MONEY renting

These Are the Most—And Least—Affordable Places to Rent

Fieldston Historic District, Riverdale, Bronx, New York
Alamy Fieldston Historic District, Riverdale, Bronx, New York

A New York City borough is the least affordable—but it's not the one you're thinking of.

It’s no secret that renting has become more expensive in recent years. Now, new data a from housing data firm RealtyTrac lets us know exactly where in the country renting is most and least affordable.

In order to find out which areas are easiest on the typical renter’s wallet, RealtyTrac crunched the numbers on 461 counties across the U.S. with a population of at least 100,000 and sufficient data available, to determine the percentage of the local median household income that gets eaten up by the “fair market” rent (set by the U.S. Department of Housing and Urban Development) on a three bedroom property.

The Bronx, in New York City, where fair-market rent takes up a whopping 69% of median income, ranks as the least affordable county in the nation—a result of the borough’s extremely low median income and relatively high rents.

San Francisco, Brooklyn (Kings County, New York), and Philadelphia, are also high on the list, each taking up around 48% of the typical household salary in rent payments.

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On the other end of the spectrum, Delaware County, Ohio, was ranked as the most affordable city for renters, with fair-market rents costing just 14% of the median household income. Delaware was closely followed by Williamson County, Tennessee; Hamilton County, Indiana; and Fort Bend County, Texas.

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RealtyTrac also notes that renting is generally more expensive than buying a house. The firm found monthly ownership costs of a median-priced home—including mortgage payments, property taxes, and home and mortgage insurance, assuming a 10% down payment—account, on average, for just 24% of the median income. Fair-market rents, by comparison, averaged 28% of the typical household income. Overall, RealtyTrac found house payments were more affordable than fair-market rents in 76% of the counties it analyzed.

“From a pure affordability standpoint, renters who have saved enough to make a 10% down payment are better off buying in the majority of markets across the country,” said RealtyTrac vice president Daren Blomquist.

That said, Blomquist warned, “Keep in mind that in some markets buying may be more affordable than renting, but that doesn’t mean buying is truly affordable by traditional standards.” He added, “In those markets renters are stuck between a rock and hard place when it comes to deciding whether to buy or continue renting.”

MONEY First-Time Dad

Why This Millennial Is Kissing the City Goodbye

Luke Tepper
This time next year, Luke will hopefully be playing on grass.

MONEY writer and first-time dad Taylor Tepper announces his retirement from urban living.

Renters in New York City have a uniquely dysfunctional relationship with real estate: The more time we spend living in some of the most desirable housing in the world, the less happy we become. Or maybe that’s just me.

My wife and I pay $2,100 a month for what seems like two square feet and minimal natural light in a converted hospital in a cool Brooklyn neighborhood. There’s an artisanal pizza shop, hole-in-the-wall cafe, and kid-friendly beer garden right around the block. I’m a 15-minute walk from a major metropolitan museum, botanical gardens, and the best park in all of New York. When it’s warm I bike, toss the frisbee, and drink whisky on rooftops. The beach is only 30 minutes away.

Unfortunately, warmth doesn’t last forever, and when it gets cold outside—say, from Thanksgiving to Easter—I spend more time indoors. Which means I’m trapped with a 21-pound baby monster who smashes, grabs, and pounds anything he can get his hands on, from cellphones to lamps. As a result, I’m slowly devolving into madness. Spending hours upon hours inside with two other people, only one of whom yields to reason, punctuated by intermittent excursions into tundra-like conditions, makes it seem as if the walls are slowly inching in on themselves.

Don’t get me wrong—I love the city, I went to school in New York, I’ve lived here for almost the entirety of my adult life. But after 13 months as a father and 19 months as a husband, I’m ready to escape to the land of malls and carpool lanes, single-unit houses and trees, the land of my birth: suburbia.

That said, it’s one thing to want move, it’s another to actually do it. Here’s a window into my thought process—and that of other millennials facing the same decision.

We’d Still Be Renters

Years of high rent and monthly student loan bills, combined with the cost of childcare, made it next to impossible for us to save up for a down payment. So we’re looking to rent wherever we go, which should mean more money left over for us. According to NerdWallet.com’s cost of living calculator, we could reduce our housing costs by about 25% if we moved to northern New Jersey or Long Island.

Even if we had enough funds stashed in our joint bank account, there are a couple of reasons why a home purchase would be a poor move. For one, conventional wisdom states that your target property should be no more than two and a half times your gross income. The odds that we’d find a New York-area home in the $300,000 range that’d we’d actually want to live in are low.

OK, let’s say that we had the savings and lived in a less expensive city. Should we jump into the market then? Not necessarily, says Pensacola, Fla.-based financial planner Matt Becker.

“Don’t rush to buy a house just because you want to go the suburbs,” Becker says. “That can lead to a quick financial decision as opposed to a good one.” Since transaction costs are so high, we’d need to stay in the home for a number of years to for buying to make financial sense. And who knows if we’ll want to live in a particular town for that long? My wife and I are still early on in our careers, we could end up lots of places.

Even Though Now Is a Good Time to Buy

If your bank account is fatter than ours and you’re ready plant some roots, buying might make sense. In fact, if you can get a mortgage, now is a great time to buy, since 30-year mortgage rates are absurdly low. Mortgage behemoths Fannie Mae and Freddie Mac announced late last year that they would allow down payments of as low as 3% on some mortgages. (These moves were directed at people who haven’t owned a home for three years, or are in the market for their first house.)

Once you’ve made the decision to move, you need to think about where you’d like to spend the next seven to 10 years. While we need more space, I don’t want to give up some of the best aspects of the city—good restaurants, a sense of community, hipster/independent movie theaters—in the trade. In that regard I’m like a lot of young buyers, says Greensboro, N.C.-based Realtor Sandra O’Connor. “There’s real movement among millennials who are looking for places to live with walkable areas,” she says. “They don’t want to always be in their car.”

If you’re still undecided about whether renting or buying is the better choice for you, check out Trulia’s rent or buy tool. Those who fall in the rent camp should understand that finding rental units outside of cities can be a lengthy process, per O’Connor and Becker.

All Suburbs Are Not Created Equal

So I want to move, but where should I go? I put the question to Alison Bernstein, president of the Suburban Jungle Realty Group, a firm that specializes in helping its clients find the best New York City suburb for them. Bernstein says that city dwellers eager to jump need to “understand that a house is a house, but the dynamic of a town is very difficult to grasp.”

To that end, Bernstein laid out a number of questions that anyone thinking about relocating needs to consider:

How many working moms are in town? What type of industries are there? What’s the breakdown of private versus public school? Even if the schools are highly ranked, there are towns where there is a lot of momentum to send kids to private schools and this does change the personality of the town quite a bit. What do you do over the summer? Does the entire town empty out? Does everyone hang out at the pool? Who is moving to the town? How will that change the school system and the vibe over the next 10 years?

Bernstein has also noticed a few trends with today’s younger buyers. “They are happiest with a smaller piece of property, a more modest home, and being in a more cosmopolitan suburb. Also they are not plowing every last penny into their house. They are still budgeting for travel.”

The Costs of Commuting

Right now I pay $112 a month (soon to be $116) for a 30-day subway pass to get to the office. We are only a 20-minute drive from my wife’s work, which means we shell out a very reasonable $50 a month on gas. When we move to the suburbs we will pay more. For the sake of argument, let’s say that we end up relocating to Pelham, New York, just north of the city. My monthly bill rises to $222, while my wife’s morning drive will consume almost twice as much gasoline, meaning our monthly outlay will jump by about $160.

But that’s just the money. The time we spend going from home to work and back will grow as well. Doing some back of the envelope calculations, my in-transit time will increase by 10 minutes each way, while Mrs. Tepper will spend an additional 20 minutes or so in traffic. Combined we’ll endure about an hour more per day on our commute, which sends shivers down my spine.

There are a few positives about the longer commute, though. For one, car insurance is generally cheaper outside of the city. According to CarInsurance.com, the average rate in my neighborhood is a little less than two times that of Pelham’s. While I wouldn’t necessarily expect to cut our car insurance costs in half, this savings would take a bit of the sting out of much higher commuting costs.

Aside from lower insurance rates, we could also dedicate a portion of our new abode as a work space. As Mrs. Tepper and I advance in our careers, we hope to have more leeway in terms of a flexible work arrangement. While our commute might be longer, we’ll most likely have to do it less often. And each saved car ride is more money in our pockets.

The Tradeoffs

Getting older involves a series of decisions that have the net effect of limiting one’s personal freedom. I became a journalist, which means I couldn’t be a doctor (leaving aside the question of whether or not I had skill to do it in the first place). Marrying one woman, and being keen on staying married, means I can’t marry a different one. A life in one town is a life not lived in another.

Which is all to say that I’ll miss living in Brooklyn. Despite the hipster clichés, I really do enjoy artisanal, delicious, overpriced hamburgers and 17 different IPA varieties at my bars. I like walking everywhere, even if we have a car, and a touch of self-righteousness about your home is good for the soul.

But I think of my sojourn in New York’s best borough as I think of college: I wish I could stay forever, but it’s time to move on.

Financial planner Matt Becker understands my dilemma. He recently moved from Boston to suburb-rich Pensacola and is still adjusting to his new life. He walks less and drives more. While his young family has more space to play and grow, that also means he has more house to furnish and air condition, which means more costs. I imagine we’ll encounter something similar.

The combination, though, of high rent and minimal space has lost its luster. Even if we end up breaking even in our move, or only saving a little bit, our dollars will go further. We can have a backyard for our son and our dog and us. We’ll have a laundry machine on the premises, so we don’t have to lug 20 pounds of clothes a couple of blocks through the snow. We’ll have a full-size dishwasher.

I proudly proclaim without regret what might have depressed my younger self: these amenities are more appealing than staying in Brooklyn.

More From the First-Time Dad:

MONEY Investing

The Low-Risk, High-Reward Way to Buy Your First Investment Property

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Fuse—Getty Images

These four questions will help you be a more successful real estate investor.

When I first read Brandon Turner’s article, “How to ‘Hack’ Your Housing and Get Paid to Live for Free,” it was like a light switch flipped in my head. That was the first article that truly made sense to me as a wannabe investor. It seemed so clear, so right, so obvious that everyone’s first real estate investment should be in a small multi-family property.

I immediately set out to implement this strategy — to buy a property, to move into it, rent out the accompanying units, and to start living for free. Unfortunately, I quickly ran into a little problem: I had set myself up to attempt to meet four seemingly impossible criteria:

  1. The property needed to be affordable with conventional financing.
  2. The property needed to be in a location that I wanted to live in.
  3. The property needed to generate positive cash-flow.
  4. The property needed to offer a reasonable chance at appreciation.

After spending six months looking for an investment property to acquire house-hacking style, I’m not convinced that the truly difficult thing for a first time investor is in getting financing, or even in finding properties that cash-flow sufficiently. The truly difficult problem for me was deciding on where I wanted to make that commitment. Buying a rental property that you intend to live in and actively manage is more than just a financial commitment. You are likely going to live, work, and invest in that area for at least the next few years.

I actually feel that I had plenty of opportunities to purchase duplexes and fourplexes that would have been decent from a cash-flow and appreciation standpoint within 20-50 miles of Denver. Those opportunities seemed almost too easy. The real trick in my opinion is buying those types of properties right downtown. I’m talking inside the city limits.

I’ll admit it, I’m a spoiled, immature 24-year-old, and I refuse to live in an area that isn’t near the heart of my city (Denver, CO). I want to be close to where my 20-something friends live — by Coor’s Field, downtown restaurants and nightlife, convenient to I-70 (the highway that grants easy access to the awesome Rocky Mountains), and, of course, right by my workplace.

In this article, I want to walk through why I believe that all four of those previously mentioned criteria are so important to first time investors and explain some of the basic things that I did to buy a property that I believe meets each of them. I think that this approach is possible for many people who live in urban environments and are willing to be patient and methodical.

Here are four questions that I believe every first time house-hacker should ask themselves, and how I personally answered them.

Question #1: Can I afford the property with conventional financing?

There are two obvious followup questions to the “can I afford this?” question:

  • How much money do I have?
  • How much money does property in the area I want to buy in cost?

If you want to house-hack and still live in a reasonable place in an urban area, you need some cash. Even with great owner-occupier financing terms, you’ll need a substantial amount for the downpayment if you want to live in a somewhat desirable spot near a happening city. I’m not interested in living in Detroit and putting down $500 for that $10,000 home. I want to live and invest in Denver, CO, where a comparable structure might cost 10, 20, or even 50 times more than that.

I spent a full year working hard and living frugally to save up an amount that would comfortably cover a 5% down payment on properties in the area that I wanted to live in. If you don’t like this strategy for gathering funds for your first downpayment (the “save more money” strategy), then I’d suggest that you seriously question whether you want to get into real estate investing in the first place.

Another critical thing to keep in mind is that if you are purchasing a property that needs repairs, minor or major, you will need cash to pay for them. Among other expenses, I’ve shelled out thousands in plumbing and electrical work, appliances, and DIY tools and materials. If you are transitioning from renting to an owning property, then there might be a chance that, like me, you don’t own a robust set of tools and don’t have familiarity with the materials needed to work on even relatively simple projects like painting and drywall repair. By ensuring that I bought the property with a good $10,000 cash cushion, I was able to easily cover all the little repairs and contractor costs that came up, and I now have a pretty solid little toolset that has proved to be much more enjoyable to work with than I previously would have thought.

Related: A New Way to Look at the Concept of “House Hacking”

Question #2: Will I be happy living there?

I think that many of us as investors, new and experienced alike, have to acknowledge that we are investing to improve our financial position and in doing so, to improve our lives. I believe that house-hacking does not work if it means that you have to live in an area that you don’t want to be in! For me to be happy with my living situation, I needed to live in the city. It was not acceptable to purchase property in the boonies and move far away from the places I enjoy going to on a regular basis just to get a good return on my first investment. For me, that meant I had to limit my purchasing area to properties close to the heart of downtown Denver, CO.

Buying property actually downtown (less than 5-10 blocks away from Coor’s Field in my mind) was simply not a reasonable option — the only properties that most newbies can reasonably purchase might be condos, which are not a traditional type of investment from which one can generally expect great rental cash-flow. It’s just too expensive in the true heart of the city, and the only properties that are being purchased there are multi-million dollar homes and swanky apartment complexes. There’s a reason why buildings go straight up in big cities.

Fortunately, Denver has several surrounding neighborhoods with properties at price points affordable to folks making less than $50K per year. These neighborhoods are convenient to downtown with good bike routes and cab/Uber rides that are less than $10 a pop. I ended up picking two areas to search for property. Both areas were roughly equidistant from downtown Denver and my workplace (BiggerPockets HQ happens to be about 5 miles directly Southeast of Lower Downtown Denver).

Question #3: Will the property cash-flow?

Here in Denver, CO, we’ve got a little bit of a tough housing situation. Houses and investment properties are being listed for less than one day and then selling for ten, fifteen, or even $20,000 more than asking price. I’ve heard from some readers that cities with similar characteristics, like Austin, TX, have similarly tough markets for investors.

Luckily, as an owner-occupier looking to buy multifamily property, I had a couple of serious advantages over the competition. First, I was looking at properties that most other would-be homeowners weren’t interested in; first-time buyers usually aren’t looking to purchase a duplex, triplex, or fourplex. Second, I had the opportunity to bid on properties before investors that did not intend to inhabit the property because of a special government program — the First Look program from Fannie Mae.

In my opinion, these two advantages that I had as an owner-occupier house-hacker are the trump cards that gave me an edge in looking for great multi-family deals in an urban environment. After months of searching, my agent suggested a duplex to me. This property was listed on the MLS and was like a lot of other opportunities out there that I had looked at, but with one small difference: this property was part of that “First Look” program.

Because investors couldn’t make offers on the property for several weeks, and because the demand for duplexes, triplexes, and fourplexes among first-time homeowners is very small, I had little competition. I was able to run the deal by my friends, family, mastermind group, and by investor friends I’d met through BiggerPockets. That window gave me the confidence I needed to pull the trigger and make the largest financial commitment of my life to that point — while competing investors never even had a chance to offer.

Question #4: Is there a reasonable chance at appreciation?

If you read around on BiggerPockets, you are going to learn that experienced investors refer to appreciation as the “icing on the cake” — it’s usually not even considered in the purchase of investment property. While it’s still a good idea to look at cash-flow first as an owner-occupier, putting in the extra time to look for investment properties that offer a good chance at appreciation as well can reward you handsomely in the long run.

As a house-hacker, appreciation can produce a more powerful financial impact for you than it can for a traditional investor, because of a special tax-law that benefits owner-occupiers:

Assuming that you live in the property for more than two years, when you sell property, much of the capital gains are tax-free.

This tax break is incredibly powerful for those looking to house-hack with small multifamily properties because we have the opportunity to take advantage of appreciation as it relates to both income properties AND smaller residential properties:

As multi-family properties, increasing the income of the property can force appreciation.

As hybrid properties, duplexes – fourplexes can also benefit from appreciation caused by an improving local market.

I carefully selected properties that I felt offered me the opportunity to get both types of appreciation:

  • Forced Income Appreciation: I chose a property that needed what I considered to be a reasonable amount of cosmetic work and that had multiple opportunities for improvement. Since moving in, I’ve had the entire plumbing system overhauled, I’ve added appliances like washer/dryer units and refrigerators, and I’ve put in substantial cosmetic work, Do-It-Yourself style. These improvements should reduce the operating expenses of the property over the long run and give me an advantage in attracting and retaining tenants, hopefully improving the property’s long-term income potential.
  • Market Appreciation: One of the benefits to purchasing properties in an area that you yourself want to live in is that, generally speaking, other folks want to live there, too. This presents a decent opportunity for appreciation in itself if you have personal reasons for desiring to live in a certain area that are applicable to large demographics. However, I didn’t stop there, as I looked for properties within these neighborhoods that were also in the path of government sponsored infrastructure projects.

In my case, a light-rail project is currently under construction and will offer convenient and low-cost transportation options to my neighborhood. It is my hope that infrastructure projects like this one, coupled with the overall tremendous growth of the Denver local economy, will allow me to benefit from market appreciation, though I understand that having purchased the property, this is now out of my control.

The hope here is that I can leverage both types of appreciation to create substantial value from this property over the next few years. I then hope to cash out on that increase in equity, tax-free, and reinvest it in a larger income producing real estate asset.

Related: BP Podcast 086 – House Hacking Your Way to 97 Units (While Holding a Full Time Job!) with Cory Binsfield

Conclusion

This is my first investment property. There is every possibility that I’ve made a huge mistake somewhere along the line. I could be way off in my estimation of expenses, long-term rents, desirability of the neighborhood, or I might have simply gotten ripped off on the purchase in general. I hope that none of those things are true, and I certainly feel that I did my due diligence at each stage of this investment — but only time will tell if I correctly analyzed each critical input.

Maybe I’m slower than other investors, and maybe I suffered from a great deal of “analysis paralysis.” It took me a long time to pull the trigger and finally make a serious offer on my first investment property. I had been researching my market and defining my criteria for at least 6 months — not to mention the full year that I had been saving up for such a purchase!

That said, I believe that my first investment is by far my most important. A bad choice could cripple me financially, discourage me from investing again, or at the very least, significantly slow me down in accumulating the funds to make a second investment. But, in spite of all the potential negative outcomes, because I did just one thing right, I can sleep well at night:

That one thing was buying in an area that I am happy to live in.

At the end of the day, it doesn’t truly matter whether I’m able to keep my unit rented out, or if the market tanks. Worst case scenario, I get an expensive education in real estate investing and live in a place that is slightly smaller than I could have otherwise afforded.

I’ve got the ultimate exit strategy.

This article originally appeared on BiggerPockets, the real estate investing social network. © 2015 BiggerPockets Inc.

More from BiggerPockets:
I Quit My Day Job, Retired Early & Started a New Venture Using Real Estate: Here’s How
3 Smart Ways to Make an Extra $1,000 a Month Through Real Estate Investing
5 Habits of Highly Miserable Real Estate Investors (and How to Kick Them)

MONEY Credit

Help! I Lost Out on an Apartment Because of a Credit Report Mistake

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Chris Ryan—Getty Images

A reader got turned down for an apartment thanks to a mistake on a credit report. If you're looking to rent, here's what to watch out for.

A reader, Emily, wrote to us after being turned down for an apartment because of a previous eviction for her husband — only he’d never been evicted. Instead, she thinks his records may have been confused with his father’s. Here’s her story:

My husband and I tried getting an apartment last month and they denied us because my husband supposedly has an eviction, but it’s not him, it’s his dad who has the same exact name, and my husband wasn’t even old enough to rent when the eviction happened. How did the third party get this information mixed up if we submitted my husband’s social security, and this eviction doesn’t even appear on his Experian acct.? We are mind-boggled.

Rod Griffin, Experian’s director of public education, says it’s unlikely the couple were denied an apartment because of an eviction on a credit report, but she is right to be concerned about a possible mix-up between her husband and his father.

“The apartment leasing company was almost certainly looking at a tenant screening report (rather than a credit report),” Griffin said. “A tenant screening report may incorporate information from multiple sources, one of which may be credit report. However, credit reports do not include information about evictions. So the information likely was provided by another consumer reporting company that compiles information about things other than credit or from public record sources,” he said in an email.

If Emily and her husband had been turned down as a result of something in a credit report, they should have received an “adverse action” letter explaining why they were rejected and giving them any credit scores obtained in the process.

As it is, they might want to ask the apartment leasing company for details on how to reach the provider of the tenant screening report. They’ll want to find out who supplied the information about the eviction and how to contact them.

One way an eviction could affect a credit report and score is if a landlord turns a delinquent account over to a collection agency. In that case, a collection account (though not an eviction) would appear on the credit report. And in the case of people who have the same name and once shared the same address, a mix-up is possible.

And although shopping for a place to live doesn’t feel like applying for credit, it’s smart to check your credit reports before you start looking. Check for accounts you don’t recognize or other information that is inaccurate. If you see problems, you can dispute them and get a resolution before misinformation hurts your score. Griffin said most disputes are resolved within 14 business days, but could take as long as 45 days.

Some property managers do ask for permission to see credit reports and/or credit scores as part of the application process, so it’s smart to be ready and to know what the leasing company will see if it requires a credit check. You can check your own credit as often as you want, without affecting your score. (You can get a free credit report summary, with updates every 30 days, from Credit.com, and you are entitled to one free credit report annually from each of the three major credit reporting agencies.)

More from Credit.com

This article originally appeared on Credit.com.

MONEY renting

How to Be a Dream Tenant and Snag Any Rental You Choose

Hand holding gold key, close-up
David Muir—Getty Images

Keep pets, friends, and bad credit from ruining your shot at a nice rental

If you are a renter, you have many obstacles ahead of you. Landlords are full of horror stories, and you are just another potential horror story. You want and need to be the best renter the new landlord has ever seen.

No landlord really wants you, but they need you. They need you to help them pay their rental mortgage; they need you to help them pay their personal mortgage, they need you to help them retire early. But they do not need you to come around and damage the premise or cause them a lot of extra work. Here is how to be the best renter you can possibly be.

Prepare for the Apartment Viewing Process

When you set up a showing for a rental property, it is really an interview. You are interviewing the landlord or property management company, and they are interviewing you. Make a critical mistake in this process, and you will have to move on to the next property. You do not have to be dressed for church, but do not come looking like you are homeless.

Get A Solid Credit Score

Anyone can have a decent credit score at 18 years old. Apply for a secured pre-paid Visa card, use it for a small charge once a month, and pay the bill when it comes due. Just like that, you will have a 700+ credit score. If you already have bad credit, you are starting behind the 8-ball and may have more difficulties. Clean up your credit report as soon as possible to increase your credit score.

Related: The Top 14 Tips Landlords Wish Their Tenants Knew

Knowing approximately what your credit score is will help immensely, in case there are credit score requirements for the rental. There is no sense in applying for a place you will not get. Bring in your proof of a credit score to help, but know that any decent landlord will also run your application through a credit check process and verify that your version closely matches theirs.

Come Prepared to Rent

You should be ready to rent any place you are looking at; otherwise, why waste your time or the landlord’s? Bring along proof of employment and income, along with your W2, tax forms, or a pay stub. Bring a pen to fill out an application and a checkbook to write out a check for the application fees. If you like the rental, you should also put down a holding fee to hold the rental. If you do not like the place or the landlord, keep the information in your pocket for the next place.

Control Your Viewing Group

Bring everyone along who will be renting — and no one else. A landlord will assume that your friend who arrives with you and is “living somewhere else” will be moving in as soon as you sign a lease. If your fiance who has just gotten out of prison stays in the car, I will also assume he looks so rough no one will rent to him, and I will also assume he will be moving in. Do not be offended if the landlord wants to keep criminals out of their multifamily rental.

If you have kids, do not let them run wild in the rental. It is not your place yet. If you are viewing an occupied unit, remember that it is someone else’s house. The current tenants do not even want you there, but they know the landlord needs to show it. If your kid steals a toy from the current renter and you have to come back from your car to return it, please do not be offended when you are politely declined for the rental.

Clean Up Your Pet Situation

Get rid of your “lab mix” dog that looks and acts like a purebred pit bull. Landlords do not like pit bulls, insurance companies do not like pit bulls, and many cities do not like pit bulls. If you have a 200 lb. bull mastiff, expect to be declined as a renter in any places that do not also allow horses. If you have six cats, get rid of at least four of them. Do not even apply if you have an intact male cat.

If you have a fish tank, keep it under 55 gallons. I have had renters with 200+ gallon saltwater fish tanks, and while they are impressive, they are way too big. Do not think for a minute that large or poisonous snakes are a great pet in an apartment, even though they are quiet. If your dog barks, get a bark collar for it.

If you have more than two pets, in any combination of dogs and cats, you are going to have a problem, especially if you can barely afford the rent.

Learn Move-In Etiquette

Once you have been approved, plan on moving in during the day. You can start as early as 7 a.m. during the week — or even 8 a.m. on the weekends — but do not start moving in after 8 p.m. Wait until the next day. Do not block the other tenants’ cars with all of your mover’s cars. If you have to temporarily block driveways and garages, be prepared to quickly move out of the way in short notice. Other tenants need to go about their day and do not want to be inconvenienced by you.

Watch for the walls and ceilings when you move. Do not scrape the walls and break ceiling light fixtures. If you drop trash in the hallways or common areas, pick it up. If you see a neighbor, introduce yourself if they do not do so first. Your neighbor is your ally. They are the ones who will tolerate your noise — or call the cops on you. It’s your choice: be a neighborly neighbor or be the “strange person across the hall.” A simple handshake is all it takes.

Requirements of a Great Renter

Pay Rent. It is impossible to be a great renter if you do not pay rent. You could be a personal friend of Gandhi or a guest of the Pope on a regular basis, but if you do not pay rent, you are a terrible renter by definition. Pay your rent on time; it is due on midnight the evening BEFORE the first of the month. Not on the first, not on the fifth. Set up an auto-pay system so you do not forget; it will save your renter reputation. If you need to pay rent in two installments, pay half in advance, and the rest when it is due.

Do Not Force Other Tenants to Leave. If you have weirdo habits that creep other tenants out, it is a bad deal. Do not deal drugs in the apartment area, or even look like you might be a drug dealer. If you want to be a drug dealer, go do it at work, not at home. If you have a habit of hanging laundry on the deck or using a sheet for a curtain, think twice about it. You do not want to bring down the appearance of the complex because you are too cheap to live like a normal human being.

Do Not Bring in Pests. Stay away from the free furniture on the curbs. It is there for a reason; no one wants it. It is likely to be full of bedbugs. Stay away from bringing home boxes from stores and restaurants that are full of cockroaches. If you bring in cockroaches or bed bugs, do not be surprised if you are eventually asked to leave. It is easier to rid an apartment of pests when it is empty. Pests are non-discriminatory in terms of income level, but low income habits seem to attract them.

Do Not Invite Your Criminal Friends Over. Many criminals who have been to jail or prison have a different mentality when it comes to resolving issues. It typically becomes a fight waiting to happen. Combine criminals, alcohol, and a card game, and it is only a matter of time before someone gets offended and a fight breaks out. When someone gets into a fight and they are hit with a 1.5L brandy bottle, they can fall against the stairway railing and lose half of their ear. I have seen it happen. If you have criminal friends, go play at their house, not yours.

Do Not Just Hang Around. Do not loiter around the outside of the building or allow your friends to do so. When you come home or your friends come over, go into your apartment. Hanging around looks bad — it looks like you are looking for trouble to get into. And especially do not hang around the building or parking lot around after dark. Hanging around and drinking is even worse; do not drink outside your apartment. If you are grilling alone, a beer to pass the time might be OK. Never drink outside when you have friends over.

Disclose Your Extra Guests. Do not expect that because you have paid the rent, you can have extra people living there. There is a reason why tenants get screened; one reason is to make sure you will likely pay the rent. The other reason is to screen out potential troublemakers. If you want a guest, get them approved by the landlord. Maybe there will be slight increase in rent, maybe not. And extra guests also include extra pets.

Do Not Be Crazy. If you think it is a great idea to come home drunk at 2 a.m. and start a fight with your roommates, think again. The other neighbors do not want to hear you wrestling around like a bunch of wild bears upstairs. If you then think you are invincible and want to go out and find another party but decide to punch the ceiling light on your way out, it will not wind up good. The light fixture is cheap to replace, but I will be charging a much greater amount against your damage deposit for my time and trouble.

Be Quiet After 9 p.m. Most tenants work a typical day job. They expect it to be quiet when they go to bed or start to get ready for bed. If you like parties, loud TVs, shoot-em-up video games, or even loud card games, you need to think twice about whether a multifamily rental is for you. You share walls, ceilings and floors. Your music and sound effects become their noise. If you already met the neighbors, they might come over and help you realize you are making too much noise. If not, they may just call the cops.

Related: How to Find a Tenant in Any Market: A Comprehensive Guide

Do Not Attract Police Calls. Call the cops as often as you need to, but never get them called on you. One call and you could be evicted. If you committed a cardinal sin, like domestic abuse or drugs, expect to be shown the door. If your live in roommate gets arrested for having a vehicle chop-shop in the garage, do not expect you will have until your lease ends to move out; you will be lucky to get until the weekend to move. When bad behaviors are noticed and one gets kicked out, everyone gets kicked out.

After the Move-In

Remember that the hurdle you had to overcome to move in, your neighbors also have experienced. The reason why your rental is nice is directly related to that tenant screening hurdle. You should want to keep it nice and get a great landlord reference.

Your home is your castle, but it is not going to be yours forever. Give proper notice to move out. Keep it clean and mostly presentable. Clean up after your pets and control your guests. Enjoy the time you are there.

This article originally appeared on BiggerPockets, the real estate investing social network. © 2015 BiggerPockets Inc.

More from BiggerPockets:
I Quit My Day Job, Retired Early & Started a New Venture Using Real Estate: Here’s How
3 Smart Ways to Make an Extra $1,000 a Month Through Real Estate Investing
5 Habits of Highly Miserable Real Estate Investors (and How to Kick Them)

MONEY renting

The Top 14 Things Landlords Wish Tenants Knew

150205_REA_rental_1
iStock

Pay your bills, respect your neighbors, and please hide your weed. Please.

Sometimes the landlord/tenant relationship can be a difficult one. But it does not have to be that way, and it certainly does not have to start out that way. As landlords, we try to get this relationship off to a good start and keep it that way by taking care of our properties and tenant concerns.

But some tenants, perhaps due to past experiences, prepare for the worst and thus approach the relationship ready for a fight. Maybe they have never had a decent landlord. Maybe some just do not know how to act. Whatever the reason, here are 14 tips from our 12 years as landlords to tenants everywhere for a decent landlord/tenant relationship.

1. Pay your bills on time. Seems fairly obvious, I know, but many tenants believe they can pay every other bill before they pay the rent. Want to stay on our good side? Please pay your rent on time.

2. Always try to be polite. I will, too. Being polite and calm really does go a long way. You would not like it if I left you snarky or angry screaming messages on your voicemail. I know sometimes issues can seem to linger on and on, but we really are doing our best to get things resolved.

3. Listen to our instructions. We tell you things for a reason. If we show you how to trip a breaker or turn a gas valve off, listen. It may just save your butt. If we tell you there will be a hard freeze tonight and to please let your faucet drip, don’t call us the next day and complain that your pipes have frozen and you need to do laundry. I can’t control the weather, so you will just have to wait until it warms up.

4. Help us. We try to take care of our properties, but we can’t be everywhere all the time. Is there something we need to know about? Tell us. Is something broken? Let us know. Help us by being our eyes and ears.

Related: How to Find a Tenant in Any Market: A Comprehensive Guide

5. Tell the truth. Did you or your kid flush something down the toilet and stop it up? Then tell us the truth so we can get the problem resolved as quickly as possible. After a dozen years in this business, we can almost always determine the culprit anyway.

6. Please just leave me a message. If we do not answer your call, do not hang up and call over and over again. There are times we simply cannot take your call. How do you think we are going to feel when we finally answer you after you have called five times in a row? It had better be a matter of life or death.

7. Understand that we have a lot going on. Sometimes other tenant’s issues may take priority. We know about your issue, and we will get to it just as soon as we can. We might for example need to make sure everyone has heat before taking care of your dripping bathroom sink.

8. If you get in a bind, talk to us. Communication is key! Tell us what is going on. Did you lose your job? Has your roommate gone off the deep end? We have been there before, and we know what it is like. But if you do not talk to us, there is no way we can help you. Please do not put your head in the sand and hope whatever problem you are having will go away. It will not, and things will only get worse.

9. Treat my property and the people who do work for me with respect. You would not believe how many people are just plain rude to the people we send over to try and fix their problems. Plus, how do you think we are going to react if we see that your place is a mess or that you are causing damage? Disrespecting our properties or our help is a sure way to create an adversarial relationship.

10. Work with me. We know you have a busy schedule. So do we, and trust us, we want your issue resolved as quickly as possible too because we have a dozen or so more to deal with. It all goes much easier if you work with us on times and arrangements. You might have to put up your dog for a day or allow us into your apartment on your day off. We hate to disturb you, but we will be done and out of your hair just as soon as we can.

11. Trust me. We are not going to steal your stuff or try and stiff you. Yes, we know some landlords might, but not us. If we say we need to get into your home, it is for a legitimate reason.

Related: Here is the Best Indicator of Tenant Quality… Hands Down

12. Follow the rules. They are there for a reason. They were explained to you when you moved in, and you agreed to follow them. It just makes life harder for all of us if you choose to ignore them. If you could not live with the rules, then you should not have moved in.

13. Respect your neighbors. Would you appreciate a loud party the night before you need to make a major presentation at work or before your final exams? No, you would not. Remember that you live in an apartment building, and you have neighbors — sometimes very close neighbors. Think about how your actions might affect them. I’m not saying do not have any fun; just try to be considerate.

14. Hide your weed. Just please do this. It is technically against your lease, and you really never know when there will be an emergency and who will need to access your place.

A lot of the above is just common courtesy and common sense. But for those few — and you know who you are — please review and follow the above and let’s make your stay with us as pleasant as possible.

This article originally appeared on BiggerPockets, the real estate investing social network. © 2015 BiggerPockets Inc.

More from BiggerPockets:
I Quit My Day Job, Retired Early & Started a New Venture Using Real Estate: Here’s How
3 Smart Ways to Make an Extra $1,000 a Month Through Real Estate Investing
5 Habits of Highly Miserable Real Estate Investors (and How to Kick Them)

 

 

MONEY renting

3 Smart Ways Renters Can Protect Their Finances

Shape of house made out of stacks of pennies and wallet
David Malan—Getty Images

Sharing an apartment requires taking a leap of faith. Make sure you have a safety net in place.

Millennials are a generation of renters—expected to spend some $600 billion on rent over the next five years. And the percentage of Gen Y making the transition to homeownership is not expected to spike anytime soon.

Of course, there are several advantages that come with not having a mortgage that may appeal to the average Gen Y’er who’s saddled with student loans, credit card debt and job uncertainty. Renting allows for a more flexible lifestyle, since you can pick up and move with no strings attached. Plus, you avoid property tax, mortgage insurance and all the other costs that come with homeownership.

The downside? If you’re shacking up with a roomie—whether it’s a friend or a random person picked off Craigslist—you are taking a leap of faith that that person will be as responsible with their finances as you are. If the person is not, you could end up paying, literally, since a landlord could hold you liable for the entire rent and your credit score could suffer from your flatmate’s missteps.

Help protect your finances with these three moves:

Pick a Roommate First, Location Second

In a perfect world, you’d find the perfect apartment followed by the perfect roommate. After all, location is key.

But if you had to prioritize one over the other, for the sake of your financial and mental well-being, be more choosey about the person rather than the place, says Matt Hutchinson, director of UK and NYC-based roommate site SpareRoom.

You want to pick someone you click with and with whom you have an easy time communicating. In your listing include details of what you do to relax, what your hobbies are, and where you like to socialize, adds Hutchinson.“You don’t need to be best friends with your roommates, but sharing an apartment with people you like will help you feel relaxed and at home,” he says. Making sure you’re compatible now helps ensure that you won’t find yourself back on the apartment market—and wasting money on movers, brokers and the like—too soon.

Even more important, an ideal roommate also respects the fact that there are shared responsibilities and obligations that need to be met on a timely basis.

The landlord should do a credit and background check on each tenant, but you’d be wise to ask your potential roommate in advance to show you his or her credit score to get a sense of how financially responsible he or she has been. You can purchase this from MyFico for $20; if your roommate doesn’t want to lay out the money, offer pay for it. Better to lose $20 now than thousands later.

Keep Rent to No More than 30% of Income

In expensive cities like New York, San Francisco and Washington, D.C., it’s easy to justify spending a hefty chunk of your salary on rent.

A survey by SpareRoom found that three out of four renters spend more than the often-recommended 30% of income on housing. Of those, 42% fall into the “severely rent burdened category” where they spend 50% or more of their pay on housing.

Do yourself a gigantic favor and keep your housing costs as low as possible, even if it means spending an extra hour per day commuting to and from work. Even if it means walking up three or five flights of stairs to get to your door.

And if you still can’t keep it to below 30%, consider moving home temporarily with mom and dad. There’s no shame in that if it means you’ll be able to use your extra income to save and pay down debt.

Get Your Name on the Lease

Nearly half (46%) of roommates in New York, a popular city for renting, admit that they’re not on the lease for their current rental, according to the SpareRoom survey. Another 6% have no clue whether they are or not.

People often think it’s better not to be on the lease, says Hutchinson.

“While this will mean you’re less accountable financially, it also means you have no legal rights or protections,” he says. “Your landlord or roommate can ask you to leave and there’s nothing you can do about it.”

If you’re subleasing from a tenant, make sure the landlord is aware, he says, and make sure you have written agreement in place with your roommate that covers at least the bare minimum, such as how much rent you pay.

Farnoosh Torabi is a contributing editor at Money Magazine and the author of the best selling new book When She Makes More: 10 Rules for Breadwinning Women. Her new podcast So Money features intimate interviews with leading entrepreneurs, authors and influencers. Visit SoMoneyPodcast.com to listen to the show’s inaugural interviews with Tony Robbins, James Altucher and Jean Chatzky. Follow her on Twitter.

More by Farnoosh Torabi:

MONEY home prices

What to Expect From the Housing Market in 2015

aerial view of subdivision
David Sucsy

Consumers think 2015 will be a better year than 2014, especially for selling a home. But the recovery faces an uphill climb.

What does 2015 have in store for the housing market? Nine years after the housing bubble peaked and three years after home prices bottomed, the boom and bust still cast a long shadow. None of the five measures we track in our Housing Barometer is back to normal yet, though three are getting close. The rebound effect drove the recovery after the bust but is now fading. Prices are no longer significantly undervalued and investor demand is falling. Ideally, strong economic and demographic fundamentals like job growth and household formation would take up the slack. But the virtuous cycle of gains in jobs and housing is relatively weak, and that will slow the recovery in 2015. All the same, consumers are optimistic, according to our survey of 2,008 American adults conducted November 6-10, 2014.

Consumers Expect 2015 to Be Better, Especially for Selling a Home

Consumers are as optimistic about the housing market as at any point since the recovery started. Nearly three-quarters — 74% — of respondents agreed that home ownership was part of achieving their personal American Dream, the same level as in our 2013 Q4 survey and slightly above the levels of the three previous years. For young adults, the dream has revived: 78% of 18-34 year-olds answered yes to our American Dream question, up from 73% in 2013 Q4 and a low of 65% in 2011 Q3.

AmericanDream

 

Furthermore, 93% of young renters plan to buy a home someday. That’s unchanged from 2012 Q4 despite rising home prices and worsening affordability.

Which real estate activities do consumers think will improve in 2015? All of them – but especially selling. Fully 36% said 2015 will be much or a little better than 2014 for selling a home. Just 16% said 2015 will be much or a little worse, a difference of 20 percentage points. The rest of the respondents said 2015 would be neither better nor worse, or weren’t sure. More consumers said 2015 will be better than 2014 for buying too. But the margin over those who said 2015 will be worse was not as wide.

BetterorWorse

 

Despite this optimism, barriers remain to homeownership. Saving for a down payment is still the highest hurdle, as it was last year, followed by poor credit and qualifying for a mortgage. Not having a stable job has become considerably less of an obstacle, dropping to 24% this year compared with 36% last year thanks to the recovering job market. But affordability has become a bigger obstacle. Some 32% of respondents cited rising home prices, compared with 22% last year.

BiggestObstacle

 

Housing Recovery in 2015: Rebound Effect to Fade Before Fundamentals Can Take Over

Different engines power each stage of the housing recovery. During the early years—roughly 2012 to 2014 – the rebound effect drove the recovery. Investors and other buyers scooped up undervalued homes and took advantage of foreclosures and short sales, boosting overall sales volumes. Local markets hit hardest in the housing bust posted the largest price rebounds. Now, though, the rebound effect is fading. Price levels and price changes are both approaching normal, foreclosure inventories are dwindling, and investors are pulling back. This is inevitable as the market improves and therefore shifts to slower, more sustainable price increases and a healthier mix of home sales.

So what replaces the rebound effect in the next stage of the housing recovery? The market increasingly depends on fundamentals such as job growth, rising incomes, and more household formation. But here’s the hitch: These fundamental drivers of supply and demand haven’t returned to full strength. They aren’t able to fully take the reins from the rebound effect. Importantly, the share of young adults with jobs is still less than halfway back to normal, many young adults are still living with their parents, and income growth is sluggish. This points to a tricky handoff, and means housing activity in 2015 might disappoint by some measures, though the rental market will remain vigorous.

Here’s what we expect:

  • Price gains slow, but affordability worsens. Price gains slowed in 2014 and we’ll see more of the same in 2015. In October 2014, prices increased4% year-over-year, down from 10.6% in October 2013. The slowdown has been especially sharp in metros that had a severe housing bust followed by a big rebound. Now, prices nationwide are just 3% undervalued relative to fundamentals. That leaves fewer bargains and scant room for prices to rise without becoming overvalued. What’s more, with consumers expecting 2015 to be a better year to sell than 2014, more homes should come onto the market, cooling prices further. Nevertheless, despite slowing price gains,home-buying affordability will worsen in 2015 for two reasons. First, even these smaller price increases will almost surely outpace income growth. In 2013, incomes rose just 1.8% year-over-year in nominal terms, and a negligible 0.3% after adjusting for inflation. Second, the strengthening economy and the Fed’s response should push up mortgage rates.
  • The rental market will keep burning bright. Next year will see strong rental demand and lots of new supply. The demand will come from young people leaving homes belonging to parents or roommates and renting their own places. Until now, they’ve been slow to leave the nest. But the 2014 job gains for 25-34 year-olds should lead to the rise in household formation we’ve been waiting years for. At the same time, the 2014 apartment construction boom will mean more supply in 2015 since multi-unit buildings take about a year to build. Will rent gains slow? Probably – provided that this new supply keeps up with formation of renter households. This surge of renters will probably cause the homeownership rate to fall. To be sure, the ranks of homeowners will probably rise. But an even larger number of young adults will enter the housing market as renters.
  • Single-family starts and new home sales could disappoint. While apartment construction is breaking records, single-family housing starts and new home sales are still not much better than half of normal levels. They’ll improve in 2015, but not as much as we’d like. Our consumer survey suggests more people will try to sell existing homes. That would add to the supply on the market and possibly reduce demand for new homes. Also, the strongest source of housing demand will be young people getting jobs and forming households. But they’ll be moving into rentals and saving for a down payment rather than buying homes right away. Finally, the vacancy rate for single-family homes is still near its recession high, which discourages new construction. The apartment construction boom shows that where there’s demand, builders will build. But buyer demand for single-family homes simply hasn’t recovered enough to support near-normal levels of single-family starts or new home sales.

If these predictions for 2015 sound similar to our predictions for 2014, you’re right. As the rebound effect fades and fundamentals take over, the recovery gets slower and the market starts to look more similar from one year to the next. But there’s good news here. Even though the recovery remains unfinished, the housing market is becoming more stable and more certain for buyers, sellers, and renters.

Markets to Watch in 2015

As the rebound effect fades, our 10 markets to watch have strong fundamentals for housing activity. These include solid job growth, which fuels housing demand, and a low vacancy rate, which spurs construction. We gave a few extra points to markets with a higher share of millennials. These young adults are getting back to work and that will drive household formation and rental demand. We didn’t include markets where prices looked at least 5% overvalued in our latest Bubble Watch report. Here are our markets to watch, in alphabetical order:

  1. Boston, MA
  2. Dallas, TX
  3. Fresno, CA
  4. Middlesex County, MA
  5. Nashville, TN
  6. New York, NY-NJ
  7. Raleigh, NC
  8. Salt Lake City, UT
  9. San Diego, CA
  10. Seattle, WA

MarketstoWatch1

 

These markets are spread across the country: Boston, Middlesex County (just west of Boston), and New York in the Northeast; Dallas, Nashville, and Raleigh in the South (the Census considers Texas part of the South); and Fresno, Salt Lake City, San Diego, and Seattle in the West. No Midwestern metros make the list because they generally have slower job growth and higher vacancy rates than other markets, even though many are quite affordable and prices are rebounding.

In 2015, more markets will settle back into their long-term housing patterns. Fast-growing markets that boomed last decade, collapsed in the bust, and then rebounded are now leveling off. Even the markets that have been slowest to recover and have struggled longest are seeing foreclosure inventories decline and the sales mix moving back toward normal.

At the same time, first-time homeownership, single-family starts, and new home sales won’t come close to fully recovering in 2015. But if 2015 brings strong job growth, big income gains, and the long-awaited jump in household formation, then 2016 could be the year when we see a major turnaround in homeownership and single-family construction.

MONEY Investing

6 Ways Newbie Landlords Can Protect Against Bad Tenants

Hoarder apartment
Alamy

Skip the hassle of dealing with deadbeat renters by adding these steps to your screening process.

One of the main components of being a successful real estate investor is finding good, qualified renters for your properties. There are few things more frustrating and cash flow draining than a renter who is always late on paying their bills or worse, a renter who never makes their payments.

Here are six easy tips for you to follow to protect yourself against deadbeat renters.

1. Before you rent your property, come up with a “perfect renter” profile.

To do this, first list the main selling points of your house from a renter’s point of view. What does the perfect renter do for a living? Do they have children? What would be the renter’s interests? Once you have your avatar built, then you can actively start marketing your property to the perfect client.

For example, if the main selling point of your house its school district, then you might want to let the local PTA group of the grade school, middle school, and high school know that your house is on the rental market. You might also want to put up flyers of your house on the school’s community board.

2. Perform background checks.

This might seem like a very logical thing to do, but you would be surprised at how many landlords never ask the prospective tenant for a background check. The one I use is Tenant Background Search. This service provides me with an eviction report, FICA score, and nationwide criminal background report — and the best part is that it costs around $25 per report.

3. Have a real estate attorney provide you with all legal documents.

Don’t be cheap and buy your rental agreements off the internet at one of these do it yourself websites. Many of these agreements have loopholes that allow the renter too much wiggle room. As my father always told me, “Prepare for the worst, and hope for the best.”

Related: 6 Reasons Landlords Should Thank Their Tenants This Holiday Season

To prepare for the worse, you should go into the agreement with the understanding that you might have to take legal action against the renter — so wouldn’t you feel more at ease knowing that your attorney provided the legal agreement?

4. Be upfront and honest with the renters before they rent.

I have one rental property here in Orlando that has joust windows. Now, these windows give the house a lot of character, and it does give the house a lot of appeal; however, these windows are not air tight, and the electricity bill can be quite expensive, especially in the summer months. I have always been very upfront with all the renters, and I even put this warning in the contractual agreement.

What is interesting is that I have had only one person who decided not to rent the house because of this language, and not one renter in the past 8 years has tried to get out of the rental agreement early due to the high monthly upkeep. On the flip side, the house next door has the same joust windows, and that house always seems to have a “for rent” sign in the yard. As a landlord it is always the best practice to be fair and upfront when dealing with your tenants.

5. Include routine maintenance in the monthly rental amount.

I had to learn this the hard way by having to re-sod the front yard to one of my houses because the tenants never cut the grass, and the yard was overrun with weeds. There is nothing that will hurt the value of a house more than poor curb appeal.

Related: Rent Payment Plans Can Benefit Both Tenant & Landlord: Here’s Why

To protect your investment, include the upkeep of the yard, spraying of weeds, trash removal service, etc. in the monthly amount. This way, you can pay to have someone other than the renter provide these services, and you can make sure they are done properly.

6. Make sure the renters provide their own insurance.

It is always a good idea to put in the agreement that the renters must provide their own renter’s insurance. This way, if something unfortunate happens, it does not back up on you. I also think it is a good idea to have the rental property or properties set up in an LLC; this way, your personal assets are protected should something happen unexpectedly at your rental property. If your accountant tells you an LLC is not advantageous for you, then I would get a million or two million dollar umbrella policy for extra protection.

Being a landlord is really not that hard — just be careful and treat people fairly. Word of mouth is the best marketing, and people want to rent from good landlords.

Read more from The Bigger Pockets Blog:
7 Smart Tips for Getting the Most Out of a Property Inspection
Offering Rent Specials to Tenants Can Be a Costly Mistake: Here’s Why
11 Things Landlords Should Be Doing Every Year…But Probably Aren’t

MONEY Face to Face

How to Deal with a Roommate Who’s Late Paying the Rent

Past Due envelope slipped under door
Jim Corwin—Alamy

Unfortunately, sharing an apartment can also mean sharing money woes. Use these conversation starters to make sure your own finances don't end up in the gutter—and you don't end up on the street—because of someone else's problems.

If your roommate can’t manage his or her share of the rent, you’ve got more than an uncomfortable situation on your hands.

When both your names are on the lease, you’re both liable for the full amount owed to the landlord, and you can both be evicted if payments aren’t made in total. Your credit score may suffer in the process, too—making it difficult for you to get another apartment. Serious stuff.

Still, the first time your roomie misses a payment, you might give him a pass, says San Francisco-area financial counselor Susan Bross. “But if this happens more than once, it’s about bad decisions they’re making with their money.”

And since the situation could worsen, you’ve got to address it head on, she says. Here’s how:

OPEN GENTLY: “Can we talk about what’s going on with our rent payments?”

Your first goal is figure out why your roommate was late, so that you can determine whether missed payments will continue to be a problem in the future.

If your housemate has just started freelancing and hasn’t yet figured out how to balance expenses against an irregular income, the problem may resolve itself once she gets more settled. But if she’s got a shopping habit that eats up all her paycheck before she can get to her bills, you may have a regular headache ahead.

As you try to ascertain the situation, try your best not to come off as accusatory, says Dr. Eric Dammann, a New York City clinical psychologist and financial coach.

The last thing you want to do is put your housemate on the defensive before you’ve had a chance to discuss resolutions. And if the conversation escalates to a fight, it’ll be tougher for you to live harmoniously under the same roof going forward.

“So bring it up in the gentlest way you can,” he says.

PUT IT IN PERSPECTIVE: “I was late paying some of my other bills last month because of the missed payment.”

If your roommate’s not opening up, or if he acts like missing the deadline is no big deal, let him know how his lateness is affecting you or the rest of your roommates.

“Suggest ways in which it is a big deal,” says Dammann. “You might get through that way.”

Also, explain to him the possible consequences if his portion of the rent is not met every month (e.g. you’ll get kicked out and both end up with poor credit).

FIGURE OUT A GAME PLAN: “Let’s come up with a system so we make sure we don’t have to have these conversations again”

or

“If you’re not able to keep up with rent payments, I need to know so that I can go to our landlord and try to renegotiate the terms of our lease.”

If the late payments are truly only a matter of forgetfulness, try to encourage your roommate to set up a new system to avoid missing payments, so that you’re not left scrambling for money again.

The fix could be as simple as a Google alert, a gentle reminder on a whiteboard in the kitchen, or together using a site like Splitwise, that helps roomies coordinate shared expenses.

But if you find out the issue is more serious or more chronic, start by asking your roommate if he sees any possible resolution, such as asking a parent for money. No end in sight to the problems? Without being too aggressive, let your flatmate know that you’ll have to get the landlord involved in order to protect your own finances.

Then do so, stat. “Most leases can be modified,” says Brandy Peeples, a Frederick, Md. litigation attorney specializing in real estate. “If your landlord knows you’re having problems, he or she may work with you—it’s practical to go back and ask.”

You could see if your landlord will allow you to bring in an extra roommate to reduce everyone’s individual contributions. Or you could try negotiating an early termination fee that allows your roommate to pay a fine and leave the apartment.

“It’s good to keep the landlord into the loop,”says Peeples. “If you wait until after the fact, a lot of times the landlord is not going to be so forgiving.”

RELATED: 3 Tools that Help You Nudge Friends to Pay You Back

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