Rental property in Philly can be a great investment. On the other hand, there are a lot of things to know and rules to follow that are specific to the city. This blog post is an attempt to consolidate them into a step-by-step list. You may also want to check out this list of landlord resources
When you buy
- The basics. This should go without saying, but you should never purchase a property without a signed agreement of sale and title insurance. Pick your own title company, don’t use one that’s friendly with the seller.
- Check the water reading. The water bill follows the property, not the owner. If the prior owner used a lot of water right before selling the property, or if incorrect usage has been reported because of a faulty meter, you could be on the hook. Get a physical reading from the water meter and give it to your title company.
- Order a U&O. If there are L&I violations associated with the property, you won’t be able to rent it until they have been corrected. A U&O ensures that the property is violation-free and has the correct zoning/usage. You can order a U&O from the city here. You can check online for violations here.
- Avoid junk fees. Get a copy of the settlement sheet at least a day in advance, and make sure you’re not being charged any junk fees!
- Exisiting tenants. If the property already has tenants, get a copy of the leases in advance. Check what the landlord collected in terms of rent and security. All prepaid rents and deposits must be transferred to you on the settlement sheet. If the tenant is behind in rent, that’s the prior owner’s problem not yours. You should also be credited with a prorated portion of the current months’ rent.
- Check the usage. If the property is a multiunit, it is extremely important that you verify that it has the correct usage before buying. Many multifamily properties in Philadelphia are operating illegally. The seller is required by law to provide you with a L&I RealEstate Certification. This will tell you the legal number of units and whether there are any violations. You can also do a preliminary check by looking up your property at Philly’s zoning archive website. Look for the most recent “Application for Zoning Permit” and check the bottom of the form to see that the number of units and their usage matches what you expect.
- Check trash fees. If the property is a multiunit, you are required to pay $300 per year to the city for trash collection. If the previous owner didn’t pay, you will be responsible for all of his back payments! Your title company should check this for you, but many don’t know law exists. Make sure that they do!
Before you rent
- Rental license. It is illegal to rent a property in Philly without first obtaining a rental license. The cost is $50 per year per unit. You can find the form here.
- Commercial activity license. To operate any business in Philly you must have a Commercial Activity License (formerly Business Privilege License) and a Philadelphia Tax Account, and being a landlord is no exception. Obtaining this license is now free, and you can use the same rental license form to obtain it. Write down your CAL number, you will need it!
- Take pictures. Make sure you take pictures or a video before you rent your property. This will give you documentation of the initial state of your unit in case there is a disagreement when your tenant moves out.
- Run a credit check. Running a credit check should be an essential part of your screening procedure. When interpreted well, it can give you insights into whether your tenant will consistently pay on time. We use MrLandlord, but there are a variety of good options. Obtain a signed form from the tenant authorizing you to pull their credit. After you pull their credit, store the form in a locked filing cabinet. Remember, that form contains all the information that someone would need to steal your applicant’s identity, and it’s your responsibility to keep it safe.
- Check for evictions. The largest red flag for an applicant is a prior eviction. You can check for Philly evictions for free at the municipal court website. Check the court website even if your credit check includes an eviction search. The court site is more current and has pending cases.
- Landlord locks / Simplisafe. Landlord locks save time and hassle by giving you a master key that opens all of your properties. Simplisafe alarms are a good way to secure a vacant property. They are wireless, so they can easily be moved from location to location.
- Rental Comps. Not sure how much to rent your unit for? Padmapper, Rentometer and Zillow are great free websites to get rental comps.
- Join HAPCO. HAPCO is the largest Philadelphia landlord association, and at $125/yr joining is a no-brainer. You will get access to their eviction service, their message board with hundreds of landlords who can answer your questions, and more.
When you rent
- Lease. Make sure that you have a solid lease. You can use this one as an example.
- Lead-paint pamphlet. You are required by law to give tenants the EPA lead paint pamphlet. Save some trees and set your printer to print it “4 per page, black and white, fast draft”.
- Philadelphia Lead Disclosure. In 2017, Philadelphia added its own lead form, which much be attached to every residential lease. Philadelphia Lead Paint Form.
- Good housing pamphlet. You are required by law to get tenants the city’s good housing pamphlet.
- Rental suitability certificate. You are required to obtain a rental suitability certificate each time to rent a unit. This verifies that you have a current rental license and that the property does not have L&I violations.
- Voter registration / Trash day. You need to update your voter registration whenever you move, so you could be nice to your tenants and provide them with the voter registration form. It’s also a nice gesture to look up their trash day for them.
- Security deposit escrow. Pennsylvania law requires that all security deposits be held in an interest-bearing escrow account in the tenant’s name. Most banks offer landlord/tenant escrow accounts that can manage any number of tenants in one umbrella account. They will require a W9 form to be filled out by the tenant.
- Copy of driver’s license. You should make a copy of a government photo ID for each person that is on the lease.
- Move-in inspection. A move-in inspection records the initial condition of the property so that there are no disputes regarding damages when the tenant moves out. Here’s is the move-in inspection form that we use.
- PGW Landlord Cooperation Program. In Philadelphia, if a tenant doesn’t pay their gas bill it can get attached to your property as a lien, and you will have to pay it in order to sell the property. However, if you sign up for PGW’s landlord cooperation program and remain in good standing, they will not lien your property. Note that the water department does not have such a program. Accordingly, landlords should keep water bills in their own name and bill the tenant each month. You can sign up for LCP using this link.
- Smoke / CO detectors. You need one smoke detector per bedroom and one per floor in common areas. You need one carbon monoxide detector per floor, and there must be a CO detector within 15 feet of all bedrooms. You can buy combo detectors from most hardware stores.
- Lead safe test. If there are any children 6 and under moving into your unit, a licensed technician must perform a lead dust swipe test prior to movein. The tech will give you a form for the tenant to sign.
After you rent
- Trash fees. Starting in 2010, all multiunit properties are required to pay $300 per year for trash collection. If you don’t receive a bill, give L&I a call. They are probably mailing it to the wrong address and tacking on fines and interest in the meantime.
- BIRT/NPT. All landlords are required to pay business income (BIRT) and net profits (NPT) taxes on their rental properties. Failure to do so results in a $5000 lien, even if you only owe them $20. You can find out more information here.