June 2, 2006: Tips for Phoenix real estate investors on avoiding unexpected fees and penalties

With regard to my recent advice to a young landlord, a reader phoned to leave this sage counsel:

Don't forget about the rental tax. The worst way to find out about unpaid taxes is by getting a bill for three years' worth of arrears. If you're aware of the issue, you can write the tax into your lease and have the tenant pay it.

You should exercise a similar forethought when it comes to municipal and homeowners association fines. If you don't specify in the lease that the tenant will pay for any infractions, then you will be left holding the bag.

The same goes for utilities. You will need to restore the utility accounts to your name every time the property goes vacant. You should specify in the lease who pays the charges and deposits for restoration of interrupted service.

If you should ever have to evict a tenant, pay particular attention to the utilities, because you could end up parking a big chunk of money as a deposit for your former tenant's bad payment history.

Here's a money-saving tip for a vacant house: Throw the main breaker so that anyone showing the property can't turn the air-conditioning down to 60 degrees and then forget to turn it off. When you're working on the property, you can turn on the power for the time you need it. The rest of the time, your bill is zero. (A refrigerator without power must have its doors propped open or the stench will be outrageous.)

There's a lot more I could cover. I have a model lease addendum I share with my landlords addressing these and many other issues. If you'd like a copy of it, send an e-mail to GregSwann@bloodhoundRealty.com.

Here's my best advice for any landlord: Befriend the neighbors. Their fear is that your tenants will pull down their home values. Let them know that that's your fear as well and that you need them to phone you when your tenants are over the line. You will have addressed their concerns and turned them into an informal espionage network.


Greg Swann is the designated broker for BloodhoundRealty.com, a full-service Metropolitan Phoenix real estate brokerage. This article originally appeared in the West Valley regional sections of the Arizona Republic.

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