As a landlord, it’s important to be aware of the things you cannot do when renting out your property. In most cases, you want to rent out your property as quickly as possible. However, there are some restrictions in place that you need to be aware of. For example, tenants have a right to quiet enjoyment, which means landlords can’t interfere with their day-to-day activities. And even if a tenant violates the lease terms, landlords can’t carry out an illegal eviction such as moving their personal belongings out of the property. So, before you start advertising your rental property, make sure you are familiar with the 11 rules landlords should abide by.

The 11 things a landlord cannot do

1. Discriminate against a tenant

Landlords cannot discriminate against tenants based on their race, color, national origin, religion, sex, familial status, or disability. This means that landlords cannot refuse to rent to someone based on these factors. They also can’t charge a higher rent or deposit to someone because of any of these factors. Additionally, landlords cannot evict a tenant based on any of these factors.

The Fair Housing Act also prohibits landlords from discriminating against tenants based on their source of income. This means that landlords cannot refuse to rent to someone because they are receiving government assistance or their salary level.

In addition, there are certain questions a landlord simply cannot ask. You should not enquire about a tenant’s future plans for children or marriage or imply that they should not rent your property as they might not match the local demographics.

2. Enter the property without notice

What’s more, as landlord, you cannot enter a tenant’s property without prior notice. This means that landlords need to give tenants 24 hours’ notice before entering the property, except in the case of an emergency. If a landlord enters the property without giving notice, they could be considered trespassing.

As with your own home, you would not expect to wake up one morning to have your bank manager strolling around the kitchen, and likewise, your tenant has a right to quiet enjoyment the property, meaning they are not to be unduly disturbed.

3. Pressure a tenant to leave the property

Landlords cannot force a tenant to leave the property. If a tenant violates the lease terms, a landlord may issue a warning and/or terminate the lease agreement; however, you cannot create an environment that would be unpleasant for the tenant in an attempt to make them move out. This means you cannot intimidate or threaten the tenant, even if they have missed a payment. You must follow the legal procedure for securing an eviction.

4. Change the Locks

Landlords also cannot change the locks on the property to prevent the tenant from returning. This is true whether the tenant is paying their rent or are in arrears. If you do this, you are considered to be committing an illegal eviction.

5. Remove a tenants’ personal belongings

Whether or not you have reasonable cause to evict your tenant, you cannot go through or remove a tenant’s possessions from your property unless those items remain on the property after the eviction is complete.

Even then, your state may require you to contact the evicted tenant and offer them an opportunity to collect the possessions or instruct you to dispose of them.

6. Turn off the utilities

Disconnecting the gas in the middle of winter might feel like the ideal way to get rid of a troublesome tenant, but the fact is that doing so will result in a judge agreeing that you unlawfully evicted them. This could result in legal penalties for you and an ongoing loss of income if the tenant is permitted to remain on site.

7. Unfairly raise rents

As a landlord, you want to get the most rent possible from your tenants. However, there are rules in place that prevent you from unfairly raising rents. The lease agreement between you and the tenant sets out the required amount of monthly rent, and this usually cannot be changed before the lease runs out unless otherwise specified within the lease.

In addition, your area may have laws governing the amount you can raise the monthly rent, including at renewal.

8. Refuse to repair

Landlords are responsible for repairing their properties, which includes both the interior and exterior of the property. This includes fixing any damage that may have been caused by the tenant, such as holes in the walls or a broken window.

Landlords must also make sure that all appliances and facilities within the property are working correctly and must provide heat and hot water to the tenants. Boilers and other essential systems must be routinely maintained and certificated obtained to prove the work has been done.

9. Use any of the space on the property

Despite the fact that it is your property, if you rent it out in its entirety, this means you cannot take possession of parts of the space unless specifically agreed upon in the lease. Such as storing tools in the garage or having a locked room or cabinet with item can be prohibitive. The tenant should have free and unrestricted access to every area of the property.

10. Ban service animals

Many landlords have a no-pet policy, which there are entitled to do so. However, you cannot prevent a tenant from having a service animal, as this would discriminate against those who need them. You may request to see appropriate documentation, but otherwise, you cannot prevent or hinder the animals from being on-site.

11. Refuse to return the deposit due to wear and tear

As a landlord, you are not allowed to refuse to return the deposit to a tenant due to wear and tear. This is because this is considered damage that is inherent in the use of the property and is not caused by the tenant. As such, it is up to the landlord to fix any wear and tear before they rent out the property again.

Is it worth being a landlord?

As a landlord, you want to rent out your properties as soon as possible. It’s important to remember, though, that there are a number of things that you cannot do related to the property once a rental agreement is signed by a tenant. Failing to follow these guidelines can cause you more grief than simply waiting for the eviction notice period to pass, so don’t be tempted to take matters into your own hands.

For most landlords, renting out their properties is an enjoyable and mostly passive income, and building up their portfolios is the most important thing on their minds. If you have a similar mindset but lack the capital to dive into buying multiple properties, you may wish to consider is a refinance investment properties plan.

Why refinance your investment properties?

The great thing about owning property is that it is a stable investment that typically only goes up in value, and on those rare dips, you simply need to hold until the recovery. As such, it’s hard to lose with property investment.

If you already own one or two properties and wish to invest in more, it is possible to scale, all you need to do is refinance investment properties. essentially taking out new mortgages that release equity back to you and allow you to use that as the deposit on another property that is also mortgaged. In this way, you can grow your portfolio, keeping each property rented out. Most tenants are reliable, hard-working types who will pay you for years, as long as the property is maintained and you do not violate their rights to quiet enjoyment.

When the Covid-19 pandemic first hit, the markets were jumpy. What would happen? Which industries would go to the wall and which would thrive?

Price volatility can wreak havoc on the unprepared entrepreneur. While many businesses succumb to the drop in demand, others have been buoyed by rising demand during adverse conditions. One industry that has thrived through the pandemic has been self-storage.

Self-storage through the pandemic and other disasters

During a pandemic or most other conceivable collapses of civil society, one industry that will almost certainly remain profitable is self-storage facilities. Self-storage facilities are appealing for multiple reasons, but especially because of the affordability, availability, and security.

Self-storage facilities offer a number of benefits not available with other means of storage. They are generally more affordable than traditional storage units, even in bad economic times. Rent for standard-sized units is about $100-$300 per month on average. The prices range depending upon the size of the unit and the location of the facility.

Macabre as it may be, storage companies often refer to the four D’s; Downsizing, Death, Dislocation, and Divorce. Unpleasant as they may be, they are part of reality.

In the spring of 2020, fear was rampant across the nation, and the impacts were felt in several waves in the self-storage industry, with upticks in demand and, therefore, in profits.

To begin with, students were sent home from universities. Some students opted not to lug all their possessions home or found that there was no longer space at home for them, and so they moved their property into storage.

At the same time, workers were asked to work from home, and both businesses and employees came to realize the benefits of this arrangement. Many organizations opted to downsize their main offices, placing surplus equipment into storage in case of future needs. Meanwhile, those employees able to work from home have begun to move from the cities and towns, heading for lakeside properties or spaces in the mountains or open plains of the continent. These moves also resulted in a surge in short and long-term storage needs.

Businesses closed their doors permanently, or at least for the foreseeable future, but some owners opt to store their products and equipment for brighter days. We certainly hope as many as possible are able to fulfill that desire, but in the meantime, the storage requirements are great for the self-storage industry.

Death and divorce also reared their ugly heads. Divorces rose due to couples finding themselves trapped in close proximity than they were used to and the subsequent toll this took on their relationships. Death, of course, remains the grim reality in this Covid-19 pandemic, with relatives needing to store possession as homes are sold or repossessed.

Self-storage hits the headlines

The New York Times wrote that “Occupancy rates are at record highs, drawing investors and entrepreneurs looking for growth opportunities,” while the Wall Street Journal reported that “uncertainty about whether to stay put, move, or just clear out the junk motivated new customers.”

The self-storage industry is currently worth $39 billion, while across the board, other industries have seen significant money wiped off the face of the Earth. A similar story occurred through the 2008 housing crash and recession, where self-storage emerged as the only real estate investment trust category to show a positive return.

The future of self-storage post-pandemic

This sharp rise in self-storage refinance and the use is only the beginning. With the profitability of almost double of its nearest competitor, Apartment buildings, self-storage is a secure investment opportunity for savvy entrepreneurs.

Human nature is to hang on to the majority of our possession rather than strip out the unused items. As such, in times of trouble, consumers will opt to store their possessions rather than dispose of them. However, it doesn’t all need to be doom and gloom to turn a profit in the self-storage industry. In times of prosperity, storage is often needed for overflowing purchases or for storing worldly possessions while venturing out on global adventures.

What’s next for Self Storage and Refinance?

The self-storage market has seen some recent turbulence, but it remains strong overall. Regardless of the economic situation, self-storage looks well-positioned to continue making investors some significant profit.

If you are interested in investing in large commercial real estate projects, self-storage may be a wise option for you, given how lucrative self-storage properties can be. National Self Storage Association (NSSA) members reported an average occupancy rate of 87% in 2008. While there have been dips in occupancy along the way, rental rates continue to rise.

One reason for this success is location. The NSSA states almost 95% of US households live within 15 minutes of a self-storage facility. This means even during an economic slowdown, people will still be storing their goods.

Why Self Storage?

Self-storage is versatile, generally offered with short one-month lets, and can be used as an emergency measure for anyone who has experienced displacement due to flooding, property damage, divorce, or anything you can think of.

When the economy regains its strength and people can afford to commit to creating small businesses, self-storage offers an affordable warehousing option for short to medium term, while business finds its niche in the market.

The self-storage facility is a stable investment for your portfolio. As long as the goods are retrieved when tenants move out, this type of storage will remain profitable for years to come.

It’s also worth noting you can diversify your investments with several different types of storage units in the same location, such as climate-controlled units and drive-up storage.

So, if you’re looking to diversify your portfolio and make a big return, self-storage may be the perfect option for you.

Looking to Refinance a Self Storage Facility

Whether your looking for funding or refinancing of self-storage facility, get in touch with a refinance expert at New City Financial. Call 855-229-2239 and get a Self Storage Refinance quote.

Savvy investors know something when applying to refinance an apartment building that you don’t. But we’re going to change that right now. Have you ever wondered how landlords can afford to own entire apartment buildings? What if we told you that the smartest among them do it without spending any of their own money?

It’s true, smart investors can find ways to fund high-level investments without spending their own cash? The guide below may give you the clues to a future where you own most of an apartment building without having to fund the purchase yourself.

Let’s look at this through an example and show you two routes to this success. Using a real-world case study, I’m going to show you how you can own the majority of an apartment building even though your investors will finance the whole thing.

Our Case Study

Let’s say that you have found a 15-unit apartment building available for the modest sum of $550,000. To make this purchase, you raise $250,000 from several investors needed for the initial payment, legal costs, and the inevitable renovations.

Before the purchase, you observed that this was a value-add opportunity, with the option to raise rents to be aligned with the local areas. Raising the rents from $475 per month to the median rental values for the area of $600 means an opportunity to earn an additional $22,500 per year over the previous landlord. This implies a capitalization rate of 8%, the prevailing cap rate in this area.

Clearly, this is an excellent opportunity with a decent return. You estimate it will take 3 years to reach this level of return, as tenants may leave with the rental increase, and new tenants will need to be found.

So, let’s look at the options for how you could structure the deal with your investors. The first is the simplest option, but the second will leave you as the majority owner of the building without necessarily putting any of your funds into the project.

Option 1: Straight Equity Split

The easiest way to structure the deal would be to give your investors the majority of the equity, given that they are funding it. Something like 70% for the investors and 30% to you for putting the deal together and managing the project.

If you all agree to sell the building 5 years later, you receive 30% of the cash flow distributions and 30% of the increase in the property’s value. Based on the values we calculated above, you should be looking at around $50,000 from the rental income, plus 30% of the appreciation, which might run into $20-40,000 more.

Not only is this a great return without putting any of your own money in, but you also don’t risk depreciation of property value, should there be a crash at the time you are selling, as your funds are not involved.

But there is a better option.

Option 2: Preferred Rate of Return

You could consider offering your investors a preferred rate of return rather than a straight equity split.

In this scenario, you would agree to pay the investors a % of their investment amount before any agreed split. So, for example, if you offered the investors for this project an 8% preferred return on investment, you would pay them 8% of the $250,000 they invested, equating to around $20,000 yearly. If your projection of a $22,500 return on the project holds good, you’ll pay the investors their cut, and then the remaining $2,500 would be split based on your agreed equity.

Of course, this generous 8% preferred return rate means that if cash flow goes down, you could be caught short financially.

Investors are generally happy with this arrangement, as it presents a good ROI per year. You may also wish to offer a stake in the equity, for example, 25%, which means that whatever is left over after the preferred rate of return, they get 25%, you keep 75%, either from cash flow or a profit at sale.

The critical risk to be aware of is that if cash flow is lower than the agreed rate, you will still owe those funds to the investors. This means that you may have years where you receive little or no income from the project. Because of this, use the preferred return with caution. It is best used for investments with a lot of cash flow to reduce the risk outlined above.

However, there is one significant advantage of this arrangement: You have 75% of the equity in this deal, remember? While the preferred payout is in place, it doesn’t do you much good because 75% of zero is still zero. But what if the preferred pay would disappear? That would increase cash flow and, with that, your compensation.

Of course, the significant advantage of this deal is that you own 75% of the property but have yet to put any money into the project. If you could eliminate the preferred payout, your cash flow would increase. Is there a way to do this?

Eliminating the Preferred Return with a Cash-Out Refinance

Indeed, there is! Instead of selling the property after 5 years, you can a refinance or cash-out refinance the apartment building after 3 years, the period that is in this scenario you would reach the expected level of return. By refinancing, you can return the investors’ principal funding and simply continue holding onto the property.

Because you have returned the capital, you no longer need to pay out the preferred return rate, but you would continue to supply the investors with 25% of the cash flow and profits from the eventual sale, as they would own this part of the property.

This strategy eliminates the risk to investors after 3 years, and they still enjoy 25% of all cash flow distributions and profits, making this a popular option. For you, this option eliminated the preferred rate payout. You do have the refinance to service, but the rate on that compared to the 8% is minimal.

Interestingly, the return for the investor for Option 1 and 2 are very similar. But for you, the difference is startling. Option 1 would provide you with around $40,000 after 5 years without any investment. Meanwhile, option 2 results in a huge $120,000 after 6 years. That’s well worth waiting the extra year. Or hold on for another 4 years to see a profit of around $230,000

Conclusion

Ultimately, the idea of buying a value-add building using the money from investors or through a refinance apartment building program will appeal to many people. Offering a preferred rate return along with a minority stake in the building is an ideal way to get investors on board with the idea.

Your agreement will make it clear that once the investors’ capital is returned, the preferred rate payout ceases. When you refinance, you can eliminate this cost and enjoy the profits for the remainder of your ownership of the property.

Need funding for your apartment building or refinance? Get a Refinance Rate Quote here or call us at 855-848-2862.