Thanks to the plunge in the price of single family residences, buying one as rental property may once again make economic sense. Whether it would make legal sense for a do-it-yourself amateur landlord is questionable.
Finding a tenant is the easy part, provided you don’t run afoul of the Civil Rights Act and wind up defending yourself from the ACLU. Then there’s the old saw that a man’s home is his castle. A generation or two ago that proposition was only taken literally when someone came crawling through your bedroom window at three in the morning. It wasn’t a big deal if the landlord dropped by now and then to check the place out and make sure the tenant wasn’t destroying it.
Now tenants are very particular about letting the landlord onto the property, much less through the front door. This insistence on absolute quiet enjoyment and exclusive possession has hardened through legislative amendments to California’s landlord tenant law. Landlords now face complicated advance notice requirements to inspect their own property, and even more complicated ones to show their property for sale.
Along with past tolerance of informal inspection by the landlord went the acknowledgment that rent had to be paid on time. If a tenant couldn’t pay it he moved out voluntarily. If he could pay it but rented month to month, he also moved out voluntarily on 30 days notice of termination. Now if the tenant has occupied the house more than a year, he gets 60 days notice. And every tenant who doesn’t pay the rent or ignores a termination notice turns into an amateur lawyer.
According to landlord tenant law there is a quick “summary” lawsuit called unlawful detainer for evicting a tenant, but if a landlord doesn’t do everything perfectly he may well lose. And a recalcitrant tenant can easily postpone the inevitable for weeks by filing a bogus answer to an unlawful detainer complaint and declining to depart until the day before the sheriff shows up to put him out on the street.
Other nightmares are premises liability and uninhabitability. If the tenant falls through the deck, the landlord is strictly liable for the tenant’s injuries, even if the tenant never complained about the deck and the landlord had no idea it had termites. Uninhabitability prevents eviction for non-payment of rent. That sounds fine in theory, but uninhabitability now extends to things your grandparents would have fixed themselves or ignored. And now there’s that new four letter word, MOLD! Add allegations of mold by the tenant and things get seriously ugly under landlord tenant laws.If you insist on becoming an amateur landlord, hire a professional management company to handle repairs and deal with tenants. A professional management company is in a much better position than you are to handle those tasks. They also stand between you and the tenant, their insurance as well as your own protects you, and you can yell at them instead of the mirror. If you insist on being hands on, at least get a lawyer to handle evictions for you. If you attempt to navigate the unlawful detainer minefield yourself, you will probably blow it. Getting a lawyer to form your own corporation or limited liability company to own your rental property will also help protect your nest egg.