Investing in Rental Properties Makes Financial Sense

There are many reasons why becoming a housing provider can help you meet your long-term financial goals:

• Rental income can provide a steady, recurring income stream, supplementing your existing income or even becoming your primary income source.
• Real estate tends to increase in value over time, so owning a rental property can be a long-term investment that grows your wealth.
• As you collect rent and pay down your mortgage, you build equity in the property, increasing your net worth.
• Landlords can be their own bosses and manage their properties on their own schedule, offering a degree of independence and flexibility.
• Rental properties increase housing options, especially in areas where affordable housing may be limited.

Of course, there are financial risks involved, such as vacancies, normal wear and tear, and upkeep/repairs for heating, cooling, and water systems. It's important to budget for these with a financial cushion to cover these costs. However, there is one cost that housing providers should never have to cover: damages to a property caused by a tenant.

Landlord-Tenant Guides define each of your responsibilities.

At orientation for new tenants, EDEN's Rental Specialist thoroughly educates the participant on the do's and don'ts of program eligibility and their responsibility as a good tenant. Nothing is spared!

The Specialist provides each new participant with a handbook: Landlord-Tenant Rights and Responsibilities: A Guide to Tenancy or Ohio Landlord-Tenant Law: What You Should Know! Both cover topics necessary for understanding what it means to be a good tenant, such as damages, repairs, wear and tear, escrows, security deposits, and more. These booklets can be printed from EDEN's website.

It's always good to read these at least once a year to remind yourself of who is responsible for what. Feel free to distribute these to your non-EDEN tenants.

Budget for normal wear-and-tear repairs

Property declines are a part of the tenant's occupancy, and small deterioration is unavoidable and considered ordinary wear and tear.  This is NOT something that can legally be charged to the tenant or taken from a tenant's security deposit. Wear and tear depend on its use, age, and quality of material.  

What are some examples of wear and tear and not abuse?

• Small indents caused by furniture resting on a wall.
• Old carpet that has worn out or starts to discolor.
• Minor marks or the floor.
• Painting and finishing that fades.
• Piping or metal that rusts.
• Outlets, GFCI, and light switches that no longer work as intended.
• Dents in the wall from door handles.
• Loose grout.
• Loose railings.
• Leaking faucets.
• Loose knobs.
• Peeling caulk.
• Fading enamel in tubs.

What constitutes property damage?

Property damage is harm to your property that lowers the value, usefulness and functioning of your property. Damage can happen from ordinary use, neglect, and intentional abuse. It does NOT include normal wear and tear.

Examples of property damage may include:

• Large holes in the walls or floors.
• Changes to the property that were not pre-approved, such as removing the cabinetry, removing a sink or toilet, painting the walls or house an obnixious color.
• Permanent stains, cigarette burns, or holes in carpeting or flooring; broken floor tiles, etc.
• Misused appliances, broken doors, or cracked windows resulting from abuse.
• Cracked or broken mirrors.
• Writing/drawing on walls, floors, doors or cabinets.
• External and internal damage due to animals.
• Vehicles that have parked on the lawn, causing damage.
• Excessive trash that you can be fined for.

Consider doing a monthly or quarterly walk through your rental property. If you discover damages, this would be a good time to go over the lease with the tenant, focusing on any clause that relates to damages, photos before they moved in, available security footage, or witnesses.

If a tenant admits to the damage and tells you that they will have it restored, you might want to refuse the request. If you agree to allow the tenant to make changes or repair broken items, it can lead to shoddy repairs, more damage, and more expensive costs that come out of your pocket. Property maintenance and wear and tear items should be taken care of by you.

Document, document, document!

Prior to leasing a property, thoroughly document its condition prior to move in. The best documentation is photos of the property, especially:

• Doors, locks, and handles.
• Screen doors; security doors.
• Windows and window locks.
• Appliances: stove, refrigerator, microwave, dishwasher, washer, dryer.
• Wood floors, carpet, ceramic.
• Walls.
• Smoke and CO2 detectors.
• Garage door.
• Furnace and hot water tank.

You can include the photos as an attachment to the lease and have the tenant initial them to indicate they agree that this is what the property looks like before they move in.

It is also a good practice to complete a walk-through with them, help them to understand what wear and tear means, and explain their responsibility for covering the costs for estimates and repairs that are required due to their (or their guests') deliberate destruction or neglect. Of course, all of this should be documented in the lease.

And remember: the tenant is responsible only for damages caused by them or their guests. Fallen trees, plumbing leaks, or faulty furnaces are your responsibility.

Damages by neglect ...

Negligent damages caused by a tenant occurs when there is an issue affecting the property but the tenant does not inform you of it—such as when there is a leak and a tenant fails to inform you and over time and it turns into a flood; or a furnace stops working due to disconnection of utilities in the winter and the pipes freeze and burst.

Negligent damages caused by a housing provider occurs when they do not address a tenant's request for repairs in a timely manner, delay the repairs, or hire unlicensed contractors to attempt to complete the work. If the needed repair is outside of the dwelling, the tenant may not be aware of it—such as a hanging gutter that falls and injures someone, a tripping hazard that causes someone to break their leg, unstable railings because of inadequate maintenance and allowing the deficiency to persist, etc. You the housing provider can be held liable for the injuries caused by neglect and failure to maintain and repair your property as required by law.

The tenant has the legal right to request repairs in writing. The housing provider should complete the repairs within 30 days, except when it requires a 24-hour emergency repair for tenant safety. It is also a good idea to keep documentation and invoices/receipts for any requests and repairs.

When damages occur ...

As a housing provider, it is your responsibility to be aware of local Landlord-Tenant laws and which party is responsible when it comes to damages.

If you discover damages caused by a tenant while they are living there, this can be grounds for an eviction depending on their severity. If the repairs for damages does not exceed the security deposit, you can make the repairs and ask the tenant for another security deposit to cover future damages. If the costs do exceed the security deposit, you can decide to ask for a higher security deposit or begin a lawful eviction.

If you have documented damage caused by a tenant that exceeds the amount of the security deposit, you have the option to file a small claims case. If you want to avoid legal action, consider mediation that seeks to have a positive outcome for both parties. The Cleveland Mediation Center can be a great resource.

Resources for EDEN participants

EDEN continually applies for funding that will assist housing providers in cases of participants causing abuse of property or negligent damages. We do not always get the funding, and the funders may dictate what the grant can be used for. In some cases, however, when monies are available, we have been able to help cover the cost of damages.

Recently, we have exhausted the Landlord Incentive funds. At present, there are landlord risk mitigation funds known as Stepping Up. These funds are available for housing providers whose EDEN participants have caused damage through the destruction of property or the abandonment of property. To be eligible, the guidelines state that a tenant must have past or present justice involvement—e.g., been convicted, incarcerated for a month or more, probation, parole, etc.—repairs have been completed, and EDEN has received photos and invoices submitted with the application. The Stepping Up monies allow for a maximum of $5,000.00 per tenant. This is a stipulation that must be followed, and we cannot deviate from it.

To see if a tenant meets the qualifications for the Stepping Up funds, please contact Katie Westbrook at kwestbrook@EDENcle.org. If the tenant qualifies, we will have someone contact you and walk you through the claim process.

When we have other grants that are less restrictive for damages, we will inform you through this newsletter.

Final thoughts ...

It is your right to maintain the property and to have it returned in as good a condition as when the tenant moved in ... less normal wear and tear, of course.

EDEN's role is to administer housing subsidies paid to the housing provider on the tenant's behalf. EDEN does not—and cannot—enforce the lease agreement. The lease agreement is a legally binding contract between the tenant and the owner or management company.

EDEN Housing Stability Specialists are available for support. Their role is to intervene and to act as an unofficial mediator that links the tenant to services and resources, make them aware of program violations, and assist in resolving issues between the owner of the property and the tenant.

If you report damages to EDENLandlordInfo@EDENcle.org, they will inform you of available funds for damages you might be eligible for.

If a tenant refuses to allow you to enter the property to make repairs, that is a program violation. Email EDENLandlordInfo@EDENcle.org, and they will make a referral to the Housing Stability Specialist to explain this to the tenant.

Thank you for being an EDEN partner and helping us provide housing solutions to people experiencing homelessness or housing insecurities!

Communicate with us!

We value our partnership with you. EDEN cannot fulfill its mission of providing housing solutions to people facing the challenges of housing insecurities and homelessness without the support of Housing Providers and managers like you. If you have any concerns, please reach out to our Community Housing Agents at the information line 216-503-6369 or email EdenLandlordInfo@edencle.org and we will do our best to offer solutions or refer you to the person at EDEN who can help.

 



 

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