There are many terms related to being a landlord that get used on a regular basis.
But have you ever really thought about the actual meaning behind them?
Today we are going to discuss some of the most common real estate terms every property owner in the rental property business should be aware of and, as an added bonus, we will provide some awesome resources related to each so that you can really understand what it means to be a landlord.
Important Real Estate Terms and Definitions for Property Owners
Real Estate Agent
Also known as a real estate broker, the real estate agent is the middleman between sellers and buyers of real estate property, such as the coveted homes in Havre de Grace.
Upon successfully pairing a seller wanting to purchase a property to a buyer that is selling, the real estate agent is compensated a commission based on the purchased property’s selling price.
Fixed Rate v. Adjustable Rate Mortgage
A fixed rate mortgage has a predetermined interest rate that will last the lifetime of the loan you take out to make your Bel Air rental property investment. They typically have a loan term of 15 or 30 years.
An adjustable rate mortgage has a variable interest rate that changes after 5, 7, or 10 years. If you are planning to own your property for longer than 5 years it is recommended you get a fixed rate mortgage to avoid large jumps in monthly mortgage payments.
In order to be considered a landlord you must own a rental property. This type of property is one in which you receive payment from the occupants, otherwise known as the tenants, in return for using the property as their own.
Investment properties are purchased with the intention of earning a return on investment through means such as rent collection. It can be a long-term commitment and house tenants for long periods of time, or can be a short-term commitment in the case of flipping the property for a profit.
Property Management Company
Property management companies such as Bay Management Group can help manage all aspects of your Edgewood rental property. They act on behalf of the landlord and are in place to help preserve the property and generate positive cash flow.
Property managers are typically paid a monthly management services fee that is usually a percentage (8-12%) of the monthly rental amount.
Check out – 10 Reasons to Use Bay Management Group
Gross, Operating, and Net Operating Income
Your gross income can be defined as the total amount of money you collect each month from your tenants. This number will not include any expenses your property may have such as taxes, insurance, maintenance, or repairs.
The operating income is the costs associated with maintaining your Harford County investment property. This will only account for expenses such as taxes, insurance, maintenance, or repairs.
The net income will be the total gross income minus operating income. This calculation is important for determining whether you have a negative or positive cash flow.
This is the process used by either the landlord or property management company to find potential tenants for your family-friendly Abingdon home. Tenant screening assesses the likelihood a prospective tenant will fulfill the lease agreement terms and will care for your property.
Check out – How to Interview Tenant References
Fair Credit Reporting Act
This consumer protection law established procedures for how landlords or property management companies can use a prospective tenant’s credit history during the tenant screening process.
The potential tenant must give permission to have a credit report run, the credit agency used to run the report must be provided, and a detailed explanation for denial of a rental application must be given to the tenant.
Check out – Landlord-Tenant Laws to Remember
Equal Credit Opportunity Act
The ECOA prohibits credit discrimination of prospective tenants based on the following criteria: race, color, religion, national origin, sex, marital status, age, or because public assistance is received.
This is the payment made at the beginning of the lease term by the tenant that helps guarantee the tenant will meet their financial obligations under the terms of the lease. It also helps to cover the costs of any damage beyond normal wear and tear that may have been incurred by the tenant.
Check out – The Top 5 Reasons to Collect a Security Deposit
Normal Wear and Tear
This is the expected condition of your rental property after a lease term and is a result of normal everyday use of the property. You can make deductions from your tenant’s security deposit to use on damages to your Aberdeen property only if they exceed the definition of normal wear and tear.
This is when a tenant vacates your rental property for any reason.
A high turnover rate can prove costly for a landlord since the property must be cleaned and repaired every time a new tenant moves in. If your property remains vacant for any extended period of time you will also feel the loss of rental income because no monthly rent is being collected and you may have to boost your advertising efforts to find tenants which can be expensive.
Check out – The 5 Best Ways to Reduce Tenant Turnover
This is the removal of your tenant from your rental property. Reasons for eviction can include a tenant’s refusal to move out and non-payment, among other things. It is important you follow the proper procedures for eviction in Maryland if you come across a problem tenant that needs to be removed from your property.
Check out – A Step-by-Step Guide to Maryland Tenant Eviction
This type of eviction occurs when a tenant experiences unlivable conditions due to negative actions by the landlord. Things that may force a tenant to move out unexpectedly include a failure to provide heat, water, or electricity.
The tenant is legally protected in the case of constructive eviction because it is the landlord’s duty to provide basic habitable living conditions for tenants.
Check out – Breaking the Lease: What Landlords Need to Know
Covenant of Quiet Enjoyment
Also referred to as a breach of quiet enjoyment, this is an implied or expressly written promise in the lease agreement granting tenants the right to not be excessively disturbed by neighbors, landlords, or property management companies during their stay.
If you really want to be successful as a Harford County property owner, it is important you fully understand the ins and outs of the rental property business. This includes learning the true definitions of common real estate terms that will apply to your situation whether that is investing in your first property, screening new tenants, or even evicting the problem ones.
If you are looking for some extra help with your rental properties, contact Bay Management Group today and see what they can do to help you. With an experienced staff dedicated solely to property management, you can trust they understand every real estate term and how they apply to your valuable rental properties.