Richard Uzelac has been helping rental landlords and property managers upscale their businesses. With RealtyTech, you can enjoy the benefits of a functional website with automated search power. California is a market we service. That’s why, in this blog, we want to provide insights for rental property managers and investors about California’s new law, AB 2493, which is changing how landlords can charge application fees for rentals to make it fairer for renters.
Take Away:
- No more random fee collecting: Landlords can only charge an application fee if they actually have a place available for rent right now or very soon. They can’t just collect fees and applications without an actual unit.
- Two ways to screen applicants:
Option 1: The first qualified applicant gets it.
- The landlord gives you the application form along with their exact screening rules (like minimum credit score, income requirements, etc.).
- If you’re the first person to apply and meet all those specific requirements, the landlord must offer you the rental. They can’t keep looking for “better” candidates.
- If other people apply after the first qualified applicant and also meet the requirements but aren’t chosen, their application fees must be refunded.
- However, if you apply and don’t meet the landlord’s stated requirements (e.g., your credit score is too low), the landlord doesn’t have to refund your fee.
Option 2: Landlord picks the “best” applicant (but refunds everyone else).
- If a landlord wants to review multiple applications and pick the one they think is the “best fit,” they can still do that.
- But, once they choose someone, they must refund the application fees to everyone else who applied, regardless of whether those other applicants met the screening requirements or not. This means even if someone didn’t qualify, their fee is returned if they weren’t chosen in this scenario.
Guide to Becoming a Landlord In California
Venturing into the rental market as a landlord can be a rewarding investment. However, before you hang a “For Rent” sign, it’s crucial to understand the essential steps involved. This guide outlines six critical areas to ensure you’re well-prepared for the responsibilities and opportunities of property ownership.
1. Analyze Your Local Rental Market
Before setting your rent, thoroughly research the rental market in your area. Investigate what comparable properties are leasing for. This vital market research will help you determine a competitive rental rate for your home, one that not only attracts quality tenants but also ensures your venture remains profitable. Understanding current demand and pricing trends is key to a successful start.
2. Prepare Your Property for Tenancy
Your property must be safe, habitable, and compliant with legal standards before welcoming tenants. Under the California Civil Code, this includes guaranteeing proper electrical, gas, and plumbing systems. Additionally, you’ll need to install functioning smoke and carbon monoxide detectors. Ensuring your property meets these essential conditions is fundamental to providing a secure and livable environment.
3. Understand Local and Association Regulations
It’s imperative to familiarize yourself with all local ordinances and any Homeowners Association (HOA) rules that could impact your rental property. This includes checking for rent control regulations in your specific location, understanding any limitations on renting out a second unit if it’s not owner-occupied, and being aware of any rental restrictions imposed by your HOA. Adhering to these rules is non-negotiable to prevent potential legal complications down the line.
For the most important update, please check out California’s new law, AB 2493.
https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=202320240AB2493
4. Consult Your Mortgage Lender
If your property is currently mortgaged, a crucial step is to contact your lender. Some mortgage agreements contain specific clauses that restrict or prohibit renting out the property. Confirming that you’re permitted to rent out your home under the terms of your loan agreement is a necessary precaution to avoid potential breaches and financial repercussions.
5. Consider Professional Assistance
Navigating the complexities of becoming a landlord can be made easier with professional support. Consider partnering with a reputable real estate agent who can assist with drafting robust lease agreements, effectively advertising your property to a wide audience, and meticulously screening potential tenants. Alternatively, you might opt for property management services to handle the day-to-day responsibilities, from maintenance requests to rent collection, allowing you to take a more hands-off approach.
6. Assess the Financial Implications
Becoming a landlord carries significant financial implications that extend beyond just collecting rent. It will impact your property taxes and potentially alter your insurance requirements. It’s vital to speak with your Certified Public Accountant (CPA) and insurance provider to fully grasp how this new arrangement will affect your financial situation. Plan accordingly to ensure you’re prepared for all financial responsibilities. Also, be aware of how renting out your primary residence could affect potential capital gains exemptions.
If you’re a property manager looking for a website for your property management business, we’ve got it covered at RealtyTech. Discover the foundational knowledge that can empower your own growth in property management and how a professional online presence can help you attract and manage your own incredible portfolio.
