Watch Out For These Hidden Fees When Purchasing Your First Rental Property

Posted on by Bay Management Group

Watch Out for These Hidden Fees When Purchasing Your First Rental Property

If you are looking to invest in a Philadelphia rental property, being prepared beforehand is the best way to go.

This is especially true when it comes to the financial side of purchasing a rental property.

It is easy to be misled by the initial sales price of a rental property, and even more so if you are new to investing in real estate.

However, there are costly fees tacked onto the purchase price of any property you buy that need factoring into your overall budget.

This way you don’t accidentally overextend yourself before even getting started.

That’s why today we are going to break down the miscellaneous fees you can expect to see throughout the purchasing process of your Philadelphia rental property, so that you don’t go over budget, don’t have to dip into your personal savings, or don’t have to take from the rental property emergency fund you spent so long building up.

 

The Hidden Costs of Investing in Philadelphia Rental Property

1. Earnest Money

Though not technically considered a “fee,” earnest money is definitely something you will need to pay upfront after showing interest in property that’s available for purchase.

Typically 1% of the property’s purchase price, earnest money is paid as a way of proving you are genuinely interested in buying a property.

It serves to protect the seller, who will then pull their property off the market in hopes you will actually buy.

Keep in mind this is not a down payment, should you decide to purchase the property.

However, this money can be applied to your down payment total when the time comes, because it will be credited back to you during closing.

 

2. Loan Origination Fee

Loan Origination Fee is the Biggest Fee You'll Pay in Your Philly Rental Property Purchase

This is usually the biggest fee you will have to pay when it comes to finalizing your mortgage.

It is used to assist your lender in generating, or “originating,” your mortgage.

In short, your mortgage lender requires this money in exchange for preparing your mortgage for closing.

 

3. Application Fee

Sometimes your mortgage company will charge you to prepare and process your loan application.

This is money due to them for investing time and effort into your loan application process.

 

4. Credit Reporting Fee

Credit Report Fee When Purchasing Your Philly Rental Property

Just like you are sometimes required to pay for a loan application fee, you may find that your mortgage company requires you to pay for the credit report that is run on you during the loan application and approval process.

Whenever you are considered for a mortgage loan, your credit worthiness is checked – often by a third-party service – to determine whether you are a good candidate for a loan.

The processing fee associated with this credit check is passed from the third-party service to the mortgage company, and lastly, to you.

 

5. Property Appraisal

When you apply for a loan from a mortgage company to cover the cost of a rental property purchase, the mortgage company wants to make sure they are lending you money on a property that is actually worth the amount of the loan they are considering approving you for.

This is why your mortgage company will request a property appraisal.

This appraisal will help determine the fair market value of the property you are interested in so that the mortgage company can decide if they want to move forward with lending you money.

 

6. Home Inspection

Home Inspection is a Hidden Fee With Your Philly Rental Property Purchase

Though not always required, a home inspection protects you from purchasing a property riddled with problems.

A professional inspection of the property you are interested in reveals any underlying issues that even the seller may not be aware of.

This way, you can have all inspection issues handled before you commit to purchasing the property.

Keep in mind that a general home inspection will not cover all aspects of the property.

In fact, here is a list of common things in the property that will require a specialized inspection:

  • HVAC system
  • Mold
  • Foundation
  • Well Water
  • Septic System
  • Radon
  • Structural
  • Termite

If you want any of those things cleared before purchasing the property, you will need to hire a separate inspector.

 

7. Property Surveyor

The rental you are looking to buy will most likely need to be professionally surveyed to verify the physical specifications of the property.

This of course, comes at a price you have to pay.

If, by chance, a previous survey was done on the property, and nothing has changed since that survey was officially documented, you may be able to forfeit surveying the property again, which will save you some money.

 

8. Private Mortgage Insurance (PMI)

Private Mortgage Insurance is a Hidden Fee With Your Philly Rental Property

This fee is reserved for people who pay less than 20% down on the property they are buying.

It protects the interests of the mortgage company, since they are lending you a large amount of money to cover the cost of the property.

You will pay a monthly PMI fee until your loan reaches 80% of the home’s fair value market.

This is in addition to the mortgage you will have to pay each month.

 

9. Title Fees

Many fees tie into what is commonly labeled as the “Title Fees:”

  • Title Insurance. A title insurance policy insures the property against any liens or defects in the title of the property, and includes any administrative and documentation fees.
  • Title Search. A title search will reveal previous title holdings of a property.
  • Recording Fees. Any fees associated with recording the deed and other related documents with the County Recorder’s Office pass on to you.
  • Title Policies. Both the owner and mortgage title policies will be your responsibility (unless the sales contract deems otherwise), and are typically a percentage of the total sale price of the property.
  • Flood Certificate. If your property is located in an area that experiences heavy flooding, you will need a Flood Certificate designating the property as being located in a flood zone. This will also prompt you to purchase the required flood insurance.
  • Tax Certificates. These show previous property tax payments and any owed taxes. All taxes from the closing date through the end of the year are your responsibility. These taxes can be integrated into your monthly mortgage bill.
  • Documentation Fees. You pay any fees related to the Deed, Deed of Trust, and Notice of Purchaser.

As you can see, there are many fees incorporated into what are commonly referred to as “title fees.”

 

10. Home Warranty

You may want to consider investing in some home warranty coverage if the property you are looking to invest in is no longer covered under the original manufacturer’s warranties.

This will cover things like kitchen appliances, ceiling and exhaust fans, plumbing issues, the furnace, and even electrical problems.

This is typically paid for annually, and only adds to all the other fees you have to pay during the purchasing process.

 

Altogether, purchasing rental property in Philadelphia, or anywhere for that matter, is bound to cost much more than you might initially expect, thanks to these hidden property fees.

And while the fees are not hidden on purpose, for those that are inexperienced with the purchasing process, these added costs can come as quite a surprise and significantly impact your initial budget.

If you are new to the rental property industry, and are looking to invest in some rental property, consider enlisting the help of Philadelphia’s best property management company, Bay Management Group.

We have extensive knowledge of the region and can help guide you when it comes to choosing a locale for your rental property. We know how much rentals are going for, what you can expect your monthly rent rate to be, and can even help you with managing your property after purchasing it.

So, contact us today and see how we can help you with your Philadelphia rental property investments. This way, you can use our knowledge of the area to better budget for your investment and ensure there are no hidden surprises come closing time.

What Are the Responsibilities of a Property Management Company?

Posted on by Bay Management Group

What Are the Responsibilities of Your Gaithersburg Property Management Company?

If you own rental property in Gaithersburg and self-manage your rental property business, you may be finding that there is a lot more to being a landlord than you originally anticipated.

And with that in mind, you may be thinking it is time to enlist the help of one of Gaithersburg’s top property management companies.

You may also be wondering to yourself what exactly a property management company is responsible for when it comes to your investment property. 

For those that are unsure whether investing in a property management company is a good idea, or for those that simply don’t know what a property manager is responsible for, keep reading.

Today we are going to give you the rundown on what an experienced, highly qualified property management company should offer you in terms of services.

 

What a Qualified Gaithersburg Property Management Company Should Do

1. Property Advertising

Property Management Company Should Advertise Property

One of the most important responsibilities your property management company has is advertising your vacant property to a high-quality tenant pool.

They should utilize a diverse set of platforms such as Craigslist, MLS, online classifieds, and even direct mail to expose your property to a wide group of prospects. They should also be available for those reaching out with interest.

 

2. Tenant Screening

All potential tenants should be thoroughly screened by your property manager. This includes background and credit checks to make sure they have no criminal background, previous evictions, or outstanding debts.

Additionally, your property management company is responsible for avoiding any discrimination when it comes to fair housing laws and screening potential tenants.

This is a key reason to enlist the help of a property manager. The last thing you want to do is be sued for unintentionally discriminating against an interested tenant.

 

3. Tenant Move-In

Property Management Company Handles Tenant Move-in

Here are some of the things your Gaithersburg property management company will handle at the time your new tenant moves into your investment property:

  • Legally compliant lease drafting according to your specific needs
  • Evaluation of local rent rates so your rent will generate income
  • Lease term start and end dates
  • Detailed move-in inspection with all parties, complete with photographs
  • Collection of security deposit and first and last month’s rent

Lastly, your property manager will provide your tenants with the keys to your property, as well as a welcome tenant package, complete with pertinent contact information, maintenance responsibilities, local area information, and possibly a small gift welcoming your tenant to their new home.

 

4. Maintenance, Repairs, and Complaints

Anytime your tenant has a maintenance or repair request, your property management company is the one to handle it.

And, if you choose one of the top property management companies in Gaithersburg, your tenants will have access to an on-call maintenance crew that is available 24/7.

Not having to take after-hours calls from tenants is one of the best benefits of enlisting the help of a team of property managers. Not only do they have the resources to handle emergencies, they take the pressure off of you and having to be available all the time.

It is also a good idea to look into a property management company that has a 24-hour hotline for tenants that have complaints or non-emergency issues. Again, not having to field these calls all night long is something you’ll love.

 

5. Rent Collection

Property Management Company Should Collect Rent

Receiving rent payments, tracking down those that haven’t paid, sending out rent reminders, and disbursing payments to you are another huge responsibility you place in the hands of your property management team.

In addition to collecting your rent money and handing it over to you, your property manager is also tasked with the job of initiating eviction proceedings, should your tenant fail to pay rent on time.

This includes filing paperwork to start an eviction, sending out proper notices, representing you in court, and even aiding in the removal of tenants, should the need arise.

 

6. Property Inspections

Making sure your property is being well cared for throughout the lease term takes a lot of effort.

That’s why having a property manager to conduct seasonal inspections is so helpful. Not only can they check to make sure everything is okay with your tenants (which is a great customer service method), your property manager can make sure your tenant is fulfilling their lease obligations.

Finding small maintenance issues and fixing them before they turn into bigger issues, reminding tenants of their tenant responsibilities, and finding out what would make your tenants happier are all things that will ultimately aid you in your quest for success as a property owner.

 

7. Bookkeeping

Bookkeeping Handled by Property Management Company

Property management companies have a duty to maintain all financial documentation as it relates to your rental property business.

Here are some things your property manager will likely handle while managing your rental:

  • Proper accounting of all rent payments collected, including receipts
  • Annual reporting of all financial statements, including a 1099 form
  • Monthly income/expense reports
  • Documentation of any payments made on your behalf (utilities, HOA, insurance premiums)
  • All maintenance estimates, work orders, and invoice/payment receipts
  • Yearly tax information for the property itself and the rental property business

While it can be helpful to hire on a separate accountant to help you with your yearly financials as they relate to your rental property business, know that an experienced property management company can handle most, if not all, of that documentation for you.

In fact, some property managers will even help you file your annual taxes so that you don’t have to hire external services.

 

8. Tenant Move-Out

Just as your property manager helped move your tenant in, they are responsible for helping your tenant move out as well.

When a tenant gives their notice to move out of your property, you property manager will likely inspect the unit as a whole to determine what damages the tenant has incurred.

From there, the following will happen:

  • Provide tenant with a detailed list of estimated damages
  • Return the remaining balance of your tenant’s security deposit
  • Re-key all locks and make any repairs
  • Clean rental property for next tenant that will move in
  • Place vacant property back on the market

 

This is not meant to be an exhaustive list of Gaithersburg property management responsibilities.

Rather, it gives you a good idea of the scope of tasks a high-quality property manager will gladly take on while managing your rental property.

If you own rental property in Gaithersburg and have realized that self-management of your investment property is not right for you, get in touch with Bay Management Group today. We take great pride in our customer service-oriented approach to property management, and strive to provide you and your tenants the best experience possible.

The 4 Most Common Tenant Types in Philadelphia

Posted on by Bay Management Group

Four Common Tenant Types in Philadelphia

The more experience you have as a Philadelphia landlord, the more you will realize there are all kinds of different tenants out there.

And, in order to be a successful landlord, it is important that you tune into these different types so you can learn how to recognize red flags early on, how to keep a high-quality tenant for the long-term, and everything in between.

Though you are not an expert in human behavior, and filling your vacant rental property is going to be your main priority, there are plenty of signs to look for during the tenant interviewing, screening, and placement process that can help ensure you place only the very best tenants in your investment property.

Today we are going to look at four of the most common tenant types that make up the rental property business, examine their behavior, and explain why they may or may not be best suited to lease from you.

This way, the next time you run into someone that exhibits a certain type of personality, you will be prepared, and know whether to move forward with the leasing process.

 

4 Common Tenant Types Trying to Lease Your Philadelphia Rental Property

 

1. The Hurried Tenant

If a tenant is trying to move into your rental property ASAP, as in, that very same day, take a step and evaluate the situation.

Sure, there are those times when a potential tenant might be in a serious situation, through no fault of their own, and may truly need a same day move-in.

However, there is always the chance that this prospective tenant was just evicted by their previous landlord for non-payment of rent, and hopes that by rushing the tenant screening and placement process you will miss this important fact.

The hurried tenant is going to exhibit an eagerness to turn in their application and related fees, including the sizable security deposit you are surely asking for.

They might even have explanations for not having recent pay stubs on hand, no solid references of any kind, a poor credit score, and more.

The point is, no matter their reason for wanting to move into your Philadelphia rental so quickly, do not let a hurried renter rush you into making a decision.

Follow your strict screening process, or better yet, have your experienced Philadelphia property management team handle it for you, so you don’t miss a tiny detail that could potentially turn into a major problem later on during the lease term.

 

2. The Overly Confident Tenant

The Overly Confident Tenant in Your Philadelphia Rental Property

We all like to think that we are the best at everything we do.

We are exceptional employees, parents, friends, and yes, even tenants.

However, there is a major difference between being confident, and being overly confident.

If you run into a prospective tenant that wants to do nothing but boast about how great a tenant they will be while leasing from you, we offer one piece of advice – make sure their claims are true.

Overly confident tenants are likely to remind you continuously of the following things during the tenant screening process, in hopes of convincing you they are the best fit for your property:

  • They have a perfect credit score
  • Their income is sky-high
  • Late rent payments are never an issue
  • They always follow the rules
  • Everyone loves them
  • They never complain about maintenance or repair issues
  • Loud parties will never be an issue
  • Their children are angels and never break a thing

Sound familiar?

Surely, you have come across a potential tenant that likes to boast about how great they are, any chance they get.

And, while this may be true, it is important you do your due diligence, and research their claims.

After all, credit scores, criminal backgrounds, and previous rental history will speak for themselves.

In addition, despite what a tenant may say to you about not throwing loud parties, not having a pet, or having children that never cause any problems (so renter’s insurance is never needed), make sure you add these provisions into your lease agreement anyway.

If you are unsure about how to draft a legally compliant lease agreement that addresses all of your concerns, despite having a “perfect tenant” on your hands, have your Philadelphia property manager help you.

This way, should you decide to approve the overly confident tenant, because they do seem excellent, you and your investment property are still fully protected.

 

3. The Cautious Tenant

The Cautious Tenant in Your Philadelphia Rental Property

It is wise to be cautious of anyone you do business with, no matter the circumstances.

But you know those tenants that repeatedly remind you of how they have been scammed, or taken advantage of by every single past landlord?

Of course you do.

Those tenants are difficult to deal with.

Especially with so much information swirling around, warning tenants that many landlords are just out to raise rents, violate the Fair Housing Act, overcharge on security deposits, and even infringe on your right to quiet enjoyment of the property they are leasing.

Of course, a successful and reputable property owner, and their respective property management company, will not swindle tenants during any part of the leasing process.

This includes prior to move-in, during occupancy, and after moving out.

Yet, the cautious tenant will remain uncertain, unless you prove otherwise.

However, leasing to the cautious tenant is not a bad thing.

In fact, leasing to a cautious tenant is a great opportunity for you to show them that you and your property manager are the best around Philadelphia, and that they can rely on you to take care of them while leasing your investment property.

Here are some tips for encouraging a cautious tenant to relax a little:

  • Perform secure background checks so your tenant isn’t concerned about identity theft
  • Go through the lease agreement line by line so your tenant understands both parties’ responsibilities
  • Direct your tenant to the Philadelphia rental laws, and ensure them that the fees being charged are valid
  • Provide a thorough contact list of everyone your tenant may need to get in touch with for any questions or concerns
  • Offer a tenant welcome package upon move-in so your tenant feels special

Providing superior customer service to all of your Philadelphia tenants is necessary if you want to make it in the rental property business.

Yet for the cautious tenant, the one who is suspicious about your every motive, exceptional customer service can really make a difference in building a strong, and long-lasting, landlord-tenant relationship.

 

4. The Young Tenant

The Young Millenial Tenant in Your Philadelphia Rental Property

In the past, we have discussed the impact that millennials have had on the rental property industry nationwide.

And, while the stereotypes still hold strong in many people’s minds, the truth is, leasing your Philadelphia income property to a younger tenant is no more or less risky than leasing to someone who is older and more experienced.

That said, millennials do come with their own set of special conditions when it comes to leasing a rental:

  • Tech-savvy. Millennials shop around on their mobile devices, don’t have a lot of experience using snail mail, and want rental amenities such as strong Wi-Fi to support the multiple devices they have – desktops, tablets, streaming devices, and smartphones.
  • Location is Key. The younger crowds want to know their home is within close proximity to shopping, dining, and entertainment hot spots so they can get out and enjoy their youth. If they go to school, location will also play a role in whether they decide to lease from you.
  • Spotty Pasts. Age is typically a major factor in how much money a millennial is raking in each month, what kind of credit score they are sporting, and even whether they have had any legal mishaps recently.

Leasing to a millennial is a great option, so long as they meet your tenant screening criteria.

It is, however, important to note how different they will be when compared to a middle-aged couple with a few kids and a dog in tow, or the elderly couple looking to lease a low-maintenance rental while they settle into retirement.

But different doesn’t mean bad.

 

In the end, Philadelphia is a big city with a diverse group of people.

Understanding the different types of people you may come across while seeking a tenant for your rental property is going to make the entire leasing process smoother.

If you own rental property in the Philadelphia region, and need help dealing with the four common tenant types, get in touch with Bay Management Group now.

With experienced property managers that have seen it all, we recognize a problem tenant from the start, understand the concerns many cautious tenants may have, and are in tune with what the younger crowd seeks in a rental property.

5 Tips for the Prospective Pikesville Rental Property Owner

Posted on by Bay Management Group

Tips for the Prospective Pikesville Rental Property Owner

Investing in a Pikesville rental property is a great way to supplement your current income, build your retirement fund, or even just create some extra cash on the side for a fun vacation.

And, now is as good a time as ever to put your money into the real estate market, and start raking in the positive cash flow.

However, as a prospective rental property owner, there are some things to watch out for before putting all of your hard-earned cash into the “perfect rental property.”

And no, we are not talking about the run-of-the-mill advice that we see over and over:

  • Find a great location
  • Understand your financing options
  • Calculate prospective ROIs
  • Work with industry professionals
  • Get out of debt before buying
  • Determine going rental rates

 

Of course, these are all exceptional pieces of advice.

And, these tips should never be ignored when it comes to getting into the rental property business.

However, there is a lot more to becoming a successful rental landlord, especially in the beginning when you are looking for a property to purchase and lease.

That’s why today we are going to share with you some lesser-known tips on becoming a successful landlord. This way, when the time is right, you are fully prepared for what is to come.

 

5 Tips for the Prospective Pikesville Rental Property Owner

1. Avoid a Fixer-Upper

Avoid a Fixer Upper House as a Prospective Rental Property Owner

It is safe to say that this tip will not apply to every Pikesville rental property owner.

In fact, we have talked about investing in fixer-upper rental properties in the past, and have even claimed they offer property owners plenty of benefits.

Discounted prices, higher positive cash flow, and less competition are just some of the many benefits of investing in a fixer-upper rental property.

However, for those that are just starting out in the rental property business, this may not be the soundest advice.

Fixer-uppers tend to cost more money and take longer to renovate than initially expected.

Rather than wasting more time and money in the beginning than is necessary, it is best to purchase a rental property in as close to move-in condition as possible.

This way, you can place tenants in the property right away, especially with the help of your Maryland property management company, and start bringing in rent payments immediately.

 

2. Look for Simplicity

You know that beautiful Pikesville property you have been eyeing forever?

The one with a slate rooftop, crown molding, custom paint colors and window treatments, specialized lighting both inside and out, and a breathtaking pool in the backyard, complete with a cascading waterfall?

Well, as nice as all of this seems, for an inexperienced property owner without much equity or incoming cash flow, a property like this is bound to cost a lot more over the course of a tenant’s lease term than you would like it to.

Custom designed homes can rake in higher rent rates, that’s for sure.

But, they are also more difficult to maintain, and are harder to fix when it comes to replacing custom elements such as lighting, paint colors, and window treatments.

That’s why aiming for a more simply constructed rental property is often better.

You should also consider how easy it is to access the rental’s heating, cooling, plumbing, and electrical systems.

After all, these are things you or your property management team will be responsible for, should anything break.

Repairs on a plumbing system that is hidden deep within the walls and ground of your rental property are sure to cost a pretty penny.

Look to invest in a rental property that offers many simple amenities (because amenities do garner higher rent rates, and attract more tenants), but also a property that has a basic structure and uses standard materials.

 

3. Inspect the Property

Inspect Your Property As a Prospective Rental Property Owner in PIkesville

Before purchasing any real estate, it is critical you have the property inspected.

This is even truer when it comes to a Maryland rental property.

Why?

Because in Maryland, property owners have a legal responsibility to provide their tenants with a safe and habitable place of living.

A plea of ignorance will not sit well with the courts, should you face a landlord-tenant dispute because your rental ended up being unsafe and hazardous to the tenants living in it.

Electrical fire hazards, mold, lead paint levels, extreme rodent and pest infestations, and other safety and health issues will ruin your rental property business if you’re not careful.

Plus, it will not bode well in the community if your reputation precedes you as the landlord that didn’t care for his tenants.

If you are a prospective rental property owner, it’s important to have any property you think you may want to invest in inspected.

The small cost associated with a thorough inspection, as well as the inspection checklist you can provide your tenants upon move-in, will ease the mind of your tenant and prevent any disputes in the future about unsafe living conditions.

 

4. Watch the Utilities

Offering your Pikesville tenants an incentive to move into your newly acquired rental property is a great way to grab a high-quality tenant, and bring in a consistent flow of cash.

Many successful landlords offer to pay for a portion of their tenant’s utilities each month.

This added bonus is often enough to get a tenant that is on the fence about moving in the push to sign a lease agreement.

And, as a way to lower vacancy rates and keep lease renewals high, this incentive is very effective.

However, you should be careful when it comes to “paying for” your tenant’s utilities.

Oftentimes if the utilities you are paying for are in your name, you are financially obligated to pay those bills in full each month, regardless of whether your tenant is paying rent or not.

For a non-payment situation, this could mean you have to shell out cash of your own, despite not receiving a monthly rent payment, until an eviction goes through.

This is not wise.

If you are going to offer to pay for your tenant’s utilities such as water, sewer, trash, or gas, consider offering this bonus in the form of a lower monthly rent payment.

 

It will then be your tenant’s responsibility to have the utilities in their name, and pay them in full each month.

5. Create a Maintenance Crew List

Create a List of Maintenance Crew For Your Pikesville Rental Property

Property maintenance is a big part of being in the rental property business.

This is why all prospective rental property owners should take care to create a maintenance crew list before purchasing an investment property, so that maintenance and repair requests after a tenant moves in will not be an issue.

One great thing about enlisting the help of an experienced property management company in Pikesville is that they typically have a sizable Rolodex of licensed, insured, and bonded contractors for helping your tenants with all of their maintenance issues.

Not only does this save you the time of having to wade through endless contractor possibilities, it makes property maintenance simpler because someone else is handling it for you.

Timely, affordable, and reliable maintenance crews that work for your property management team around-the-clock will ultimately provide exceptional customer service to your tenants, and make your life much easier.

 

In the end, there are many things to think about when it comes to purchasing a Pikesville rental property.

And, for those that are looking to replace their day job with being a landlord, supplement their retirement income, or make life more enjoyable thanks to the extra positive cash flow from a rental, success is not optional, but mandatory.

If you want to boost your chances of achieving success as a rental property owner, get in touch with Bay Management Group today.

With us, you maintain complete control over your rental property, but receive all the help you need to become successful.

This includes advertisement of your newly-purchased rental property, tenant screening and placement, rent collection, move-in and move-out inspections, and of course, help with eviction procedures should that become an issue.

Top 5 Mistakes New Landlords Make, and How to Avoid Them

Posted on by Bay Management Group

mistakes-new-landlords-make-how-avoid-mistakes-ellicott-city-maryland

If you are lucky enough to own rental property in Ellicott City, you know that managing a rental home requires experience, knowledge, and a lot of patience.  In addition, you know that if you do not employ a property management company, self-managing rental homes means running a small business on your own.

Or, maybe you don’t own rental property quite yet and are curious to know which mistakes to avoid as a novice in the rental property business.

Either way, if you are interested in investing in rental property in the Howard County area, and are hoping to learn from the past mistakes of previous newbie property owners, keep reading.

Today we are going to look at the most common mistakes new property owners make in their quest to build a strong rental property portfolio and rake in a positive cash flow throughout the year.

 

Top Mistakes New Ellicott City Landlords Make

Without prior experience in the real estate or rental property industries, it is easy to make plenty of mistakes as a new property owner.  And unfortunately, some of these mistakes can cause more problems than just a bad day.  In fact, some common mistakes new landlords make can cause a loss of money, a legal dispute, and even a collapse of their rental property business before it gets off the ground.

Read on to find out what mistakes you should avoid as a new Ellicott City property owner.

 

1. Not Adequately Screening Potential Tenants

properly-screen-tenants-ellicott-city-maryland-rental-property

For new property owners that have not employed the help of Howard County’s most experienced property management company, Bay Management Group, you may quickly find that one of the biggest mistakes you can make is to rush the tenant screening process.  Sure, your number one goal is to place tenants in your property and start collecting rent right away.  However, not thoroughly screening a tenant may end up costing you much more money in the end.

Here are some of the credentials you should verify before placing a tenant in your investment property:

  • Personal Information. Have potential tenants fill out a rental application that includes all of their personal information.
  • Background Check. Check for prior evictions, criminal history, and terrorist activity.
  • Financial Stability. To ensure your prospective tenant will have the means to pay rent each month, check for past bankruptcies, liens, judgments, credit worthiness, and income.
  • Contact all references listed on the rental application and ask the pertinent questions to make sure your tenant is worthy of placement in your property.

Having a property management company conduct thorough tenant screenings on all potential tenants will help catch bad tenants before they move in and you’re stuck dealing with problems and likely an eviction.

 

2. Underestimating the Cost of Maintenance and Repairs

Everyone that gets into the rental property business is hoping to incur income from it; whether your rental property serves as supplemental income or your primary source of money, you’re looking to make some cash.  After all, that’s why you have invested so much of your time and hard-earned money into a rental home.  However, many new landlords fail to realize until it is too late just how much added expense regular maintenance and repairs on their properties will cost annually.

Spending thousands of dollars each year on maintenance issues big and small, upgrades to make your property more appealing, and repairs that are your responsibility will easily cut into your positive cash flow.  Here are some things to consider to ensure these costs do not cause you too many financial setbacks:

  • Have savings set aside for routine maintenance and repairs
  • Only hire licensed and insured contractors
  • Make sure your tenants know before move-in what their maintenance responsibilities are
  • Provide tenants with a tenant welcome package that includes maintenance tips

 

3. Not Following the Law

follow-law-new-landlord-ellicott-city-maryland-rental-property

Despite being a new landlord, it is your obligation to know all federal, state, and local laws that apply to leasing rental properties.

Here are some of the most important laws you should become familiar with to avoid a legal dispute:

  • Housing Discrimination. You cannot refuse to rent to a tenant based on criteria such as race, color, religion, national origin, sex or gender, disability, or familial status.  This is why although your tenant screening process should be thorough; it should also be legally compliant.
  • Right to Privacy. There are times when you will need to enter your rental property while it is occupied.  However, regardless of whether it is for a maintenance issue, repair, or routine inspection, there are proper notices you must provide and time limits that you must follow before entering your rental property.
  • Improper Use of Security Deposits. Though security deposits are collected from your tenants prior to move-in to cover expenses such as damage or non-payment of rent, there are specific rules and regulations that you need to understand and follow during the collection and use of security deposits.
  • Wrongful Eviction Procedures. Starting the eviction process is never fun, especially if you are new to the rental property business. However, if your tenant needs to be evicted from your Ellicott City rental property, make sure to follow the legal eviction process.

Breaking the law when it comes to renting property is an easy thing to do if you do not educate yourself properly.  This is where having a property management company in place becomes key.  Not only does an experienced property manager keep up to date on the ever-changing rental property laws, the management company itself typically backs you in court if a dispute ever lands before a judge.

 

4. Not Putting it in Writing

What exactly does putting “it” in writing mean?  Well, in the case of rental properties, “it” means any agreement that you come to with your tenants regarding anything that has to do with your rental property and the leasing of it.

Drafting a written lease agreement, complete with provisions outlining both parties’ duties and responsibilities, is one of the most crucial things a new landlord can do before placing a tenant in their property.  Things such as the rent collecting process, issues regarding maintenance, and even basic provisions about how a tenant can redecorate your rental property must appear in writing, must be agreed to by both parties, and must be signed as a legal contract for the entire lease term.

Additionally, any other agreements you decide upon later in the lease (e.g. the allowance of a pet) should be drafted as an addendum to the existing lease agreement and signed by both parties.

 

5. Charging too Much Rent

dont-charge-high-rent-ellicott-city-maryland-rental-property-min

As a new landlord that has presumably placed a large amount of money into their first investment property, it is natural to want to charge a high rent to make up for any financial setbacks that getting into that first property created.  In fact, even seasoned landlords want to charge a premium rent and make as much positive cash flow as possible.

The difference is, seasoned landlords know how to read the market, follow area trends, and understand what a reasonable rent amount is.  If you are a first time landlord, consider getting advice from real estate professionals knowledgeable in the area your rental property sits.  Better yet, do your own research and see what similar properties are renting for compared to yours and adjust the amount according to any amenities you may be providing tenants.  In the end, it is better to charge a lower, more reasonable rent than have a property sit vacant hoping for higher paying tenants.

 

Other Important Mistakes to Avoid

Though the above 5 mistakes are some of the most common, and detrimental, any new landlord can make when it comes to their first rental property, here are some more things that should never be far from your mind:

  • Make sure communication with tenants is open, available, and professional
  • Always enforce lease terms, especially when it comes to rent collection
  • Do not mishandle abandoned belongings left behind from your first tenants
  • Learn successful marketing strategies if you do not have a property management company to do so
  • Don’t forget to routinely inspect your property
  • Make sure you have homeowners insurance and consider requiring tenants to have renters insurance

In the end, being a new landlord can come with a steep learning curve if you have never had any experience with real estate.  And, while the rental property business is a very lucrative venture if done correctly, there is always a chance you make a damaging mistake as a new landlord that can cost you time, money, and your sanity.

If you are new to the rental property business and are looking for an exceptional Ellicott City property management company, contact Bay Management Group today.  Our experienced and knowledgeable staff can help guide you through the entire leasing process and ensure everything is done professionally, legally, and with the least amount of hassle possible.

Survival Tips for First-Time Landlords: Avoiding Trouble at All Costs

Posted on by Bay Management Group

Tips on How To Survive Managing Your First Rental Property

First-time landlords in Montgomery County make up a unique group of people. Some are homeowners looking to upsize or downsize and thus want to lease their home; some are investors seeking ways to fund their retirement or quit their corporate jobs; while others are accidental landlords, who for one reason or another, must turn their primary home into a rental property.

Whatever category you fall into as a first-time landlord, know that there will be some struggles in the beginning while you find your bearings.

But hey, you have to start somewhere right?

If you are a first-time landlord, understanding that there is more to managing a rental property than signing a lease agreement and collecting monthly rent checks is important. Unfortunately, many new landlords do not understand this concept and find themselves overwhelmed from the get-go.

That’s why today we are sharing some of our best survival tips to help you navigate the rental property world a little more easily.

 

How to Survive Your First Rental Property

1. Have a Realistic Timeline

Getting into the rental property business, regardless of your situation, is the same for everyone when it comes to one thing: the goal. The goal is always to generate positive cash flow.

The problem is that many first-time landlords think that they will immediately generate enough cash flow in the beginning to pad their vacation funds, pay off their mortgages, quit their jobs, and live the rest of their lives as though retired.

However, this is far from the truth for most landlords, even those who have been in the business for some time. Turning a rental property profit is a marathon, not a sprint. Just like everything, it takes planning, as well as time to build success and enough money to reach your goal. That is not to say it can’t be done—just take it slow, have a plan, and know that there will be some setbacks along the way.

 

2. Understand Your Expenses

Be Sure You Understand Your Expenses Before Becoming a First-Time Landlord

Just as survival tip number one explains, turning a profit (unless you are somehow incredibly lucky) is no easy feat in the beginning. There are initial expenses that come with owning a Montgomery County rental property that you should be aware of before investing in your first property. It is important to know as well that some of these expenses are not just initial costs and will follow you the entire time you own rental property. Here are some of your expected expenses:

  • A sizeable down payment for the property
  • Additional financing for the mortgage
  • Repairs and upgrades you need or want to make
  • Property taxes
  • Insurance
  • Attorney, accountant, or property management fees

In the end, budgeting for emergencies and recurring expenses associated with your rental property will help you keep afloat even when you are just starting out.

 

3. Make a Checklist

Make a Checklist As a First-Time Landlord

If you are not going to enlist the help of a property management company (though it is highly recommended) consider making a checklist of the entire leasing process so you don’t miss an essential step. This will include things such as property advertising, tenant screening, property walk-throughs, lease agreement drafting and signing, regular inspections, rent collection policies, and eviction procedures.

And that is just the beginning. It is key that you do not leave out a critical step—some regions have specific landlord-tenant laws that must be followed precisely when it comes to tenant placement.

Getting your local Montgomery County property management team to help is the best way to avoid any trouble. They are knowledgeable about tenant placement and can manage your property throughout the lease term by addressing any major issues, even legal ones, quickly and efficiently.

 

4. Have Open Lines of Communication

Communicating with your tenant is a great way to build a strong landlord-tenant relationship. As a first-timer, you may be blissfully unaware of how many times your tenant will want to communicate with you. From maintenance and repair requests, to complaints about neighbors, and the many reasons why his/her rent will be late that month, there is always the chance your tenant will have a lot to say.

What this means for you is that email, phone, text, and snail mail should all be options for communicating with your tenant unless otherwise specified in the lease agreement. What this also means is that your tenant will (and should) have access to you 24/7 for emergencies.

If you do not want to deal with this hassle, or an angry tenant, a great solution is to hire a property management company to handle all communication with your tenants.

 

5. Be Strict About Rent Payments

It is so easy to fall into the trap of letting a month or two of rent payments fall into the “Late” category. This is especially true if your tenant is genuinely a good person and has a seemingly legitimate excuse. However, in order to avoid this perpetual problem, and the possibility of a non-payment, it is best to set the rules hard and fast at the start of the lease term when it comes to paying rent. Here are some things you should do:

  • Determine acceptable forms of payment
  • Choose a due date and specify grace periods if applicable
  • Designate payment methods (g. mail-in, online portal, walk-in)
  • Calculate a late payment fee
  • Outline late rent policies including eviction procedures

The key here is to make sure your tenant has a firm understanding of your rent policies and the consequences for failing to pay on time. This way if anything should require legal action, you can prove you protected yourself to the best of your ability and that your tenant was fully aware of the lease provisions.

 

6. Know When to Outsource

Know When To Outsource Your Repairs Vs. Doing Them In-House

You rental property will fall victim to some damage while your tenant resides there. This is inevitable. And, while some repairs are easily fixed without the help of a professional contractor, there will be times when hiring an expert is necessary.

Knowing when to outsource repairs to a hired expert will save you time, money, and frustration. Just because you think you can fix something in your rental property does not mean you have the skills to do so efficiently. In addition, if you are constantly fixing your rental property and managing everything else as well, you will end up losing out on precious free time. Sometimes hiring a professional is the smartest choice.

 

7. Hire a Property Management Company

The best survival tip anyone can offer first-time landlords who are new to the rental property business is to enlist the help of a property manager who can take care of all of the above. Be honest, unless you have been studying up on how to be a great landlord, and shadowing someone in the industry for some time, you probably do not have much experience with managing rental properties. And, if your goal is to make money, learning as you go can be one of the biggest ways to fail at achieving a positive cash flow.

If you are in the Montgomery County area and find yourself becoming a first-time landlord, contact Bay Management Group. As Maryland’s leading property management company, Bay Management Group offers property owners a whole host of services that help you avoid any kind of trouble.

From professional property advertisement to eviction processes, and everything in between, Bay Management Group gets it done so you don’t have to. And to top it off, we offer the lowest property management fee in the area. So don’t wait to get the peace of mind you deserve as you embark on this journey as a first-time Montgomery County landlord, get in touch with Bay Management Group today.

What to Consider Before Investing in a Rental Home with an HOA

Posted on by Bay Management Group

Homeowners associations in America don’t have the best reputation.  They have a history of complaints of abuse, mismanagement, and wasted finances, and things don’t seem to be changing. However, there are some benefits to investing in a home that is part of an HOA.

The best thing to do is, before you invest in a rental property in the Montgomery County region, investigate whether the property is part of an HOA.  After all, as the property owner you are liable for the tenants that reside in your home and pay a monthly rent.  This means any violations of the homeowners association’s rules and regulations by your tenants may fall upon you in the form of hefty fines.

Today we will look at some of the things you should consider before investing in a property monitored by an HOA.  This way, when it comes to deciding whether an HOA is right for your property investment needs you will be better prepared to make a knowledgeable decision.

 

Common HOA Complaints from Income Property Owners

Many Complaints Arise From People Who Are Part of An HOA Homeowners Association

As mentioned earlier, there is no lack of complaints against homeowners associations across the country.  Some of the most common ones include:

  • Wasting of association funds
  • No access to official records
  • Poor communication
  • Hostility towards homeowners or tenants
  • Manipulation of elections
  • Withholding of facility or service use
  • Poor maintenance of common grounds
  • Secret meetings
  • Violation of Fair Debt Collection practices

That being said, not all HOAs are bad.  And, if you take your Montgomery County investment properties seriously and research everything before signing on the dotted line and placing tenants in your home, an HOA may actually help maintain the value of your property and thus your monthly rental rates.

 

HOA Questions To Help Guide You

Here are some of the most important things to consider before purchasing a rental property that resides in an HOA.

What Services Does the HOA Provide?

Each HOA will have its own set of specific services it provides your community, though there are some general things every quality HOA should offer.  These basics include:

  • Administration services
  • Financial services
  • Customer service
  • Communication
  • Maintenance

It is a good idea to get a detailed list of everything the HOA says it is responsible for before buying a property.  You might also consider questioning the HOA’s level of involvement in the community to ensure it is following through on its obligations and staying proactive.

 

What is the HOA’s Financial History Like?

Take a Look at the HOA's Financial History to See How They've Used Money in the Past

Though every HOA differs in terms of daily procedures, homebuyers are entitled to see their potential HOA’s financials to ensure the HOA is not in the red.  You can receive this document via the homebuyer or directly from the HOA.  It will likely include things such as:

  • The balance sheet
  • Yearly revenue from monthly dues
  • Reserve fund balance
  • Notice of pending lawsuits
  • Information regarding recent assessments
  • Percentage of homeowners behind on their dues

Unfortunately, reading complex documents such as an HOA’s financials can prove challenging.  You might need to have someone you trust in the finance industry to help you decode all of the numbers.

 

How Do The Common Grounds Look?

HOAs are responsible for maintaining the common area of the community.  Do not simply focus on the property you are looking to purchase.  Rather, get a look at the community as a whole.  If a neighboring yard looks disheveled, chances are the HOA is not implementing its rules and regulations as strictly as you may like.

Because first impressions are so important, it is crucial the entire community looks well groomed.  No prospective tenant will want to lease from you if the neighboring homes are not up to par on their curb appeal.  Plus, if you are paying what can sometimes be hefty monthly HOA dues, you should be sure the HOA fulfills its part of the deal and maintains the grounds.

 

What is the HOA’s Method of Communication?

Communication and Community Are Key With Homeowners Associations To Ensure Voices Are Heard

A large part of what HOAs do is communicate with the board members and community homeowners.  A reputable homeowner’s association will effectively communicate the community’s needs in a variety of ways to make sure everyone involved in the community is up to date.  This includes phone calls, emails, live chats, and even a website for homeowners to know what is going on in the neighborhood.

 

How Does the HOA Assessment Collection Work?

One of the most disliked things about HOAs is their collection of monthly assessment dues.  Often inflated, many homeowners have no clue how their monthly dues are being used to help the community.

HOA assessment money is important for the stability of the community.  It helps to pay for the common grounds all residents enjoy as well as extra activities put on by the association for the benefit of the residents.  In addition, this money also pads the reserve funds that cover the cost of any major repairs to the community.

It is the responsibility of the HOA to collect assessments from homeowners.  And, if you own a Montgomery County rental property, it is likely you are paying the monthly HOA dues as a benefit to your tenants.  As a homeowner you are entitled to know that the community’s money is being put to good use and is used responsibly.  In fact, there are laws in place protecting residents from shady HOAs that use the assessment money poorly.

You should learn before making a property purchase how the HOA handles its finances and do your best to ensure the HOA is fulfilling its obligations to the community with that money.

 

Does the HOA Have The Following Traits?

Though it can be hard to judge the overall feel of a homeowners association without having actual experience with them, it is important you do your best before purchasing an investment property.  Try talking to the board members to get a feel for who they are and what their roles on the board entail. Or, try to converse with prospective neighbors and see how they like the neighborhood and what they think of the HOA.

Here are the most important things your future homeowners association should do for the community:

  • Respect all homeowner interests
  • Enforce the democratic process where all opinions are heard and weighed equally
  • Offer community services and amenities to all residents
  • Maintain the community’s values
  • Enforce the rules and regulations
  • Meet the financial obligations set forth in the CC&Rs
  • Conduct ethical behavior in all matters with transparency to all community residents
  • Balance the community’s needs and those of individual homeowners

 

In the end, where you plan to purchase your Montgomery County rental property is a big deal.  And, when you throw in the possibility of the property being in an HOA community, there is even more to consider.

If you are looking to purchase a rental property that has an HOA representing the community, make sure to do your research thoroughly.  You are financially obligated to an HOA once you invest in a property that has one and you want to make sure that you are happy with how the HOA conducts its business, maintains the value of your neighborhood, and enforces the rules, especially the financial ones.

In addition, if you are looking for an experienced property management company to help you manage your Montgomery County rental property, contact Bay Management Group today.  Not only can we help you with all things property related, we help manage your tenants and ensure they are following the HOA rules and regulations perfectly.  By enlisting the help of Bay Management Group, your concerns about HOA properties will disappear.

6 Tips to Successfully Show a Rental Property

Posted on by Bay Management Group

how-show-maryland-investment-property

Showing a client’s vacant rental property to prospective tenants is one of the principal roles of a property manager.

Though emphasis is often placed on appealing to the right tenant pool, as well as the importance of proper tenant screening, the truth is that the in-person showing of the home to potential renters is just as crucial.

Staging a vacant rental property can be done easily and without a great deal of time.  With a little bit of curb appeal and a nice looking interior, you will have more tenants wanting to lease your client’s rental home than you know what to do with.

But there is more to getting a tenant to sign a lease agreement than just a nice exterior and inviting interior.

Today we will look at the top tips for showing an unoccupied rental property.  If you follow these simple yet effective steps, you will find great success in your showings.

 

6 Tips for Wowing Tenants with Your Rental Property Showing

1. Remember The Basics

Every property manager knows that there are basic staging rules for showing a potential tenant their client’s rental home.  Let’s look at those basics:

  • Do not underestimate the power of curb appeal. Make sure the yard is well maintained, the property is freshly painted, and the all-around feeling is inviting as a tenant pulls up.
  • Clean, clean, clean. Nothing turns a potential tenant away faster than a dirty home interior.  Make sure to inspect the property beforehand to make sure its cleanliness meets you and your client’s standards.
  • Redecorate or upgrade. Install new carpet, paint the walls an appealing and neutral color, fix the window treatments, and make sure all appliances are updated and working.

In the end, these selling points will make a huge difference in whether a tenant is interested in leasing a property from your client.

 

2. Pre-Qualify

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As mentioned earlier, tenant screening plays a significant role in the leasing process.

Before you begin showing a property to interested tenants, pre-qualify them.  This will save you time, energy, and money and will ensure you are only showing the property to qualified tenants.

Here are some great topics to ask about when someone calls to set up a property showing:

  • Their credit score
  • Reason for moving
  • Estimated move-in date
  • Whether they have pets
  • Smoker or non-smoker
  • Number of people moving in
  • If they have references
  • Eviction history
  • Estimated income
  • If they have any questions

Keep in mind that pre-qualifying tenants for a property showing cannot violate any of the Fair Housing laws that are in place to protect prospective tenants.  In addition, make sure the pre-qualifying questions are the same for all prospective tenants to avoid discrimination allegations.

 

3. Be Safe

have-emergency-plan-maryland-rental-property

Before showing a rental property, put your safety first.  Every year a number of realtors, property managers, and landlords are injured showing homes to prospective tenants.

If someone calls asking to see a rental home, get his or her full name and conduct a background check on your state’s public record website before agreeing to show the property.

Here are some ways you can protect yourself from potentially harmful situations while showing rental properties:

  • Always show properties during the daytime, never after dark
  • Call your office every hour to let them know where you are
  • Introduce yourself to neighbors so they are familiar with you and your vehicle
  • Have an “escape” plan in place for when something feels “off” (for instance, take an emergency phone call outside or inform the potential tenant another agent is on the way)
  • Always leave all doors unlocked and stand by the doorways while showing the property
  • Park on the curb rather than the driveway for a quick getaway, if necessary

Gathering information ahead of time about potential tenants and being aware of your surroundings will ensure your safety as well as a more successful property showing.

 

4. Make a Good First Impression

Small, seemingly insignificant (yet very effective) things you do before, during, and after a rental property showing will leave a lasting impression on potential tenants that view the home.

There are several ways to convince potential tenants that this property is perfect and that they need to sign a lease right away.  For instance:

  • Call and confirm scheduled showings a few hours beforehand
  • Set the temperatures in the rental to be comfortable upon arrival
  • Turn on all of the property’s lights
  • Dress professionally and check your personal hygiene
  • Smile when you greet tenants, shake their hands, and formally introduce yourself
  • Show them the grounds, both on and off the property (for example the pool, gym area, laundry facility, parking structures, BBQ areas, or roof decks)
  • Have general information about the property on hand so the tenant can remember you later. Include things such as pictures of the property, square footage, monthly rent and deposit amounts, number of bedrooms and bathrooms, and any extra amenities
  • Have applications ready for tenants to fill out immediately following the showing

In short, making a tenant feel welcome, at ease, and well informed about the property can go a long way in securing a lease agreement.

 

5. Be Informed

In addition to knowing everything about the property you are showing, it is a good idea to be knowledgeable about the surrounding area.  People often move to certain locations because they like the neighborhood or have heard it is great.

Emphasize the area’s selling points – nearby restaurants, shopping, entertainment, attractions, schools, parks, and roads for commuting.

The more information you can give potential tenants on the spot, without them having to pry, the better equipped and more trustworthy you will seem.  Plus, this information will help them to make a quicker decision and possibly forgo viewing other properties.

 

6. Follow Up

maryland-property-managers-should-have-emergency-plan

Property managers should base their entire showing process around customer service.  Doing so shows potential tenants that you are a reliable company that they can trust and easily contact to work out any issues that may arise with the property, should they decide to lease.

A day or two after showing the property, consider sending a follow-up email or making a call to the potential tenants who saw the property.

Make sure they have no further questions about the property or leasing process and wish them luck in finding their next home.

Although this seems trivial, a little kindness can go a long way when it comes to deciding which property to lease and call home.

In the end, the way you present yourself and your client’s property to potential tenants can make all the difference when it comes to getting a lease agreement signed.

By taking the proper steps before every showing, you ensure that your client will be satisfied with the amount of effort you put into filling their vacant rental.

On top of that, going above and beyond when showing rental properties can help motivate the most qualified tenants to lease your client’s property, making it a win-win situation for everyone.

 

Landlords Beware: How to Avoid Rental Fraud

Posted on by Bay Management Group

beware-scam-maryland-property-management-company

Rental fraud: What is it and how can Maryland landlords avoid it?

For those of you who have yet to experience the horror of rental fraud, we are here to explain to you exactly what it is.

Rental fraud is when someone who is not you or your Maryland rental management company claims to own your rental property and proceeds to lease it out to unknowing tenants.

Scary, isn’t it?

Rental fraud can lead to several difficult situations:

  • Security deposit and first/last month rent is collected by the fraud. Then, come move in time, tenants have no way of accessing the actual property. Meanwhile, the fraudulent landlord is already on the run with money in hand.
  • Your property’s locks are changed and tenants actually move into your rental home having no idea that their “landlord” is a fake.
  • You are forced to remove the innocent, although illegally residing, tenants who have been scammed.
  • You are left with the mess of having to prove in a court of law that the property is actually yours.

Though avoiding rental fraud may not be entirely possible, there are some proven strategies that can help reduce the chances of you ever falling victim to this type of scam.

 

Rental Fraud Comes in Many Formsbeware-maryland-rental-fraud

As mentioned above, rental fraud is when someone poses as either the landlord or property management company to illegally lease out your Maryland rental property. However, there are other types of rental fraud as well.

Landlords are also vulnerable to the types of rental fraud outlined below, and should be aware of their susceptibilities at all times.

 

The Eviction Scam

This type of rental fraud is when a tenant moves into your property with no intention of ever paying rent. As a result, you are forced to evict them.

Unfortunately, the eviction process can sometimes take months to pan out, as well as cost a great deal of money. This leaves the tenant plenty of time to live in your property while lining up another place to scam.

Avoid this scenario: The best way to prevent a tenant who is consistently evicted from every place they occupy is to conduct thorough screenings of each and every tenant you consider placing in your property. This should include a background check, credit check, income verification, and reference follow-up.

Another great tip is to meet each prospective tenant face-to-face, even if your rental management company typically does all the work for you.

Sometimes a first impression will leave you with a gut feeling not to go with a particular tenant, which can be helpful in avoiding scams.

 

The Utility Scammaryland-property-managers-fight-utility-scams

Did you know that many states hold landlords responsible for the water bill despite what the outlined lease agreement states?

Sometimes a tenant will avoid paying the water utility bill because they know that after it goes unpaid for long periods of time, the water company will go after the owner of the property (you) to pay the bill.

To add to this, many tenants are aware that the water company typically does not shut off the water supply to any given residence. This means your tenant is using water on your dime.

Avoid this scenario: The best way to avoid this utility scam is to call your local water company from time to time to make sure your tenant is current on all of their bills.

In addition, it is best to have your property management company draft a detailed lease agreement outlining the responsibilities regarding utility payments. This way, should your tenant neglect their financial obligations, you have a way to prove in court who was responsible for what.

 

The International Scambeware-maryland-international-rental-property-management-scams

This highly popular scam is an unfortunate one that many landlords fall prey to. Also known as the Nigerian 419 scam, this type of fraud involves a prospective tenant from overseas looking to lease your rental property in the near future.

The fraudulent tenant will send you a check for the amount owed at move-in, plus extra “by accident.” This extra money is usually double what you asked for move-in costs.

The fraud will then ask you to wire back the excess money and before you know it, the original check that was sent to you turns out to be fraudulent while the money you have wired back to this person was your real, hard-earned cash.

Avoid this scenario: It is best to not deal with overseas tenants, unless you have a professional helping you with the background checks.

In addition, never accept a certified check from anyone overseas. These checks will usually clear and then bounce weeks later because they are fake.

If by chance you are accepting money from an overseas tenant, only accept money orders through a reputable company, such as Western Union.

 

Monitor Your Vacant Propertiesmonitor-vacant-maryland-rental-properties

In addition to the above-mentioned rental fraud scenarios, there are other ways to avoid getting scammed by sneaky people.

Your Maryland rental property is most vulnerable when it is vacant. The last thing you want is someone breaking into your property and taking up residence with a fake lease agreement.

Should you notice someone squatting in your vacant home, chances are high that the police will have very little authority if the “tenants” have what seems to be a legitimate lease agreement.

The heartbreaking thing is that sometimes these scammers will demand you pay a “ransom” for them to leave your property. This not only costs you money but allows the trespassers a free pass. They never have to take responsibility for their actions and actually make money off of their scam.

And, if you decide against paying the frauds off, this situation will still cost you countless hours and money as you wade through the courts attempting to prove the lease agreement is fake and the “tenants” are indeed trespassers.

Avoid this scenario: Monitor your vacant properties regularly to make sure no one has stepped in and taken up residence.

You may even consider adding an active security system to your Maryland property so that if someone does attempt to break in, the police will have authority to charge him or her appropriately.

 

Watermark Your Photographs

These days, advertising vacant properties online is the norm. And, if you utilize a reputable rental management company, such as Bay Management Group, your rental home is promoted across several platforms to expose your vacant property to the widest pool of prospective tenants.

With any professional rental property ad, images of the home are a necessity. Anyone looking to lease a home wants to have a clear idea what the property looks like before inquiring about it.

The problem is, if someone if posing as you or your rental management company and posting a vacancy online, innocent tenants interested in your property may get scammed or end up living in your home without permission from the true owner (you).

Avoid this scenario: Add a watermark to all images of your property as an extra layer of protection. A watermark makes it more difficult for a fraudulent landlord to steal photos of your property and will likely cause them give up on attempting to scam you.

 

In the end, rental fraud can be a scary situation no matter the type you are involved in. That is why being proactive about your Maryland income properties is absolutely critical to keeping your money out of the hands of scammers and keeping unwanted tenants our of your properties.

If you are looking to safeguard your Maryland rental properties to the fullest extent, contact Bay Management Group.

With knowledgeable staff working solely in property management, Bay Management Group can protect you, your rental property, and your tenants from all types of rental fraud.

Peace of mind is priceless when it comes to your rental property business.

Use Bay Management Group to conduct thorough background checks, draft airtight lease agreements, and inspect your home regularly to make sure everything is in its right place.

 

The Lease Agreement Deconstructed

Posted on by Bay Management Group

understanding-harford-county-property-management-lease
If you have ever leased an apartment or home, you will likely be familiar with the lease agreement that was signed by both you and the landlord.

Yet, have you ever thought about the actual components that make up a lease agreement?

If you have not, and are thinking about using your Harford County home as a rental property in the near future, maybe you should start.

Drafting a solid lease agreement, even if completed by your Bel Air property management company, is a crucial step when it comes to leasing out your rental property.  It outlines important information, defines each party’s responsibilities, and becomes a legally binding document that can be relied upon if a landlord-tenant dispute ever arises.

Today we break down a traditional lease agreement into its most basic parts so that you will know what must be included should you decide to enter the rental property business.

Making sure that each of the following elements is clearly defined in your rental agreements will ensure that your lease agreement in legally compliant, that everyone is on the same page, and will hopefully prevent any problems from popping up unexpectedly after your tenant takes up occupancy in your Bel Air home.

 

The Main Elements in a Lease Agreement

Though every lease agreement that you draft will differ depending on the property, it is important to understand the basic framework that makes a lease agreement a legally binding contract.  This is why many landlords hire a high-quality property manager in Bel Air to handle all aspects of their income properties, including drafting lease agreements.

Having a team of experts knowledgeable about state and local laws related to your income property is the best way to protect both you personally and your rental business.

 

Tenant Names

Include the legal first and last names of all tenants that will be residing in your Bel Air rental property.  These tenants will be held accountable for the terms outlined in the lease agreement, including but not limited to, rent payment, property maintenance, and damages incurred.

This section should also include your legal name and your Bel Air property management company, if applicable.  This way, it is clear from the start who the contract binds together and which parties are involved.

 

Lease Term

It is important to include the length of time you would like the lease to be valid.  In other words, how long the tenant is allowed to occupy your property before a new lease agreement must be agreed upon. 

You should determine a start date (commencement date) and an end date (expiration date) so that both you and your tenants clearly understand when the occupancy of your property will begin and end.

It is not unusual to have your tenants agree to a one year lease.  This allows for a consistent supplemental income to flow into your bank account, while also allowing you to raise the monthly rent amount fairly easily after the year is up.

This section is also a good place to include basic identifying info about your Bel Air property including its official name, if it has one, as well as its full address including any unit numbers.

Don’t forget to add the city, state, and zip code either.  Although this may sound obvious, you want to be as thorough as possible to avoid any potential confusion.

 

Payment of Rent

collect-rent-tips-property-manager-harford-county-mdIt should already be agreed upon between you and your tenant how much the monthly rent will be.  However, you must also include this in writing in the signed lease agreement.  Include things such as:

  • The total amount of rent due
  • The exact date the rent is due (g. the first of every month)
  • The forms of payment accepted and how to make said rent payments
  • Where rent should be delivered if applicable
  • The consequences for a late or non-payment of rent

Having all of these details in your lease agreement will ensure you that your tenant has willingly acknowledged and understood their financial obligations.

It also protects you in the event that you have to evict your tenant for non-payment.

 

Deposit Amounts

If you are collecting any type of deposits from your tenant up front, you should outline this in the lease agreement.  This way at the end of the lease term, when most people forget how much they paid and when, it can easily be referred to in the signed agreement.

Deposits can include things such as:

If you do collect a security deposit, which is advisable, make sure you understand your state and local laws regarding that money so that you don’t land yourself in trouble later on.

 

Fees, Fines, and Charges

There should be a section in your drafted lease agreement that will detail any potential fees or fines the tenant may face.  For example:

  • Late rent charges
  • Bounced check fees
  • City fines
  • HOA fees and fines
  • Attorney and court fees

 

Tenant Responsibilities

Oftentimes a tenant is unaware of basic maintenance or utility duties they are responsible for.  And while providing your tenants with a tenant manual at the beginning of the lease term is definitely helpful, it is important that serious matters be included in the lease agreement too.

If you are paying for the properties water, sewer, and trash bill make sure that is included.

If you want your tenant to maintain the backyard pool maintenance, include that.

If you are prohibiting certain types of alterations to the property (such as painting the walls), you guessed it, include it.  This way, your tenant can never claim they didn’t know.

It is also important to add how a tenant can call in a maintenance request or repair.  After all, this is your Bel Air investment property.

The last thing you want is a tenant who has a pressing issue with your home’s plumbing and no way of contacting either you or your Bel Air property manager.

Include the process for making a maintenance request and include phone numbers that can directly connect your tenant with someone that can help.

 

Property Access Expectations

harford-county-property-manager-talking-tenant

Here, you can outline when your tenant can expect you to enter the premises (with proper notice of course).  This can be for inspections, to check on repair statuses, or even to show a rental property that is on the market to potential buyers.

Make sure you include what kind of notice will be given and what will happen if there is no response to said notices.

While you may not enter the premises whenever you want, especially with the intent to harass your tenant, your tenants are also prohibited from changing the locks on your property, denying you access.

 

Use of the Property

While most people have a general understanding that breaking the law is well, illegal, it is a good idea to state the intended use of your property as it applies to your tenants.

This may include provisions such as:

  • The property is to be used as a residence.
  • There is a limit on who can stay in the residence and for how long.
  • No business can operate out of the property.
  • No illegal activities will be permitted.
  • Peaceful enjoyment of the other tenants and neighbors is required.

In this section, add in the potential consequences for breaking the rules.

 

The Signatures

rental-lease-signed-harford-county-property-management
After the lease has been drafted, discussed, and agreed upon by both parties, make sure everyone on the lease agreement signs their name.  This proves everyone is in agreeance and confirms that a formal understanding of the terms and conditions of the lease agreement has been met.

 

Final Thoughts

Leasing your Harford County rental property starts with a solid lease agreement and high quality tenants.  These two things will often lead the way, whether positive or negative, for the kind of lease term you and your tenants will experience.

If you are interested in hiring a property manager and have a rental home in the Bel Air area, contact Bay Management Group to help you.

Not only will we handle all things property management related throughout the lease term, we will also get you started on the right foot from the get-go with a thorough and legally compliant lease agreement.

Contact us today and see how we can help you draft your lease agreement, place quality tenants in your Bel Air home, and manage everything else that comes next, so you can have the peace of mind that you and your property are protected.