Zoe’s Guide to Landlording
4 Steps to Getting a Rental License and Being a Good Landlord in Philly
Congrats on your investment! (Not a landlord yet? Contact us, we can help you with that.)
Owning real estate that generates passive income and accrues equity is the single best path towards building wealth and long-term financial security. Philadelphia is an ideal market to own rental properties with our constant stream of students, job growth and steadily increasing urban population. Whether you’ve already built a large portfolio or are just getting started with your first rental there are a few key steps you should take to ensure you get the most out of your investment for years to come.
STEP ONE: LICENSES
If you are renting a residential home in Philadelphia it is wise to maintain a Rental License, formerly known as Housing Inspection License. For a yearly fee it serves to ensure that rental properties are safe for tenants, it also ensures that you as the landlord have the necessary documentation should you ever need to visit landlord tenant court to evict a tenant.
To be eligible to apply for a rental license you’ll need the following:
You’ll need a Federal Tax Identification Number (for a business) or Social security Number (for an individual).
You’ll need to have Zoning Approval (for two or more units). If you DIYed a duplex, you’ll hit a roadblock getting a license until your zoning is approved so be careful purchasing or making multi-units.
You’ll want to make sure there are no active L&I code violations. No license shall be issued or renewed if the licensing property has any outstanding L&I code violations. Not sure? The city will check its records when you go to apply for the license—see pro-tips below.
You’ll want to make sure you don’t owe City any taxes of any kind. No license shall be issued or renewed if the entity is delinquent in the filing or payment of City taxes. Not sure? Again, the city will check its records when you go to apply for the license—see pro-tips below.
STEPS TO GETTING A RENTAL LICENSE:
Start by applying for a Business Income and Receipts Tax Account Number (BIRT)—basically the city gives an account number to every entity (person or LLC) that will pay city taxes. If you are self employed you may already have one as an individual. More info here: https://business.phila.gov/business-income-and-receipts-tax/
Then apply for a Commercial Activity License –back in the day these were called Business Privilege Licenses and cost $300 to obtain, now they are free. Basically you’re registering your money making enterprise, and if you are self-employed you may already have one. More info here: https://business.phila.gov/commercial-activity-license-city-of-philadelphia-tax-id/
If you are renting to anyone 6 years old or younger the city wants landlords to get a Lead Paint Certification. We’ve asked several of our trusted home inspectors and everyone sent us back to D-Tech Environmental, they charge $300 for the test and usually takes about 3 days to come back (215.233.5888). Please note that the lead test requirement only pertains to homes built in 1978 or before but applies even if the house has been fully renovated since then. You don’t need to have the lead test completed to apply for the rental license, but you should have it done before any tenants under the age of 6 occupy the property.
FINALLY—you can apply for the rental license. Which is quite possibly the easiest step after all the other qualifying items are completely in order. More info on the city’s website here: https://business.phila.gov/housing-inspection-license/
Once you have the rental license number you’ll want to get a Certificate of Rental Suitability which proves to your tenants that there are no active code violations and the house has been deemed safe to occupy by the city. More info here: https://secure.phila.gov/CRS-Onlinev2/
BEEN THERE DONE THAT PRO TIPS:
You’ll only need to get a BIRT number, commercial activity license, and a lead test once. The rental license will need to be renewed yearly.
You should be able to handle the set up and renewal steps online BUT it may end up being faster to do it in person at the Municipal Services Building across from City Hall. I needed to get a license done quickly before some new tenants moved in and the City’s website was down so I spent a couple of hours in the concourse getting everything situated. Luckily the department of Revenue and Licenses and Inspections are right next to each other, so I was able to bounce back and forth to get my ducks lined up relatively easily. And I was able to update the mailing address on my water bills while I was there. GO EARLY. TAKE A SNACK. READ A BOOK. BE NICE TO EVERYONE.
Reward yourself with a donut when you are done!
Seems complicated- yeah sort of (that’s why we made this blog). Can you operate a rental without a license? Yes, plenty of people do but we’d never advise cutting corners. Having a rental license is the best way to protect yourself as a landlord if your tenant decides to report you to L&I or just stop paying their rent for any reason. The rental license is your ticket into landlord tenant court, as opposed to civil court where the docket waiting line is much, much longer costing you WAY more money and aggravation than just getting and maintaining the rental license.
STEP TWO: IRONCLAD LEASE
Clear communication always makes for better relationships especially when money and liability are involved. Having a strong lease agreement sets expectations in advance and keeps peace in the land. Landlords represented by The Collective get access to our detailed vetting system, arsenal of documents and experience as both agents and landlords ourselves to take the guess work out of setting up and executing a proper lease.
STEP THREE: INSURANCE
Make sure your homeowner’s insurance carrier knows that you’ve got tenants and your policy reflects accordingly. Your tenants should be carrying their own renter’s insurance to cover their personal belongings and liability for them, their pets and their guests (minimums to be included in the lease agreement). Your homeowner’s insurance carrier may request a copy of their renter’s insurance for their records. It’s worth a preemptive phone call to find out.
STEP FOUR: MAINTENANCE
Just like check-ups with your doctor, scheduling regular maintenance on your rental will help keep your property in tip-top shape so you can continue getting top dollar for years to come. If you’re not handy or are too busy, good relationships with service professionals will save you time and aggravation. You’ll want to have a Plumber, HVAC contractor, Electrician, Exterminator and Handyperson on your speed dial and holiday gift list! (If you need a recommendation, we’ve got you).
I like to divide regular maintenance calls into two categories, Spring and Fall. This also gives you a good excuse to stop by and check on your tenants and make sure they’re not using your house as a mixed martial arts ring or running their commercial laundry business out of the basement (you never know!)
In the Spring:
Have your roof inspected, make sure any seams or penetrations are sealed and there’s no damage from the previous winter. Don’t wait for leaks to show themselves. If you have a rubber roof you should plan to have it silver coated for energy savings and longevity every 3 years.
Have your AC unit cleaned and change the filters on your air handler if you have central air. Clean and test and wall/window units if they are being included as part of the lease. Don’t wait for the first hot day of the year where every HVAC tech in the city is dealing with emergency cooling issues.
Check for peeling paint, exposed wood, window frames or seams that may need to be sealed. Over time a little bit of water can cause a lot of damage.
In the Fall:
Have your heating unit cleaned and change the filters. If it’s a hot water system have the radiators bled.
Test and change the batteries on your smoke detectors. Maybe your tenant doesn’t have a ladder or took down a beeping box and never put it back up, schedule a time to check personally or send a handy person to make sure that all the smoke and carbon monoxide detectors are functioning properly. While you’re at it make sure your tenant has a working fire extinguisher, which can be purchased at your local hardware store, Target or Amazon for ~$25
Have a termite/ wood destroying insect inspection done. For ~$85 you can have the peace of mind that bugs aren’t eating away your investment. If you are in an area of high- termites or if you’ve had them before you may opt to have a yearly treatment done automatically.
Landlording is not for the faint of heart, but it’s so worth it. Imagine yourself retired, on the beach in Florida or in a hot tub on the Swiss Alps (whatever blows your dress up) raking in the rental checks, thanking your past self for all of your hard work and dedication. You can do it!