Buying
Rental Properties

Property As An Investment
Prior to the change in the Federal tax laws in 1986, rental property was considered a viable method of "sheltering" losses for a tax benefit at the end of the year. Although there is no longer the "shelter" benefit, rental property is still a good investment.

For owners of single family homes, duplexes or condominiums and some apartment complexes, there are still tax advantages with specified conditions and limitations. One of the conditions is that the owner must participate in the management of his rental property in order to claim expenses against income from it. Limitation in the amount of expenses is based upon the owner's annual income.

A property management company can assist you in determining what rent you can anticipate for your investment, based on rents for other comparable properties in the area.

Leases for Residential Properties
Residential leases set out what is expected of both the landlord and tenant to avoid misunderstandings during occupancy and after the tenant vacates.

The lease should include the address of the property, the names of the tenants who will be responsible for paying the rent and taking care of the landlord's property, as well as the number of people who will occupy the dwelling. It should also contain the amount of rent, when it is due, and the name and address of the landlord. If the landlord allows a pet in his residential property, there should be a clause or addendum to state the pet's description and the conditions under which it can stay. A lease should also mention any maintenance and repairs that are expected of the tenant or landlord. The lease should include the right of access of the landlord in the event he lists his property for sale during the term of the lease.

A landlord will want to carry dwelling insurance to cover the property and provide liability coverage. The lease should state that the tenants are to have renter's insurance not only to cover their personal property, but also to provide them with liability coverage should they cause a loss to the landlord's property. The handling of the security deposit, the tenant's money held by the landlord to pay for any damage to the property when the tenant vacates, is a very important part of the lease agreement. The lease should tell the tenant what must be done to assure return of the security deposit after vacating the landlord's property. It should set out the amount of the security deposit (not to exceed one month's rent), tell the tenant where the money is being held and whether it is an interest or non-interest account.

There should be a property condition and inventory form filled in at the time of occupying the premises. Residential leases must be in compliance with the Hawaii Landlord/Tenant Act. Should any term or condition be contrary to the statute, the statute will prevail.