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Investing in real estate is a great way to earn short term rental income and long term ROI. There are a lot of opportunities for building wealth and creating a stable financial future when you own investment property.
However, it also comes with a lot of risk. This is especially true in California, which has a reputation as being one of the most tenant-friendly states in the country. As long as you understand the legal responsibilities of landlords, you should be fine. But, it’s easy to make a mistake, and those mistakes are usually expensive.
There are a few common areas where investors and even experienced landlords get into trouble.
Fair Housing and Discrimination
The federal Fair Housing Act prohibits discrimination based on race, color, religion, national origin, sex, familial status, and disability. These things may seem obvious and you probably don’t imagine you’d ever discriminate against an applicant or a potential resident. However, it’s easy to make a mistake in your marketing, your screening, or even your lease enforcement process. Make sure everything is consistent and well-documented. Don’t tell a potential applicant that a property is close to a church or perfectly safe for an unmarried woman. These things are discriminatory and you can end up with a serious fine.
California goes even further with fair housing and says you cannot make decisions about who you will rent to based on the applicant’s source of income, sexual orientation, or immigration status. Be careful what you ask and what you assume.
Renting to People with Disabilities
In addition to the Fair Housing Act, residents and applicants with disabilities are also protected by The Americans with Disabilities Act. According to this act, you need to make reasonable accommodations for residents or potential residents who have physical or mental disabilities. This might mean reserving a parking space for someone outside of your multi-family building. Or, it could mean installing a wheelchair ramp or shower bars to help someone with mobility issues.
Usually, the subject of service and support animals comes up when we’re talking about applicants and residents who need accommodation. Even if you have a no-pet policy in your rental property, you cannot deny a qualified resident who has a service animal or needs an emotional support animal. You are not permitted to restrict breeds or sizes. You have to accept the animal because the law does not see it as a pet. It’s an accommodation. You are not permitted to collect a pet deposit or a pet fee for service and support animals.
Security Deposits and Evictions
California law is pretty specific when it comes to the collection and return of a resident’s security deposit. You’re only allowed to collect up to two times the amount of rent in a security deposit on an unfurnished rental property. And, you have 21 days after the resident moves out to return all or some of the deposit. You cannot charge the deposit for normal wear and tear. Security deposit mistakes are expensive. If you’re found to violate California’s security deposit law, you may have to pay three times the amount of the deposit in damages to the resident.
It’s also getting more difficult to evict residents in California. Make sure you have a good, documented reason to want them out, and follow the legal steps carefully. You are not permitted to simply change the locks or turn off the utilities when a resident has not paid rent.
There are so many laws to be aware of when you’re renting out property in Whittier. This is simply an introduction. For more information, please contact us at LS Property Management. We’d love to tell you more.