So you've purchased your duplex property, and....now what?! How do you legally begin leasing the place? Licenses, inspections, and contracts, oh my! Continuing on in our landlord series (see the first post in the series on what to consider when buying a duplex), let's talk about where to start, legal paperwork, and marketing your duplex to find a tenant who'll be a good fit.
How to Legally Become a Landlord
Request a City Rental License:
The first step in renting out your duplex is submitting the rental license application form along with payment and the additional documents requested on the application.
Permit fees are based on the property's tier rating and the number of units within the property. Well maintained properties are typically tier 1. In Minneapolis, the rental license fee is made up of three parts and must be renewed annually:
Building Fee + Unit Fee + Supplemental Fee (if applicable)
When we initially contacted the city to request a rental license, they informed us that a rental license hadn't been pulled on our place since the early 90's. (The previous owner lived in the whole home with their family.) So, we had a bit of an 'oh crap' moment wondering if we could even get a rental permit due to the number of duplexes already in our area. (Note to Self: Check on this BEFORE you buy the place next time!) Since the home was originally built as a duplex, we were grandfathered in. They granted us a permit. Phew!
City Inspections
Once the rental license application was received, they gave us the city housing inspections phone number to set up a time to have an inspector come out and make sure we were up to code. I remember being so nervous for our inspection- what if we weren't approved! But the inspector was really just looking for major life safety issues and as he was leaving he actually thanked us for being owner-occupied landlords and for taking pride in our well maintained duplex. He said he wished more people would consider being owner-occupied landlords. We saw the inspector out, closed the front door and both took a collected sigh-as if to say- oh thank goodness that's over!
Once we received the rental license in the mail, we posted it in a conspicuous place in the tenant's back hall along with a Who To Call Poster. These acrylic poster holders are what we use to hang them up.
Take an Online Class.
I don't think taking a class is necessarily required, but you get a nice discount on your rental permit application, and it's really useful information to know as you start this new role. The class is called RentED. It's basically short videos, with easy recap quizzes after each video.
Online classes aside, I just try to think back to the fantastic landlords we had when we were renting and pin point what they did that made them so great: responsive, reliable, organized, positive attitude, went the extra mile to bring packages right to our door, etc. I think being a great landlord is really just a lot of common sense!
Rental Agreement
In terms of the rental contract, we used a standard rental agreement, and since the duplex was built in 1934, we needed to include a lead paint disclosure + an EPA pamphlet. (Homes built before 1978 are required to include the disclosure.) We also charged first and last month rent up front.
Marketing Your Unit for Rent and Finding the Right Tenant
Once we had our license and the unit was ready to show, it was time to find a tenant! We initially bought a nerdy 'For Rent' sign at Home Depot to put in the front yard with a number to call. But ultimately we hosted a Saturday morning open house where people could come see the place and fill out a rental application. As people came through, we let them know we'd review applications and let them know by EOD Sunday. We advertised on Craigslist and Nextdoor along with photos/description of the place. I liked the open house route, because it was a more pro-active and intentional way of finding a good tenant. Afterall, the tenant can really make or break this whole experience for you as a landlord, so finding someone who was responsible, self-aware, and an overall kind person was really important!
We also put together this take-away flyer with images, information about the unit, and our contact information for potential tenants to take with them.
I was a little worried that no one would come to our open house. LOL. But several people came and submitted applications! It was such a great way to meet potential tenants and to condense the amount of time we'd spend showing the place. We ended up finding our wonderful tenant this way, and we never even needed that nerdy aformentioned 'For Rent' yard sign.
A note about rental applications:
Here's a link to the rental application we used through the National Association of Independent Landlords. At the bottom of the application, you'll see there's language requesting a non-refundable application fee. We didn't charge application fees for potential renters, because in the State of Minnesota, if you charge an application fee, you're required by law to give each turned-away-person written reason they weren't selected for the unit. We just didn't want to deal with that piece, so we didn't charge for it.
Tax Time
No matter how long your tenant has leased their unit, 1 month or 12 months, you'll need to provide them with a Certificate of Rent Paid by the end of January (for tax purposes). It sounds daunting, but you basically follow the form's instructions and multiply the amount of rent your tenant paid that year, by your state's given percentage. In Minnesota it's 17%.
As the owner-occupied landlord, you'll also get some great tax breaks too, but I'll dive into that more with the next and final post in our landlording series: Pros & Cons of Landlording. Thanks for making it to the end of this post with me. Is there something I didn't address or something you'd like me to elaborate on? Leave it in comments, and I'll do my best to get back to you ASAP.
If you want to read more, here's the first post in this series on what to consider when purchasing a duplex!
Also, more good reads:
