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The Only 5 Rules You Need to Know About Investing in Real Estate

Dan Rafter — Thu, 26 May 2016 09:30:22 +0000

The numbers are impressive: The median existing home price for homes across the United States stood at $232,500 in April, according to the National Association of Realtors. That's up 6.3% from the same month one year earlier, and marks the 50th consecutive month in which median housing prices have increased from one year to the next.

This steady rate of appreciation might inspire you to invest in residential real estate. After all, the performance of the housing market during the last four years has been far steadier than that of the stock market. But be careful: Sure, investing in real estate can be profitable — but it can also be risky. Investors who don't do their homework before sinking their dollars into homes could lose a bundle of money.

Here are five rules you must know before investing in real estate.

1. Don't Let Your Emotions Betray You

Jamal Asskoumi, owner of the online real estate agency CastleSmart, says that too many inexperienced investors make the mistake of falling in love with a property for the way it looks. They then invest in it without running the numbers to make sure that the home has real potential to increase in value enough to make it a sound investment.

Falling in love with a property can also cause investors to spend too much on it upfront, making it nearly impossible for them to make a profit after their purchase.

"Unlike stocks that are numbers on a screen, property must be liked and appreciated before it can be invested in, and this is the downfall of many investors," Asskoumi said. "When visiting a property, investors sometimes become attached and feel as though they have to have it, regardless of the price. They end up paying more than what is necessary and lose on the investment."

2. Have Enough Money to Cover Both Known and Unknown Losses

Investing in real estate isn't cheap. You are buying a home, after all. But the real trouble spot for investors are the unexpected costs: If you rent out your investment, you never know what damage your tenants might cause. Fixing that damage could cost thousands of dollars.

You also have to be prepared for possible losses. Housing values can go down as well as up. You need the financial cushion to handle these fluctuations, said Rocky Lalvani, a financial coach and founder of the Richer Soul financial blog.

You also need the money to cover possible monthly losses until your property does appreciate enough in value for you to sell it and earn a big profit. Maybe your mortgage on the property you bought is $2,000 a month but you can only rent the home for $1,800 a month. You'll essentially be losing $200 a month while you wait for your investment to appreciate.

"Be prepared for losses; it's a cost of business," Lalvani said. "Real estate may lose money in the short term while your asset is building over the long term."

3. Don't Rent to Just Anyone

Finding good tenants is one of the biggest challenges in investing in real estate. The wrong tenants could damage your property, stop paying their monthly rent, and force you to evict them, a process that is long and costly.

That's why it's so important to do your research before renting out your home. Run the credit of potential tenants to determine if they've struggled to pay their bills before. Run criminal background checks, too, on potential tenants.

Above all, never simply buy into the promises that potential tenants make to you.

"Tenants will literally lie about anything and everything," said Eric Bowlin, a real estate investor and founder of the real estate investing blog EricBowlin.com. "Assume everyone has no job, no income, and a long eviction record, until otherwise proven."

4. Invest in the Right Neighborhood

You want to invest in an area in which homes are most likely to increase in value. Unfortunately, there is no guarantee that any home, even if located in a desirable neighborhood, will be worth more 10 years from now than it is today.

But investing in the right neighborhood can at least increase the odds.

Study what homes are selling for in any neighborhood in which you want to invest. Study, too, the average monthly rents that homes and apartments in a neighborhood fetch.

A neighborhood that is dotted with new restaurants and shops might be a good investment. So might be one that is gaining the reputation as being an up-and-coming area. Be careful, though: It's easy to spend too much upfront in these hotter neighborhoods.

Paul Ullman, founder and chief investment officer of Asset Based Lending in Hoboken, New Jersey, says that the key is to look at the strength of nearby schools and to target areas that have positive job growth. It helps, too, to know the neighborhood in which you are going to invest.

"Ideally, invest close to home, at least initially," Ullman said.

5. Know Your Limits

Before investing in real estate, be honest about what you can and can't do. If you're not particularly handy, you might not be able to repair that leaking dishwasher on your own, for instance, and might need a plumber to resolve the problem. That will add to the costs of your real estate investment.

You might also want to avoid 2:00 a.m. calls from tenants complaining that the heat in their apartment isn't working. To avoid these calls, you can hire a professional property management company to take over the daily operations of your real estate investment. Hiring such a company, though, costs money, and will eat into your profits.

"I always tell people who are interested in getting into investment real estate to consider how comfortable they are with doing any kind of repairs or construction to a house or rental property," said Todd Barton with the Atlanta office of Renters Warehouse. "You'll have to budget in the costs of contractors or professional property managers. Be honest with yourself upfront so that you don't get into a situation where you are overwhelmed with projects and mounting debts."

Have you taken the plunge and invested in real estate? What other rules should new investors stick to?

This article is from Dan Rafter of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Office Space: Should You Buy or Lease?

Thursday Bram — Fri, 21 Jan 2011 18:49:38 +0000

Link:

http://www.openforum.com/idea-hub/topics/managing/article/office-space-should-yo...

More often than not, office space isn't the biggest concern for a small business. Retail may be a different matter, but when it comes to an office where you can just get some work done, priorities are a bit different. If you absolutely have to have a place to meet clients, there are conference rooms you can rent out, office spaces rented on a shared basis, and even coworking spaces.

But there will likely come a day when you do need office space of your own. A home office can work for a while, but when you need to bring in an employee, you'll want some office space that you can call your own. From there, you have two options: You can buy, or you can lease.

Understanding the Life Span of Your Business

There's a certain ideal that implies owning your office space makes sense — after all, why pay rent when you can build up an asset for your business with a property? But the key deciding factor should be the life span of your business. If you are certain that not only will your business be around in ten years, but that you'll need to be in the exact same place, buying the office space you need may not be out of the question. But if your business has a less-certain future, tying its health to a mortgage can simply tie up your resources from the start.

For a business that is still evolving, renting offers a certain flexibility, even though you aren't spending your rent money on anything that will turn into an asset for your company. If you need a bigger space, you have the flexibility to move. If you need specialized equipment (and therefore a specialized space), you have the flexibility to move. If you need to add retail space, you have the flexibility to move. But in each of those situations, if you buy office space, you'll either need to sell it or rent it out to be able to move.

Look at Your Cash in Hand

A secondary question comes down to how much cash is sitting in your business's coffers. While getting a mortgage on a house is a fairly simple proposition, it's harder to finance the purchase of office space (especially for a small business with a short credit history). At the bare minimum, you'll need to have a down payment of 30% of the cost of the property, and you can't expect particularly great interest rates on any mortgage you take out. Furthermore, you'll be facing the costs for an appraisal, a building inspection and other odds and ends before you get to the closing.

In contrast, renting a space will cost you the first month's rent and a deposit (probably around the cost of a month's rent). That's a fraction of what you'll need to have up front to buy space.

The tax factor can also tip the scales: While your business can deduct the full amount paid for rent in a given year, the cost of buying commercial real estate (as well as improving it) is depreciated over 39 years. That means that your tax situation will likely be better renting office space, although it's important to check with a tax professional to be sure of your own situation.

Ready for a Secondary Business?

By choosing to buy office space rather than rent it, you're putting yourself into a second business — real estate investing. If you buy a property with more space than your business currently needs (generally a good plan if you expect your business to grow at all), you'll put yourself in the position of needing to rent the rest of that space to others until you're ready to use it. While that can be a good thing (at the very least, renting out space makes it easier to be sure you can pay the mortgage every month, no matter how your business is doing), that does mean that you have to pick up the nuts and bolts of being a landlord while still focusing on growing your business. The financial situation may work out, but it's worth looking into what it takes to be a landlord before making a decision.

Buying a property may also put you in the position of selling it for a profit down the road, at least if you were able to select a piece in an area where land values are appreciating. That sort of financial boost can be pleasant, especially for a small business owner who may be looking for capital to invest back into the company.

Making the Final Decision

For most small businesses, renting office space is by far the easiest option. You don't need to come up with much cash up front, you aren't tied to a property, and you don't have to figure out how to run two businesses at once.

Of course, those obstacles aren't insurmountable, and there are some points when buying office space makes sense. If, for instance, you do have the capital available and you can cut what you're paying in rent as well as pick up an investment, buying makes a lot more sense. Similarly, if you're in a market where renting is more of a gamble — an area where rental prices fluctuate dramatically — buying can be a way to keep control of your costs.

At the end of the day, it's important to look at what your business needs. See what's happening in terms of commercial real estate in your area and how that impacts you, too. You should consult with a financial advisor, as well as a tax professional, to see what will be the best fit for you. All these factors must contribute to the right decision for your business. Only then will you know if renting or buying is the best choice.

This article is from Thursday Bram of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Top 10 Real Estate Tax Write-Offs

Brian Davis — Wed, 10 Mar 2010 15:53:22 +0000

As real estate values have fallen and foreclosures have swamped the market, increasing numbers of would-be sellers are deciding to lease their properties instead of selling. These new and reluctant landlords often miss out on massive tax deductions available for investment properties, which can save thousands of dollars in taxes. In an economy where every penny counts, make sure you take advantage of these ten real estate tax write-offs, some of which are exclusive to real estate investors and landlords.

1. Mortgage Interest

Even homeowners can write off mortgage interest, so this deduction is widely known and understood, but mortgage interest can add up to many thousands of dollars each year; not a deduction to miss.

2. Hazard Insurance

If you were a reluctant landlord, you can rejoice over this one: homeowners can't write off their homeowner's insurance, but landlords and real estate investors can write off their hazard insurance premium as a deductible expense. Be sure to save a copy of your insurance premium invoice, and give it to your accountant.

3. Property Taxes

As intuitive as it sounds, thousands of property owners forget to list their real estate property taxes as deductible expenses every year, and end up effectively paying those taxes twice.

4. Property Depreciation

Real estate depreciation is not well understood, but it adds up to a substantial sum each year. Basically, the government allows real estate investors to take a "paper loss" of value on a mathematical model that assumes that properties will steadily decline in value over 27.5 years, from their purchase price to a value of $0. This means you can deduct a depreciation loss of 2/55 of the purchase price, for the first 27 years you own a property. Depreciation can become complicated however, so make sure you discuss this one with your accountant.

5. Legal Counsel & Landlord Forms

Most of the legal bills, including the cost of landlord forms and real estate legal contracts, are tax deductible for your investment property. Important exception: eviction costs, which generally cannot be deducted, but speak with your accountant for further details on exactly which expenses can and cannot be deducted.

6. Property Management Costs

If you've hired a property management company to oversee your tenants, leases, and properties, their costs are tax-deductible, so be sure to add up their fees and write them off (and remember that you'll owe the property manager a 1099 if the total fees were over $600).

7. Private Mortgage Insurance (PMI)

If you have a high mortgage relative to your property's value (and right now, who doesn't), chances are you pay an extra charge each month for private mortgage insurance along with your mortgage payment. These charges, while annoying, can at least be deducted from your taxable income.

8. Maintenance & Repairs

While homeowners can't write off their home improvements, landlords and real estate investors can! There are some exceptions (so touch base with your accountant), but in general any repairs that are required for habitability and safety are tax-deductible.

9. Advertising & Tenant Screening

When landlords have vacant properties, they can write off the costs associated with filling them, such as advertising the rental property, pulling credit reports, obtaining criminal background checks, etc.

10. Settlement Costs

If you're one of the rare and lucky people actually buying investment properties right now, some of the settlement costs you pay can be deducted, such as mortgage lender fees and government recordation costs. Not every settlement charge is tax-deductible, however, so be sure to send a copy of your HUD-1 settlement statement to your accountant so they can comb through it and find all of the deductible costs.

As a final note, remember that your accountant's bill is deductible as well, on next year's tax return, so be sure to include last year's accounting bill among this year's tax deductions, and good luck saving money on taxes!

Guest Post Blurb:

This is a guest post by Brian Davis. Brian is a landlord and real estate investor, who contributes educational content for real estate investors to dozens of websites, and consults for EZ Landlord Forms. Read more articles at EZ Landlord Forms:

This article is from Brian Davis of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Negotiating a Lease with Your Potential New Landlord

Thursday Bram — Sat, 13 Feb 2010 20:08:36 +0000

Link:

http://www.openforum.com/idea-hub/topics/managing/article/tips-for-negotiating-w...

Finding the right space for your business is an exercise in negotiation: assuming you're not ready to purchase a commercial property, you're probably looking at renting an office or a work space. Not only do you have to find a space that will provide you with the location and tools to grow your business, but you also have to convince the landlord to give it to you at a price you can afford.

Room to negotiate

On the surface, it may not seem that renting office space offers a lot of room for negotiation. You look for rentals in your price range, tour the property with the landlord or manager, and sign a lease for the amount advertised.

The truth, though, is that even if you're talking to a management company that can't negotiate on price, there are many opportunities to make your lease a more equitable contract. From exactly what expenses your rent covers to how far the landlord will go to prepare the unit for you, you have an opportunity to negotiate each step of the lease.

If you find that you're dealing with a landlord who tells you upfront that you must take or leave a deal, it's often better to leave it, suggests Stanley Bronstein, a real estate attorney from Scottsdale, Arizona. Bronstein, who has negotiated leases for both landlords and tenants, says:

If your landlord is so strong that they are telling you to take it or leave it (even in this market), my inclination would under most circumstances to tell them to take it or leave it. It is only when a prospective tenant is willing to walk away from a deal that they (the tenant) can negotiate from a position of strength.

Negotiating on price is often the hardest part of coming to terms on a lease. Because a landlord typically must turn around and pay bills for the property as a whole with a certain percentage of all incoming rents — taxes, insurance and, in some cases, utilities — many landlords will stand firm on the rent, no matter how hard you try to negotiate.

It's even harder if you're dealing with a management company, rather than an individual landlord. Management companies often have little say in setting rents: you can either pay what they ask or look for rental space elsewhere. If you look at the prices of comparable buildings in the area, however, and you see a significant difference between the space you're looking at and other properties, you may have some wiggle room.

If the rent is truly an issue, you may be able to negotiate a lower monthly price if you're willing to sign a longer lease. It does depend on the landlord and it can be a difficult choice. Choosing a longer lease can work against you in some cases: what if your business outgrows the space before the end of the lease?

Negotiate the build-out

As long as the rent itself is not at issue, though, many landlords and even management companies are willing to work with you to ensure that you'll be successful in the space you're renting. Many are even willing to negotiate customizing the space you want to rent to your needs.

Many retail and office buildings do not have spaces that will immediately meet your needs; instead landlords work on the assumption that you'll have to improve or, in the case of a new building, finish the space so that it meets your needs. This process, known as "build-out," can be as cosmetic as adding new display cases or as in-depth as rewiring the space to meet specific data needs.

When it comes to negotiating, the key question is who will pay for the improvements needed for the space you want to rent. Some landlords will simply write an allotment meant to cover build-out expenses into the lease. Others will handle getting the work done themselves. You can negotiate how much work will be done to the space or how much money your landlord sets aside for the process. You can negotiate every step of the process down to who will get the fixtures when you move out of the space. It's worth remembering, though, that it can be a subjective process: for instance, if the property manager works with a large number of rental units, he may already have the necessary carpenters or other craftsmen available, at prices lower than you can get on your own. Any allotments are also made with the assumption that whoever does the build-out work is a professional — even if you took wood shop, you probably won't be doing this work yourself.

Potential negotiation points

Other opportunities for negotiation can include every clause in the lease. Bronstein points to the indemnity clause as an example:

Often, leases contain clauses where the tenant is expected to indemnify the landlord if the tenant causes a problem. The leases typically do not contain similar language when the landlord causes a problem. Through negotiation, tenants can often get the landlords to put in similar language that protects the tenant under the appropriate circumstances.

Other items you can negotiate include up front fees and security deposits, signage, insurance provisions, the repairs the landlord will do, and options for expansion space.

It can be difficult to know if you've negotiated the best possible deal, although if it is affordable for your business and gets you the space you need to grow, it's likely a good deal from your prospective. Bronstein says:

While it is unfortunate, we live in a world where you typically won't get something unless you ask for it. The bottom line is that the best deals I've seen from a tenant's point of view come when they've "pushed" the landlord to the point where the deal almost died. You can pretty much bet that if your landlord just about killed the deal (or killed it and then revived it) you've gotten about as good of a deal as you're going to get from that landlord on that particular property.

Talk to your attorney

If you're unsure about any part of a lease, it's worth consulting a lawyer before you sign it. Leases are binding contracts, after all, and it's important to be sure that you've gotten a fair deal before you sign. An attorney specializing in real estate can review a lease, as well as negotiate on your behalf.

This article is from Thursday Bram of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

What can renters do if their landlords are in foreclosure?

Xin Lu — Mon, 15 Dec 2008 20:53:01 +0000

Lately many tenants across the United States who faithfully paid their rents on time were surprised to find eviction notices tacked on their doors because their landlords have not been paying the mortgage. Other tenants are receiving "cash for keys" offers from the banks that reposessed the homes. If you are a renter, here are some precautions you can take to make sure you do not face an unexpected foreclosure related eviction and also a few tips on what to do if your landlord is losing the home you live in.

If you are living in a rental home now in a state with a high rate of foreclosure such as Nevada, Florida, or California, then you should definitely check the public records for any liens or judgments on the home you live in. Fortunately, many counties now have land and tax records online. For example, for San Mateo County you can simply search for "San Mateo Tax Assessor" and find the Tax Assessor's homepage. From there you can search for a specific address and see if the taxes are paid ontime. If the taxes are late or in default on the property, then that is a warning sign that the property may be in financial trouble. You can also search the land records to find any Notice of Defaults, which is usually the first step in a foreclosure in California. If public records are not available online where you live, then you could go to the county seat and search for the record at the county offices. Public records are available to anyone, but some offices charge a small fee to do a search for you. You can also find detailed information such as which bank holds the mortgage on the home, and what the mortgage amount is.

Another way to check if the home you are renting is in financial trouble is by searching the local real estate listings. It is possible that your home is on the market as a short sale and your landlord did not inform you. If that is the case then the home is probably about to foreclose.

If there is any sign of financial distress then it may be a good idea to speak to your landlord and ask what is going on. If your landlord tells you everything is okay when there is a Notice of Default in the public records, then he or she may not be completely honest with you and it is probably a good idea to find a new place and get your security deposit back.

If you already received a "cash for keys" or eviction letter from the bank then you should also check the public records to see if the bank already owns the home. If the bank is indeed the recorded owner then you should definitely stop paying your old landlord rent. At this point you could either pack your bags or try to negotiate with the bank. Some banks may prefer to have occupied homes because they are less likely to be vandalized so in rare instances they are willing to sign new leases, but you still have to be ready to leave when the home sells.

Eviction laws also differ from state to state so in some cases it is worthwhile to fight a foreclosure related eviction. In this article from the Harvard Crimson, a group called No One Leaves is helping renters in Boston stay in their homes and get settlements from banks because in Massachusetts foreclosure is not legal grounds for eviction. However, this is not true in every state so you must research if a legal battle is worthwhile for your situation. Fighting an eviction also makes a renter undesirable to other landlords in the future even if the renter wins so you must make sure that you are willing to take that risk.

The good news is that the powers that be are realizing that these unjust and surprising evictions are becoming problematic for many communities. In July California passed a law that gives tenants a 60 day notice to leave a rental unit after the property is sold in foreclosure, and yesterday Fannie Mae announced that it will not evict renters in the foreclosed homes it owns. Hopefully other banks will follow suit and keep the good renters in their homes as long as they need. For now, if you are a renter, remember to protect yourself by verifying the ownership and financial status of a home through public records. Since landlords usually run credit checks on tenants, I think it is only fair for renters to find out the financial situation of their landlords. Hopefully in the future landlords will be required to disclose their financial troubles for the benefit of renters.

Have you been evicted due to your landlord's failure to pay mortgage? What did you do?

This article is from Xin Lu of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

So You Want to be a Landlord? Part I

Catherine Shaffer — Mon, 10 Mar 2008 16:50:24 +0000

With dropping home prices, a long term investment in real estate is looking pretty attractive. Whether you want to buy rental property outright, or renting is your plan B when your house doesn't sell, the most important thing you need to think about before you become a landlord or landlady is risk. The concept of risk in renting property tends to draw blank stares. After all, you have insurance on the property. You have a lease. What's the problem?

Understanding the answer to that requires a shift in your thinking. Most of us are renters at some point in our lives, whether in college, or while we are working that first job, saving up for a down payment, or in a transitional period in life. When you are renting, it seems like the landlord has all of the power. He chooses the the paint color on the inside of the house, what trees or shrubs you have in your yard, when your lawn gets mowed or your driveway cleared of snow. When your toilet breaks or your roof leaks, a repairman shows up, paid for by your landlord. When your rent is late, even a teeny tiny bit, that landlord is on your butt like white on rice. And when your lease is up for renewal, the rent goes up as inexorably as the rising sun.

And yet, when you trade places, and suddenly you are the landlord, as in a horror movie, you realize the tenant has all of the power. The tenant physically occupies your property. They can damage the structure or the appliances. Their pets pee on the carpet and chew up the woodwork. If they sell drugs, the police could literally seize your property. And the tenant controls that ultimate item of power, the rent check, which you desperately need--on time--in order to pay the mortgage each month. In fact, unless you are very lucky, the rent check probably won't cover the mortgage. Worst of all, if your tenant suddenly turns deadbeat, it can take months to evict them from the house, and all the while that mortgage payment has to be made, on time, every month, or you could lose the house to foreclosure. A myriad of laws and advocacy organizations protect the rights of the tenant, but as a landlord or landlady, you are always the bad guy, and if things get ugly, you will be pretty much on your own.

Are you scared yet? You should be. If you decide to go ahead and become a landlord or landlady for the first time, here are some tips for controlling that risk.

1. Screen your tenants. You will be tempted to rent to the first non-scary person or couple that puts in an application, but be choosy. Make sure that you do a credit check and check references on your prospective tenant. If those thing don't check out, don't rent to them! This is no time to be "nice." Don't rent to the person who deserves the house. Rent to the person who can pay for it. Find out what their income is and do the math.

2. Don't rent to section eight tenants. This is not a rule for life, just for your first experience as a landlord. When you have dozens of units, and enough cash reserves to carry you through some unexpected vacancies, then you have my blessing to take on section eight tenants. In fact, please do. But your first time out, you should turn down section eight applications.

3. Get help from a lawyer. Spend a few bucks to get your lease written up by a well-qualified attorney.

4. Avoid situations that seem strange or "funny" to you. Use your spidey sense to weed out applications that seem weird, strange, off, or otherwise not right.

5. Obey the fair housing laws. You are not allowed to discriminate on the basis of race, color, national origin, religion, sex, familial status or handicap. Obey this law scrupulously to reduce your legal risk.

6. Have proper insurance. Don't skimp on insurance for this very valuable asset.

7. Rent to people with pets. Although pets can do a lot of damage to the house, that effect is balanced by the fact that pet owners tend toward "family" values. If you have a Mom, a Dad, a kid, and a dog, you're probably going to get a rent check every month. As a bonus, your pool of applicants will be larger, because most landlords don't allow pets. Think of it this way. Would you rather replace a carpet for $500, or evict someone who was growing pot in the basement? If you've got an applicant with good references, good credit, a steady job, a family, and a pet, take it as a good sign. Obviously, it goes without saying that you should not rent to shady-looking people just because they have pets.

8. Maintain good relations with your tenants. Respect their space. Respond promptly to maintenance calls. Be understanding of the occasional rent check that arrives late. Don't sweat the small stuff, because a bad tenant is so much worse than you can possibly imagine. Remember that they are more afraid of you than you are of them.

This article is from Catherine Shaffer of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

20 Tips for Getting Your Security Deposit Back

Andrea Karim — Sun, 15 Apr 2007 18:49:54 +0000

Most of my landlords have been really great, but I did experience one rather unethical property manager who tried to bilk her tenants out of every dime they had.

Before moving out of my North Seattle apartment, I cleaned from top to bottom, bleaching the mold that formed in the closets (it was there when I moved in, and I battled it monthly), relining the cupboards with that stick-on liner so they were clean and fresh-looking. My boyfriend helped me to repair a shelf that had completely collapsed in the closet. I never wear shoes in the house, so the carpet was spotless.

When I left, I somehow managed to forget a bicycle tire on my balcony, a spare tire that I had been meaning to patch. The balcony was so moldy and terrifying that I rarely stepped out on to it, and simply forgot that the tire was there.

I was charged $75 for its disposal. And that's ON TOP OF the non-refundable cleaning service.

This wasn't exactly a swanky neighborhood in which tire disposal services run at a premium. We're talking about a musty apartment only one block from the area of town known as Crack Whore Row. And it was a BICYCLE tire, not a car tire complete with wheel and hubcap. I was pissed off that I forgot it, because I could have used it, but I didn't have the energy to fight the landlord over the charge. I wish I had, because it was completely bogus. But I didn't fight the charge, even though I now know I should have raised a stink over it.

Here are the tips I've gathered for how to be a good renter and how to get your deposit back when you move out.

Before You Move In

1. Google the leasing company, landlord's name, property name, whatever. See if you are dealing with people who are on the up and up. Check the Better Business Bureau''s online business listings for the leasing company's name (ask the landlord if they have a relationship with the BBB). The landlord that charged me $75 to throw away a bicycle tire had an awful web reputation — had I known that, I might never have rented the place to begin with.

When You Move In

2. Read your lease carefully. Understand everything that is contained therein. Note that leases are not set in stone. You can actually make alterations to them — nothing ridiculous — but if you find something in the lease that you find unreasonable (like being required to give two month's notice when you plan to leave), you can alter it, cross it out, or make additions to it.

3. Your landlord SHOULD give you a checklist of rooms and ask you to detail the condition of each one. If they don't, make one up yourself. Notice any damage that exists already (dings in wood, cupboards that don't close properly). This can be extremely tedious, so make an evening of it. Invite some friends over for a few bottles of wine (or beer) and walk around the apartment, critiquing the hell out of it.

4. If you have a digital camera, take pictures of every room, every blemish.

5. When you have gathered all of this info, written and photographic, do a walk-through with the landlord and make sure that they sign off on the list. Mail them print-outs of the photos and the room-by-room description (make sure to send the letter certified mail) and let them know that if they don't do the walk-through with you within two weeks of receiving the info, you will assume that they have signed off on your assessment.

While You Live There

6. For goodness sake, try to be clean. Get to stains before they set. If you have pets, clean the place constantly, get an air filter, open the windows, and clean up any mess as soon as you find it. Nothing is more terrifying for a landlord than walking into an apartment and seeing that your 13 cats have made the place damn near unlivable.

7. If you have a problem with any part of the apartment, if something breaks from normal wear and tear, the landlord is obliged to pay for it. If they don't, and you opt to fix it yourself (I had to replace a broken toilet seat and the bathtub caulking), take a picture of the before and after, and add it to your notes, including the cost of replacing the item. Bill the landlord for the item ASAP. If the landlord tries to bilk you later, you have more evidence of what a responsible tenant you were.

When You Leave

8. Whether or not you clean the place really depends on if you already paid a non-refundable cleaning deposit. I have never lived anywhere that didn't require me to pay a cleaning deposit. So I'll clean up anything egregious, like the aforementioned caulking (I so hate caulking), but the rest of the place, I leave broom-clean. If you haven't already paid a non-refundable cleaning deposit, clean the heck out of the place.

9. Do the whole picture thing again. Make sure that the landlord does a walk-through with you, and have them sign an agreement that you have left the apartment in fair condition. Don't feel like a jerk for doing this. You have the right to protect your money and yourself.

10. Don't assume that a super-nice landlord equals a returned security deposit. Be wary of everyone, and don't let something slip just because you think the landlord really likes you.

If a Landlord Tries to Bilk You

11. If a landlord tries to hold on to your money, demand an itemized list of the withheld money. Scrutinize it for redundancy. For instance, a landlord can't charge you to clean a carpet and then replace a carpet.

12. Also, when it comes to replacing things, you probably aren't responsible for the entire cost of replacement, unless whatever needs replacing is brand-new and you completely destroyed it. The useful life of carpeting is generally considered to be seven years. So, if the carpet was brand spanking new when you moved in, and you ruined it, you're liable for new carpet. On the other hand, if the carpet was five years old when you moved in and six years old when you moved out, you should only be liable for the amortized value of the carpet. Assuming you are responsible for damaging the carpet and it only had one year of useful life left, you should only be on the hook for about 15% of the replacement cost.

Same goes with paint: was the the paint brand new when you moved in? If not, you shouldn't be paying the full cost of a new paint job.

13. Let's say you get a bill from the landlord, and they are withholding most of your deposit for made-up charges. What do you do? Know your rights. Every state has different laws regarding just how much leeway both renters and landlords are given. Do check your state Attorney General web site to see what kind of protections are afforded to you.

14. If you think that the charges are bogus, raise a (polite) fuss. A crooked landlord is going to hope that you simply roll over and let them take your money because so many people do just that. Let them know that you believe the charges to be bogus.

15. Write your complaints down in the form of letters and send copies to an attorney, even if you don't plan to hire an attorney. Send them to your uncle the tax attorney, if you have to. I have a friend who works as an office manager in a law firm that I can send CC's to, if I need to. I address them to her, and she tears them up. Seeing a law firm's name is often enough to get people to back down, because no one wants to deal with a lawyer.

16. Don't let the landlord make you feel petty. If they try say something like, "It's only $100!", ask them why it's so important for them to take such a small sum away from you.

17. Keep as much of the communication in writing as possible. Verbal agreements (and disagreements) simply don't offer enough proof.

18. Be respectful in all of your communication. You might want to say "You cheap, cheap bastard! I lived in this ratty hellhole for two years and never complained about the skanky-ass conditions!" but you always come off better if you are polite and well-mannered. If you do have to go to small claims court, judges will look askance at written proof of your rudeness.

19. If you do decide to take a landlord to small claims court, if only to fight what you see as injustice (and keep in mind that if you win, you might be able to get your court fees paid for), do let them know ahead of time. This might avoid the hassle of actually going to court. However, don't make empty threats. Be prepared to litigate if you threaten to do so.

20. If you don't get your money back, do make sure to publicize your experience. Be reasonable, but if you truly believe that you were screwed over, let other people know. Use a site like CitySearch or Yelp to enter information about the property to warn other potential renters. Make sure that you don't exaggerate or do anything that could be construed as libel.

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This article is from Andrea Karim of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread: