I frequently get calls from prospective buyers who are interested in investing in income-producing properties, such as residential apartment buildings. The return on these investments can be very lucrative; however, there can also be many pitfalls. Before you buy the property, you should be aware of the responsibilities that a landlord must comply within the state of New Jersey, and I am sure in other jurisdictions as well.

Don’t buy anything without having an engineer inspect the premises. Depending on the size of the property, these inspections can last a whole day. It’s important to get access to all the units, to make sure that they are in compliance with the City Ordinances to get a Certificate of Continued Occupancy.

If there are children in the building, you must make sure that you supply those units with window guards to prevent a tragedy and protect your interests. You must also comply with all the laws against discrimination.

Find out the age and condition of the roof. This component on a building can cost a pretty penny if it needs replacing or has reached the end of its life expectancy.

Check out the heating system and hot water supply tanks. There is nothing worse than getting calls from tenants that there is no heat or hot water in the dead of winter. If the fuel being used is oil make sure you get an insurance policy for oil tank protection in case of an accidental spill. The heating oil supply company can direct you in that department.

Check out the electrical supply boxes for the exterior and interior of the building. Make sure you have enough lighting for the tenants when they come home after dark and in the hallways and common areas. Security of your tenants is of prime importance. Make sure the entrance and exit doors stay locked and that all the tenants get keys for their personal use.

All the common areas and hallways must have hard-wired smoke and carbon monoxide detectors. It’s not enough to have the battery-operated units. The state of New Jersey conducts inspections on buildings of four units or more, once every five years. Since they are always upgrading the codes be prepared to comply with the new regulations. The state issues a Green Card Registration when all the violations are abated. Your insurance company will also require you to comply with all the local ordinances.

If you have tenants who are senior citizens and/or subsidized tenants there are requirements that the Office on Aging and the Section #8 Housing Department will insist on and will conduct their own inspections in order to make sure the landlord is in compliance.

Once all these steps are in order and you proceed to purchase the property, you will start to collect the rent. The security deposits must be kept in a separate rent security account to prevent any commingling of funds. Unless you have the time to do so, it is recommended that you hire a property manager to keep all the records, collect the rents, apply for rent increases, oversee the repairs, rent any vacancies, have apartments painted, deal with the landscapers and snow removal, and all the other items related to property ownership.

By Martha (Malkie) Aaron, Anhalt Realty