I am about to become the owner of a rental property.
Before taking this on I talked to a financial planner. My mortgage on my house will be paid off by the time I turn 40 so I’m in good shape there, I have an eight month emergency fund, the only debt I have is my mortgage and my vehicle, I have a 401K, a Roth IRA, a few stocks, a savings account and a piggy bank! I wouldn’t take on a second mortgage (for the property) without having those things in place.
According to the financial planner, due to the housing market bust a lot of people aren’t qualified (creditwise) to purchase homes and need to rent. The market is definitely a buyer’s market now and condos are super so I got one that sold three years ago for $181K for $43K. I’m putting down half and financing the other half. I feel like I’m set on all that.
I have no idea about what it takes to rent property out so I decided on using a property management company. They will handle finding and verifying tenants, collecting rent, handling maintenance, inspections, and evictions. Luckily the state is very landlord friendly and evictions can be filed after five days of the rent being late.
Anyone out there have any advice for dealing with property management companies? This company takes 10% for doing their duties, has been in business in the area for 28 years, and is certified/bonded. There is no set up fee and they will give three months free service. They charge $295 for the signing of a tenant although if they stay less than 6 months the next sign up is free.
What things should I ask about or look out for? Even if you do your own landlording and don’t use a property management company, I’d love to hear any tips you might have.
Note the exact paint colors in each room. Not “beige”, but rather “Sherwin Williams Classic 99 semi-gloss SW6126 Navaho White”. Keep some extra on hand for the tenant or someone from the property management firm to do touch-ups.
Want to rent the place FAST? Allow pets. Of course, be mindful of breeds and temperaments; reserve the right to screen. Male cats could be troublesome in a place with wall-to-wall carpeting.
Require the tenant to carry renter’s insurance. Note that it doesn’t take place of your homeowner’s policy.
The most confusion was over the water and sewer bill. In the community where my rental property is, it’s cumbersome to transfer the billing from the landlord to a tenant. Just pay the water yourself; it’s usually not much.
Leave a supply of appropriately sized furnace filters for the tenant to change.
Consider who will maintain landscaping; you or the tenant. I left a lawnmower for my tenants, and they’re responsible for upkeep of the grounds. They’re doing a GREAT job so far.
Just say no to Section 8, unless laws in your city or state prevent it.
No smoking. Cleaning pet hair is nothing compared to accumulated nicotine.
Dammit! something ate my post.
short version then.
Ensure that if there is an HOA that the renters are given a copy of the charter along with their other information. Don’t let them, the HOA, or the management company create problems and fines through ignorance.
Take pets. many pet owners will stay and pay for years. You’ll rent the place in a snap too. Don’t charge a pet deposit, but have the lease entail that any damage caused by the animals will result in the forfeiture of the security deposit, and possible penalties if it exceeds that. There are loads of people out their with nice, large, older dogs that will happily pay a premium to live in place that welcomes their pets.
NO CARPET. Put down something else and let your renters get area rugs to warm their tootsies. It will increase the property and rental value of the condo as well as eliminate a huge hassle and long term costs of cleaning and replacing crappy, dirty, nasty carpet. Considering the deal you got, a few grand to do the whole place is a sound investment.
Insist on being CC’d on all communication between your property company and the renters. this way you are aware of what goes on there, and can ensure that you are getting your moneys worth out of your management company.
Thanks guys, already great tips. I am a pet person so I would definitely allow pets
It was built in 1999 so I’m hoping maintenance will be minimal, but I’m also realistic and know how things work. The management company says we can set a threshold so they have to contact me when a repair will be over a certain amount. Not sure what to set it as, maybe $300?
It has 2 bedrooms and 2 baths, a covered carport with assigned parking, tile and hardwood flooring, gated community, a huge pool for the condos to share, and all appliances included. The management company does the groundskeeping and they also do extermination once every six weeks.
Here are a few pics of the place (I uploaded to my photobucket to remove the address information from the real estate site)
My management company sends me a statement every month. and I go over it and check the numbers. Ask questions, you are their customer.
Water is mormally billed against the property in most states. That means that if the tenant does not pay it you will be responsible, so either have the management co pay it or insist the water co sends you a copy of the bill.
As for pets. I have a friend who had two houses and he rents to people with pets. He can ask for larger rents and a larger deposit so he figures he makes more money.
If you replace the floor covering do not go witrh carpet. The throw rugs will be the tenants any stains will be theirs.
I would consider using a CPA do do your taxes. Mine is expensive but he has saved me money land kept me out of trouble on filling out forms.
Remember either keep lots of liabiality insurance or set up the property in an LLC or both.
Consider joining the local apartment’s owners association.
Before I was divorced my wife and I had rental properties. The best tip I ever got was to appreciate that a few bucks could make a huge difference to tenants, so set the rent slightly below similar properties in the area and choose the best tenants you can. We only had one family move out on us and that was when they bought a place. And they found new tenants for us, some friends of theirs. Our rental properties were nearby and we used to do things like buying gifts for new babies and for the kids at Christmas. It’s pretty cool when your tenant asks, “Is it OK if I landscape the garden and tile the wet area down the side?”
We ended up doing away with agents when our contract finished because by keeping the rent down you don’t have an empty place to fill. Agents seem to be obsessed with maximizing rent, presumably because they earn more every time the property is vacant. However we took the attitude that a couple of vacant weeks a year costs more than discounting the rent a few dollars.
If, after a while, you begin to dislike or distrust the management company you’ve chosen, don’t be afraid to make a change.
Look into joining a local or regional apartment owners’ association. It’s not as necessary because you have a pro management company, but you’d have access to lawyers and other experts that have no incentive to screw you. You can learn quite a bit from such a club’s publications and whatnot. (Think of it as a SDMB specifically for rental-property ownership.)
The taxes and accounting for a rental property are significantly different than owner-occupied homes. Find a CPA that knows all the tricks.
Since this place is a condo, I assume there is an HOA involved. Find out what policies and regulations the HOA has regarding rental units. Some have quota limits on how many of their units can be rentals. Also, the HOA board and management should have only limited direct contact with the renter; they deal with homeowners. The tenant should be given a copy of most of the HOA documentation (CC&Rs, handbooks, etc.), and the rental agreement should include an addendum stating the renter understands their responsibilities WRT the HOA.
I’m on the pro-pet rental opinion, but with some caveats. Screen the pet personally, and screen the pet owner to ensure a responsible pet owner. Make sure your property management company is willing to manage pets-OK apartments. If your tenant doesn’t come into the apartment with a pet, don’t let them get one.
Only if you don’t mind the tenant contacting you directly. My current landlord doesn’t mind me contacting her directly when needed (so far I’ve only had to do it for one issue), but previous landlords have carefully guarded their privacy/contact information and wanted no direct contact with me at all. And I don’t blame them: I don’t take advantage of knowing my landlord’s full name, email address, and phone number, but someone else might.
snip. It doesn’t have to be that way. While it’s true that the HOA is for owners, if the the tenants need to be informed of something minor, they should be able to contact someone from the HOA and vice versa. Having to do everything through the company like we do often extends the communication to weeks. That’s pretty frustrating when it’s something very minor.