- The Washington Times - Wednesday, March 22, 2006

Sometimes I’ll get e-mail from an assertive investor who has started his own real estate investment business and is surprised by a letter from a government agency telling him to cease and desist.

I guess the investor is looking for a sympathetic ear. There’s nothing I can do about the local ordinances.

Novice investors need to be careful that they are not violating a local law or fair housing standards.

• Creating a multiple family housing unit out of a single-family house. When you see a house advertised with a nanny or in-law suite, be careful it doesn’t violate local building codes by having a kitchen in the basement to allow the nanny independence from the family.

Installing a kitchen in many jurisdictions constitutes creating a separate living quarters, and it might violate local occupancy restrictions. If your investment property is in an area zoned for single-family dwellings, it must be only for one family. Creating living space in the house for another separate “family” or entity might be illegal.

If local housing inspectors find out — and they have their ways — you could end up having to yank out the kitchen to ensure the house will remain a single-family dwelling.

m Multiple renters in one house. Some investors have been able to increase the usual rental income by having several sets of renters in the same house.

In college towns, for instance, the house may be rented out one room at a time. If local laws allow it and you’re willing to have frat parties in your investment, this can increase your total rental income.

While the going rent for the house in a college town may be only $1,200 per month for the whole house, if you could get $500 per month for each room instead, you might double or triple the going rental income for your investment.

The problem is that you also might run afoul of local ordinances. A type of rent control, this limitation has several purposes, depending on which side of the legislation you stand. It could be used to discourage carving up a house for student rental, thus preserving the nature of a single-family dwelling community. It also encourages investors to rent out to more stable renters than students, thus reducing problems with parking issues and neighborhood turnover.

• Renting to people “just like me.” Many people can’t swallow the hard fact that they must rent the house to anyone who can qualify. Renting to a nonwhite, a non-Christian or a nonheterosexual scares many investors. The investor might say he doesn’t believe they’re bad people, he just doesn’t want to handle the difference in lifestyle or culture that may invade the investment.

So the investor will try to rent exclusively to people who attend his house of worship, or stick to a certain age bracket. He might advertise only in limited media to ensure only the “right” people call. This is housing discrimination, no matter how you carve it up.

If you want to invest, buy into the fact that housing is available to anyone who can afford it.

As you move forward in the investment game, be sure you understand and are willing to comply with local, state and federal laws. It could make the difference of having a gain or loss in your investment.

For starters, check out the Fair Housing Act (www.usdoj.gov/crt/housing/title8.htm).

M. Anthony Carr has written about real estate since 1989. He is the author of “Real Estate Investing Made Simple.” Post questions or comments at his Web log (https://commonsenserealestate.blogspot.com).

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