Real Property Attorney - What is the real estate lawyers role?
As a landlord with my own personal rental properties, and as a property manager for some of my investor clients, I see all kinds of expenses that can arise without warning in the rental world. Vacancies, repairs, evictions and location all play a part in the amount of money that an investor will need to have on hand in order to make the rental a viable venture. Planning for a rainy day is an essential component in the success of any real estate investment.
The average vacancy rate in the state of Utah for 2017 was 5.5%. However, as recently as 2014, that figure was as high as 8.9%. That means that for every year that a property is used as a rental, there is a high probability that it will stand vacant for at least 1 month. As we are all aware, the mortgage payment is still due whether the rent is being paid or not, so there better be something in the piggy bank to bridge the gap.
Even when the rental market is relatively strong, there is always the chance that you will end up with a tenant that stops paying. On the front end, potential deadbeat tenants can be avoided by doing a thorough background check. Run a credit check to find out their payment history and if there is a pattern of broken commitments. Obtain the phone numbers of references, employers and past landlords, and call them. On the back end, you can protect yourself by collecting the first month's rent, a deposit, and the last month's rent at the time the lease agreement is signed. That way, if a tenant does stop paying, you have at least a month of reserves (provided by them) to get them out of the property.
The eviction process in the state of Utah is a four-step process:
a.) First, the landlord must serve the tenant with an eviction notice (also known as a "Notice to Quit" or "Notice to Vacate."
b.) If the notice is ignored, the landlord files a lawsuit and the tenant is served with a court summons and complaint.
c.) The judge will rule either in favor of the landlord or tenant after the case is presented.
d.) If the ruling is in favor of the landlord, the court will issue an "Order of Restitution" which directs the sheriff to forcibly remove the tenant from the premises.
The cost associated with an eviction will vary depending on if lawyers are involved and whether or not the eviction is disputed by the tenant. You can find more information at utcourts.gov/howto/landlord [http://utcourts.gov/howto/landlord].
The repairs necessary to keep a property in working order seem to be directly proportionate to its age. I have a town home rental that was built in 1997, and the repairs have been limited to relatively simple things like toilets and faucet aerators. However, one of my clients purchased a home built in the late 60's, and I have seen them replace the air conditioning unit, rehab the furnace, fix the fireplace flu, repair the sprinklers, and patch the leaky roof (all in the last 2 years). Needless to say, get a comprehensive inspection of all the home's systems before closing on the purchase. You'll be glad you did. However, there is no such thing as the maintenance-free home, so plan on having some reserves to be able to pay the handyman.
The amount of rent you can charge will be dictated by the area you are in. Additionally, if you rent in low-income areas, you can expect the tenant turnover to be much higher than in high-income areas. For myself and the clients I work with, a lease term of 1-year is minimum when signing an agreement. Recently, in a high-end neighborhood on the east side of Salt Lake County, we had a couple sign a 2-year agreement (with an expressed interest in staying even longer than that). Choose your location wisely - you'll be glad you did. It will lead to fewer vacancies, and therefore the need for smaller cash reserves.
Remember, if you run out of money, you'll be out of business in a heartbeat. While "getting in the landlord game" can be relatively easy with decent credit and a down payment, it is only the beginning. Go in with your eyes open, and you won't be taken by surprise.