Question: I’m considering becoming a landlord/property manager. What do I need to know before I start renting out property?
Answer: Before you become a property manager, there are numerous state laws with which you need to become familiar. Most of these fall under the umbrella of fair housing laws.
Whether you’re renting out a single family residence (SFR) or managing an apartment complex, screening tenants is important to avoid financial ruin down the line. Missed rent payments and damage to the property are the two main issues you’ll avoid by screening for responsible, qualified tenants.
But when you’re screening tenants to ensure timely payment and responsible occupancy of the property, it’s important to avoid violating fair housing law.
For example, in California it is unlawful for landlords to discriminate based on:
- genetic information;
- national origin;
- marital status;
- medical condition;
- sex (including gender and gender identity);
- pregnancy; or
- sexual orientation. [Calif. Civil Code §51(e)]
Therefore, a landlord may not use discriminatory criteria to:
- disqualify potential tenants;
- refuse to rent a dwelling;
- impose different rent charges; or
- evict tenants or their guests. [Calif. Government Code §12955]
Further, a landlord is prohibited from causing a tenant to vacate their rental property by threatening to disclose their (or someone associated with the tenant’s) immigration or citizen status. [CC §1940.2]
Read more about fair housing laws here.
*An exception to the age rule exists for senior-only housing. A project qualifies as senior housing if it is occupied solely by those who are 62 years of age and older. [24 Code of Federal Regulations §100.303]
Not sure what to include in your rental agreement, or even how to write one?
To get started, see RPI (Realty Publication, Inc.)’s Residential Lease Agreement. You may add any special requirements to the agreement, such as homeowners’ association (HOA) rules tenants will need to follow. [See RPI Form 550]
How much to charge for rent
To find the perfect amount that covers expenses without exceeding fair market rent, consider:
- your current monthly expenses, including:
- mortgage payments;
- property taxes and assessments;
- HOA fees; and
- any utilities you will include in rent; and
- future expenses, including:
- the income you will need to pay yourself for the time spent completing property management responsibilities;
- income taxes to be paid on the rent you receive that exceeds cost; and
- any fees you might need to pay your HOA for the privilege of renting.
Once you figure these expenses into the equation, look around at what other similar units are charging in or near your property.
Property managers do not currently need to hold any special “property manager” certificates or licenses in California. However, individuals working as property managers on behalf of a separate owner need to be licensed by the California Department of Real Estate (DRE) as a real estate broker or as an agent employed by a licensed broker.
If you are interested in managing only property owned by you, then you do not require a real estate license.
But this may change in the future. At the time of this writing, California’s Assembly is considering a bill which would require all landlords and property managers to take a course and pass a certificate program administered by the DRE, to be renewed every two years. Stay tuned for developments.
Where can I find out more about being a landlord?
If you’re interested in becoming a professional property manager, consider first tuesday’s 45-hour continuing education course for licensed real estate agents, Landlords, Tenants and Property Management.