Let’s assume you are a seasoned landlord. All your files are organized storing tenants information, where they work, emergency numbers, lease, and addendums, everything you need to secure your position as a landlord. In the best situations things can go wrong, however with a well organized file you minimize risk.

When a rental property is purchased it includes the existing lease. You may think the property is yours to do with what you want beginning the moment the deed is recorded; not totally. Review the lease in place; you are bound to it until the expiration date. In the event you have a good lease, I would suggest you replace the lease and addendums as soon as time permits. This brings me to my living example.

During the initial walk through I noted the tenant had been there for 3 years and I assumed that was the last time the plant shelves were clean. There was a faint odor of cat urine . . . looked much lived in. Over time we grew accustom to each other, the tenant paid the rent and we took care of maintenance issues we were told about. It wasn’t until we were ready to start bringing the rent closer to market when the fur started to fly.

The new lease was sent certified mail in June. Although the tax assessor recognizes the address it seemed the postman couldn’t find it and returned the package. Next we remailed it and followed up trying to set up an appointment to go over it and do an annual walk through. Keep in mind your time line. In the event monthly rent is due on the 1st of the month notice must be given prior to the 1st to change any provisions 30 days or more in advance. Then the monsoon season hit. It has been my experience that if your home is 10 years or older, this is about the time you find out if the secondary pan in the attic was installed correctly. There is a drain which runs from the condenser, in this case in the attic, to the ground outside eliminating the moisture in the air. When that drain gets clogged the water backs up and goes into a secondary pan. If the secondary pan is not installed correctly the water begins to pour through the ceiling; as it did in this home. The tenant was uncooperative with the repairman, not wanting anyone in the house with his daughter and refusing to make other arrangements for her. Eventually the repair was taken care of. This is considered an emergency repair which allows the landlord to access the property without 48 hour notice, however, in real life when you have an uncooperative tenant it isn’t as easy as walking in. The tenant then accused me of raising the rent (which was still substantially under market) because he called in a repair. That too is against the landlord/tenant act. My time line proved without a shadow of a doubt that wasn’t the case. Fortunately, for all of us this tenant is moving within 30 days and the property will be brought back up to standard and leased at market value.

Hindsight is better than 20/20. I now will personally hand a newly aquired tenant my lease and addendums in advance when doing the initial walk though. The tenants will be advised at that time to expect this lease when the existing one expires. This would allow for time to explain the new lease, give the tenant a copy of the landlord tenant act and may help avoid the stressful situation I found myself in.

So you are thinking about adding to your real estate investment portfolio and debating what type of property to purchase. Let’s take a look at your options.

SINGLE–FAMILY HOMES

My first recommendation is typically a single-family home. It has been my experience that life is full of surprises and ever-changing, and I like to have investments I can sell quickly if need be. Historically, there are more buyers for single-family homes than for condos, apartment buildings or duplexes. If you need to sell a property fast, it is my opinion that there are more buyers looking for a single-family residence.

One thing to consider is vacancy. No rent means you will not be able to offset expenses. Prepare for this by making your payment a month in advance or having a savings set up for maintenance. Traditionally, the “American Dream” is homeownership. There seems to be more of a demand for a home without a neighbor connected to the property. A private yard for a garden, pet, pond, private pool or spa is an amenity most renters will pay more for.

CONDOS

In the event you are considering a condominium, keep in mind that community association rules can change. For example, one of my investors recently received a notice from the association board expressing its desire to require all units to be owner-occupied. Rules like this will directly affect the value of the unit to a potential investor.

You should also pay attention to the deferred maintenance of the building and the financial statement of the association. The roof, pool, pavement, paint and other structures and amenities have a certain life expectancy, and this could add up to a large assessment in the future. Another consideration is condo conversions. A community previously operated by a management company with set renter screening standards may be different now that the property consists of numerous owner-occupied and rental units. This could affect your property.

APARTMENT COMMUNITIES

So an apartment building looks inviting? There is hope in always having some income to offset the expenses, and those expenses are multiplied when the roof needs to be resurfaced. Typically, when one unit has a problem with a hot water heater, air conditioner, heating or plumbing, it’s just a matter of time before those same problems occur in other unit. And these are not small expenses!

As time goes on and we purchase different types of property, we find what works best for us. I have owned all of the above and look at every investment with as many facts as I can gather. Inspections are important. I always recommend an inspection with an experienced company. Make sure to focus on potential problem areas, such as roofing and plumbing. Although inspection companies typically do not check such items, many will include them if you ask.

Additionally, when considering the purchase of a condo, do not lose sight of the fact that you are part of the association. The association implements assessments to cover big repairs when necessary.