The Fair Housing Act of 1968, as amended, prohibits discrimination on the basis of race, color, religion, nationality, familial status, age, and gender. Many state and local laws also forbid discrimination on the basis of sexuality or source of income, and the Americans with Disabilities Act makes it illegal to discriminate against the disabled. If you harbor any such prejudices and would allow them to come into play when renting a housing unit, then you're probably not cut out to be a landlord. However, many sincere real estate investors make honest mistakes that result in discrimination lawsuits. The best way to avoid them is to be informed.

Watch the Wording of Your Ads

The Fair Housing Act (FHA) may appear to be common sense, and most people would never think of discriminating against people of different races or religions, or on the basis of gender. However, it is important to note that the FHA extends beyond the screening process, and into advertising as well. This is where many landlords and property managers make fatal mistakes. After all, there are people who scour the classifieds looking for inappropriately worded ads so that they can pounce on them and threaten a lawsuit. While someone must have standing to bring suit, these scoundrels often work in coalitions to ensure that all of their bases are covered.

For example, if you own a rental property in a predominantly Jewish community, its proximity to the local synagogue could be a major feature. But if your ad says "within walking distance from the synagogue," you could be sending the message "gentiles need not apply" - even though this wasn't your intent. And keep in mind that you may not discriminate on the basis of whether a couple is married, whether or not children are to live in the unit, or on the basis of age. Novice landlords may not be aware of these areas of concern, and while it's a good thing that citizens are more aware of their rights today, it can be a very bad thing for well-meaning landlords who are out of step with the times.

Be Aware of Your Local Laws - And Use Good Business Sense

State law and local ordinances can extend similar protections granted under the FHA to other groups. For example, California, Minnesota, and North Dakota prohibit discrimination based on source of income - in other words, a landlord cannot discriminate against would-be tenants who rely on public assistance. Putting the political perspective of the landlord aside, such discrimination makes very little business sense, since people on welfare or social security are virtually assured of a fixed income.

Some cities make it a crime for a landlord to discriminate against lesbians and gay men. If you are uncomfortable renting to same-sex couples and you live in a community progressive enough to pass ordinances protecting their rights, then you are either in the wrong line of work or the wrong town. There can be little rational argument in favor of discriminating against same-sex couples in an accepting locale.

The Americans with Disabilities Act

The Americans with Disabilities Act (ADA) prohibits discrimination against the disabled, and also requires landlords to make "reasonable accommodations" to disabled tenants. Who decides what's reasonable? Typically, judges, if it comes to that. But while most landlords are aware of the ADA and would never stoop so low as to discriminate against a person in a wheelchair, many are unaware that the ADA also protects mentally disabled tenants. A mental disability could also include recovering alcoholics and drug addicts. The downside of this is that these types of people are prone to relapse and if they do, can cause serious problems for you and other tenants. Everyone deserves a second chance, and many recovering addicts go on to be productive members of society. The ones who are unable to recover typically have other problems, and thus it is vitally important that you document additional reasons for rejecting their rental applications if you decide to do so.

The Name of the Game is "Wealth Protection"

If you own rental properties in your own name, you are asking for a world of pain - it's the equivalent of wearing a giant "kick me" sign on your back. Instead, own your properties in corporate, limited partnership, LLC, or trust form. That way, even if you are the victim of a discrimination suit, or any other type of judgment, your personal assets may be protected against the liens of creditors.