As a property owner or investor, you should have a decent understanding of real estate as a business and as an industry. Part of increasing your knowledge of the real estate industry is learning the definition of its key terms. Knowing real estate terms will arm you with a quicker understanding of the language of many legal documents, articles, and industry experts.
You won’t be confused when reading leasing agreements and keeping up with Kentucky landlord-tenant laws. It pays to build up your knowledge so you won’t feel intimidated no matter who you’re talking to or what contract you’re reading.
To get you started, here are commons terms you’ll meet constantly in the rental investment industry:
Abandonment refers to a tenant moving out without the intention to inform the landlord properly. The tenant may just say that they are going on a trip, and then never come back. When you inspect the unit, most possessions have been taken. A tenant who abandoned a rental home is still obliged to pay for the monthly rent.
Amenities are items of value to a tenant. They may be building facilities such as a recreation center, swimming pool, sauna, gym, or parking areas. They might also be features that are part of a rental such as appliances or smart technology used in the home. Furnishing of a home can also be an amenity such as a granite countertop, top-of-the-line TV, and a dishwasher. Accessibility to transport, parks, and grocery stores can also be categorized as neighborhood amenities. These attract tenants to sign a lease with a landlord.
A bond or rental bond is a certain amount that a tenant hands to the landlord as financial protection. A bond can also be another name for a security deposit. Most of the time written notice of receipt is required by the State to be issued to the renter. The bond will cover any property damages held under the renter’s liability.
For example, upon move-in, the tenant has broken a window due to negligence. The landlord can use the rental bond to pay for the repair damages. Sometimes, when the tenant has moved out, the unit could be dirty so cleaning fees may be taken out of the rental bond. If the tenant has missed rental dues then the bond can also be deducted from the unpaid rent. Any deductions though would require an itemized list to be sent to the renter.
A real estate broker is a professional representative of both buyers and sellers of real estate properties. Brokers have more autonomy than real estate agents. They are expected to have more expertise, higher training, and deep knowledge of the real industry. This allows them to employ real estate agents or open a brokerage firm. They are very well versed in the technical aspect of real estate transactions.
Real estate agents are professionals that carry a license to represent either a property buyer or a property seller. They handle the negotiations and when the deal ends, they can earn a commission from it. This comes from the purchase price of the property so their income depends on the success of the transaction.
Real estate agents commonly work under a brokerage firm or a broker. Their duties will depend on whichever side they work with. If they represent the seller, they’ll provide advice on property price. They’ll also actively market the property. Those who represent the buyer, they’ll check the properties for sale that are within the buyer’s price range.
Constructive eviction happens when a landlord does not provide the implied covenant of quiet enjoyment to a tenant. This happens when the landlord does not take proper actions to fix a problem in the property. It can also occur when a tenant makes a repair request but the landlord chooses to do nothing. Further, the tenant will be forced to move out since the property has become uninhabitable.
Tenants can use constructive eviction in Kentucky as a court defense. Landlords can be guilty of this act when they turn off utilities, like water and electricity, which can prevent the tenant from continuing to live in the unit. Another example would be a growing pest infestation that a landlord refuses to acknowledge or remedy. Staying long-term in this environment is hard for the renter.
A co-signer refers to a person that acts as a guarantor. Most lenders require co-signers as an added safeguard in case the borrower fails to pay the loan or cannot be contacted anymore. By signing the contract, the co-signer accepts the liability to pay the loan or fulfill the terms of the contract when the original borrower defaults on it.
Some borrowers lack a good credit score or financial stability. Oftentimes, they bring in a co-signer with a good financial income. The chance for loan approval is significantly increased. Most lenders prefer letting someone borrow when a co-signer is involved since it’s safer.
An eviction is a court process whereby the landlord or a property manager removes a renter from the rental property. A few of the reasons that make an eviction acceptable is the tenant fails to pay the rent or commits a violation.
Different states have varied methods when it comes to evictions. Usually, a landlord sends an eviction notice after a prescribed period. The renter is given a set time to meet the payment dues or resolve the property damage. If no adequate response is forthcoming from the renter, the landlord files for an eviction lawsuit.
The Fair Housing Act was created in 1968 to prevent housing discrimination against specific classes. These are race, color, disability, religion, sex, national origin, and familial status. Additional classes have been added to the list depending on each State. Knowing the Fair Housing Act is critical especially during the marketing and tenant screening stage of rental property management.
It is important to have a good handle on the terminology that will be used in your day-to-day interactions in the real estate industry. Without this knowledge, you will have a hard time navigating legal documents, contracts, and negotiations that take place.
If you are still feeling overwhelmed, consider hiring a professional property management company like Alltrade Property Management. We can take care of many aspects of managing your rental property, which will save you from the stress of having to do it all yourself. Contact us today!