Smart landlords do serious due diligence
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Heed environmental matters
With environmental concerns taking center stage nationwide, landlords, too, have to take heed. They must watch out for lead paint, asbestos, mold and overall indoor air quality, says Robert Gallo, certified indoor air quality manager who is director of sales and marketing at Stamford, Conn.-based RTK Environmental Group. "If the structure was made before 1979, chances are it will have lead paint in it even if it has been painted over," he says.

First, Gallo says landlords need to give tenants the U.S. Environmental Protection Agency booklet, "Protect Your Family from Lead in Your Home." Then Gallo recommends having the property inspected by a licensed lead-testing company. "Most people are poisoned not from eating paint chips, but from the dust," he says.

Gallo says the do-it-yourself lead-testing kits only examine the surface, but can't determine if there's lead underneath. His company uses X-ray florescence to scan every painted or sealed surface. He charges at least $425 for up to a 3,000-square-foot home, which includes a diagrammed report and advice on the cheapest and safest way to correct the problem. To protect against mold, Gallo says clean up all water immediately.

Consider hiring a property manager
Lisa Vander, founder of Pacific Blue Investments in Solana Beach, Calif., actually tells her clients not to deal with all of these details. Instead, she urges her clientele to farm out that work to a professional property manager.

"If you're retired, that can be your job," says Vander, who considers herself a real estate wealth developer. "If you already have a job, do not take on managing your own property."

A better option, in her opinion, is to have a property manager handle the day-to-day dealings. To do this dirty work, property managers typically charge a percentage of the rent, with many charging as low as 4 percent for very large complexes and up to 10 percent for single family homes. The property owner, Vander says, should "learn to manage the equity in the property and buy other property, while managing the manager."

The owner's concerns should be finding out how to increase the rent by improving the property while decreasing expenses. "The owner should be doing the thinking work and not the physical work," she says.

Other matters to consider
Vander also tells her clients not to go it alone. "Get involved in an apartment association," she says. That way, property owners have others to turn to for advice, forms and referrals. She recommends establishing separate bank accounts for each property so that the finances of each investment can be analyzed separately. It's also important for keeping tax records straight.

Finally, each expert recommends demanding adequate security deposit from tenants, a form of protection if all the above fails. And to avoid the headache that Emamian experienced, insist on getting the deposit before the tenant moves in -- and in certified funds: cashier's check, certified check, money order or, of course, cold hard cash.

Next up: "Advertising your rental property"