be based upon.  I have been doing this for many years as it was required in certain cities, but this becomes a statewide requirement.
• If you reject a tenant application, you must notify the applicant within 14 days of that rejection as well as identifying the criteria that the tenant failed to meet (you should be citing something on the above written application screening criteria).  If you are rejecting the applicant for something that is not on the screening criteria document, you must return all their application fee.
• A prospective tenant who materially provides false information or omits information on the application is liable for damages, plus a civil penalty of up to $500, plus court costs.  I am not sure how this one is going to be regulated or tracked, but it could be interesting if some applicant lies to you and you can prove it.

These are some small, but important changes to how we as landlords run out investment properties.  You should make sure you thoroughly understand these.

I have a client that is very green in the rental business. He signed a lease with a tenant for 6 months.  The tenant moved in but hasn’t paid him a dime.  No month in advance, deposit, rent etc.  What can be done to get this person out?

Ouch!  Now, I suspect that 90% of new landlords have made the mistake of not getting a security deposit prior to move in, at least once in their career.  In my experience (and I have made this mistake before), you will get that deposit only about 10% of the time.  Once they move in, you have zero leverage to get that deposit.  That tenant has no fear of you actually doing anything to them.  In fact, you can’t!  No eviction in the world is going to work to get that deposit paid.

When the tenant signs the lease, you should get the damage deposit.  And before they move in, you should get the first month’s rent.  Worst case, if the time is short, get all of it prior to move in.  If the time is long between lease signing and move in, always get a deposit as the tenant can simply walk away from the lease.  While you could try to sue them for lost rent, good luck.  Actually, you could get into a wierd situation where legally you need to evict them to break the lease even if they never lived there.  Worst case, hold the keys until they give you the security deposit and first month’s rent.  This is the last leverage you have.

Another mistake that I am sure happens, but I made only once in my earlier landlord years was to accept a personal check for the deposit and/or first month’s rent.  I am sure you can guess what happens next; the check bounces.  Now you have a tenant living in your investment property that has not paid anything to be there.  Much like the guy above.  If you have several weeks prior to move-in, you have time for a personal check to clear.  Also, if the check is drawn on a local bank, drive it over there and have it cashed immediately so you get the funds directly instead of depositing in your bank, they send it to the tenant’s bank and then it gets returned 14 days later NSF.

A slight twist on this mistake is when you are dealing with a tenant that get’s a rental subsidy like Section 8.  The tenant talks the talk like they know exactly how it all works, saying they have talked to this person or that agency and you are going to get your money.  Never take the tenant’s word for it.  Call the agency or have the tenant provide written proof of the subsidy.  Just because they say they are getting emergency assistance to pay the security deposit, doesn’t mean they qualify for it.

Taking some precautions and holding the keys ransom for the money is the best option.  By they way, I told this agent to file the eviction immediately (since they also owed the first month’s rent).

Section 8 Tenants”  Every you want to know about Section 8, but were afraid to ask.”

Tonight in Burnsville at 6:30.

Register here.

• Many “friend” landlords simply let the tenant “friend” move in and just pay them some verbally agreed on amount of rent.  WRONG!  You need a standard written lease.  This may seem formal, but this really protects both of you.  With a written lease there is no opportunity for one party to remember the conversation differently.  Plus, as the landlord, if the friend stops paying you or does something you disagree with, it will be difficult (but not impossible) to evict them.  One example is a couple that let a brother rent this old house in the country.  After about 6 months, the brother started paying parts of the rent every couple weeks when they would hound him.  He then started to remodel the house, plus he moved in a couple other roommates and they all had parties every weekend.  Without a lease in place, these landlords had a terrible time getting this guy out.
• Keep a key to this home and install a 2nd one in a lock box that only you have the combination to.  You can give out this lock box code to repair guys that need access to the property for repairs without bothering your friend.
• Do not allow your friend to be late on the rent.  This will be worse than letting the average stranger tenant be late on their rent.  You will get into this strange situation where you want to hang out with your friend, but will be frustrated when he is buying a round of drinks for the bar, all the time you know he owes you back rent.
• Consider putting your friend on a month to month lease.  Then you can simply give him 60 days notice to move out if the relationship starts to sour.  Then there doesn’t need to be an eviction involved (unless he doesn’t leave).  You just part company from a housing standpoint and go your separate ways.

Renting to friends can be a great way to have a quick and most likely wonderful tenant.  Just don’t leave all your landlord experience and common sense behind!

What to do if your listing is a victim of this scam

Email the details to abuse [at] craigslist [dot] org. Be sure to include the URL (or 10-digit post ID number) in your message. For further recommendations, check out the Craigslist page on who to notify about fraud attempts. You may also report it to the FBI’s Internet Crime Complaint Center to help them determine the extent of the problem.

Rent to own contracts go by many names (and take many forms):  rent to own, contract for dead, lease option, etc.  These are creative ways that landlords and tenants/buyers have put together to allow someone with marginal credit (tenant) to buy the house they want.  Depending upon how the relationship is constructed and documented, it can be a win/win or a lose/lose for both parties.

On Wednesday, October 21, the Minnesota Real Estate Team will be holding is next Investment Property 201 seminar.  We will have Attorney, Matt Engel discussing how to best architect these relationships.  He will demonstrate the pitfalls and common mistakes that many landlords make and how to avoid them.  Matt will explain the best design for these relationships to minimize the legal ramifications if the relationship goes poorly.

Join us on October 21 at 6:30 pm if you have previously written these deals or have always had an interest in them.  Contact us now by filling out the registration form or call me at 612-281-5419 for more information.

Here goes…As most of you know, Craigslist ads are quite dry and simply text in a white background.  You can add HTML to the ad, but that is time consuming and not for the average non-geek.  A customer of mine recently posted a “For Rent” ad on Craigslist.  He wasn’t getting many calls so I told him to send over the ad.

What he sent over floored me.  It was a colorful, well-formatted web page inside of Craigslist.  This customer happens to be a geek so I figured he wrote the entire thing in HTML and posted it.  When I mentioned it, he said he found a website called Postlets.com.  This free service allows you to create a beautiful page for your rental ad or your “home for sale” ad and then simply cut and paste the HTML into Craigslist.  You can add up to 18 pictures and even a virtual tour!  If you upgrade to the paid service you can have a single property website.

See a sample here:  http://www.postlets.com/rem/2172858

Now, no more boring Craiglist ads.  Start using this today!

First, who is considered handicapped under the law?  The federal Fair Housing Act and Fair Housing Amendments Act (42 U.S. Code §§ 3601-3619, 3631) prohibits discrimination against people who:

• Have a physical or mental disability that substantially limits one or more major life activities — including, but not limited to:
  • mobility impairments
  • hearing impairments
  • visual impairments
  • chronic alcoholism (if it is being addressed through a recovery program)
  • mental illness
  • HIV, AIDS, and AIDS-Related Complex, or
  • mental retardation
• have a history of such a disability, or
• are regarded by others as though they have such a disability.

Here are the general rules that you must follow as a landlord (if you have further questions, I recommend you contact an attorney or a special interest group):

• As a landlord, you may not ask an applicant about any handicaps.
• You must base your decisions to rent to (or continue to rent to) a person solely on the basis on credit, criminal, and rental history.  You may not deny them solely because of their handicap.
• Even if it is obvious that they are disabled — for example, they use a wheelchair or wear a hearing aid — it is nevertheless illegal to inquire how severely they are disabled. In practice, if there are units available on the ground floor and 2nd floor in the same complex, you must offer both units to a person in a wheelchair, even if you believe they would not be interested in the 2nd floor unit.
• Landlords must reasonably accommodate, at the landlord’s expense, the needs of a disabled tenant such as (but not limited to):  rules, procedures, services to give the disabled tenant an equal opportunity to enjoy the common elements and his/her unit.  Designating the front parking space would be an example of this.
• Alternatively, landlords must allow a disabled tenant to make reasonable modifications to their units or common areas at their expense in order to allow the tenant to live comfortably or safely in their unit.  These modifications may not interfere with current or future tenants ability to use the property.  Typical modifications that can be done (and paid for) by a disabled tenant can include:  installing a ramp to allow wheelchair access, installing special faucets or door handles to allow for tenants with limited hand mobility.  The landlord can require that they changes are removed once the tenant leaves the property and can only be done with prior approval.
• If the need for the modification to the property is not obvious (such as a wheelchair ramp), the landlord may request a doctor’s letter prior to approving the change.  This is especially common in mental illness disability and/or phobias.

While this is not an exhaustive list, you need to be aware that you must give a handicapped tenant or applicant every opportunity to rent your apartment.

Bank Owned properties constituted 60%+ of the real estate sales each of the last 3 months.  Buying these properties is very different than purchasing a home from a homeowner.  Banks have their own time lines, rules, documents, and requirements.  They can be confusing and lead to enormous frustration if you don’t know what to expect.

Attend this free seminar on March 5 to learn more about how to buy bank-owned properties.  There will be expert mortgage brokers and real estate agents on hand to answer your questions.  Register for the seminar by filling out this quick registration form or call 612-281-5419 for more information.