Looks like I own a rental property. What should I be mindful of, as a first time landlord?
I dont know what I dont even know.
Get a property manager. Yeah you have to pay a percentage, but they have the insurance and take care of the lease etc.
First rule of rental property: You won’t get rich being a landlord.
For over 20 years, my wife and I rented out two homes that had been in the family for decades; one was my original home where I lived as an infant and callow youth, and where we lived with my first child for a time, back in the 1980’s. We were greatly sentimental about that house, but selling off both those places this past year was such a great relief.
I wish you luck, hope you make it work without undue stress for you.
This x a billion.
A professional property management company will have better resources for finding tenants, doing credit and reference checks, managing leases, and handling an eviction according to the letter of the law if things should come to that. They also have ongoing relationships with contractors and suppliers for any maintenance needs on the property. You’ll give up a percentage of the rent, but it’s worth it, even if you’re only dealing with one property.
Suppose I’ll address this one head-on. We lived there, we moved, the market chilled, and the place has warts. It’s very habitable and very practical, but not as pretty as the neighbors. I won’t care much if renters are reasonably hard on it because it needs gutting anyway. And rent around here is crazy and can easily cover the mortgage. The plan is to just own it until the market recovers and we get some unrelated stuff sorted out. The “get rich” part will come when we sell it maybe a decade from now.
First First rule of rental property: Never rent to friends or family
It’s hard work. Screening people to rent or do maintenance is difficult. Money outlays are always great with slow returns. And, renters do not always give a crap about the nice home you have offered and rip it to pieces. You’ll need it, so Good luck!
Completely agree with this. Additionally, take a good, close look at what insurance the property management company will carry and how much protection it offer you. The property manager company will be trying to protect itself first and foremost. If that means throwing you under the bus, that’s what will happen. Show the documents to your own insurance agent and make double-dog sure you know what your liabilities are.
A property manager is a must, especially if you live far away. We’ve been using the same one for 10 years and maintenance, etc. is a breeze now that we have someone that we trust on site.
I’m not sure what people are saying about insurance. I’ve always thought that was on us. We have condo insurance specifically for owners of rental units. You’ll want to make sure you do the same.
NO PETS!
Pets = Pee.
Pee everywhere.
Also fleas.
And if their dog bite, you might get sued.
You own the joint, & permitted the dog. (Especially true if a multi-unit rental, & the bitten person is another tenant.)
We self-rented once and used a manager once. Having a manager was definitely the better choice. But then that’s been said repeatedly already. I just wanted to add my 2¢.
I"ve been renting out my condo for 7 years or so, and it’s been a pretty good experience. I get money, and occasionally I have to do some work.
I don’t have a property manager, because the condo HOA itself handles anything involving common resources and public space; and because I live close enough that I can take care of most other things. I would probably feel different if it was a free standing house, or I was far away.
My biggest bit of advice at this stage is to familiarize yourself with the city, county, and state laws regarding rentals. Do you need a landlord’s license, how long does it take to evict somebody, what terms are required in leases, what terms are forbidden from leases, etc. Boulder has a nice tenants and landlords rights page that explains the rules.
Make sure you have enough money set aside to take care of surprise expenses. The fridge will break, the garbage disposal will leak, etc. These are things that you’re going to have to take care of pretty quickly.
You’re not going to get rich with just one property, but every year doing my taxes I get to see my net profit, and it is non-trivial, especially when taking into account the (lack) of hours I put into it.
Oh yeah, keep receipts for every expense, including mileage, as you will be able to deduct them on your taxes.
Another vote for a property manager. I have five units that I rent out. The property manager charges me three percent off the top. The first thing he did when he took over was raise everyone’s rent five percent (upon lease renewal). Win-win!
I handle the insurance, mortgages, and HOA fees myself. The manager just deals with the tenants, collects the rent, and sends me a draw check. No, it won’t make me rich, but it will be a mighty nice addition to my other retirement investments.
I used to landlord properties in a uni town to students, here’s a few tips:
Always get a phone number to show the place, otherwise you’ll spend a lot of time waiting on people who don’t show up!
Lease should include, “No roof access”, and “Sublet subject to landlords approval.”
When checking their references, ask a couple of easy Q’s, ‘How long you know him/her, how do you know them, etc,’ then ask, ‘Have you ever known them to not fulfill a financial obligation?’
Good Luck!
I’ve never been a landlord (I have been a tenant though). Despite that, I have some unconventional advice: watch the People’s Court because a significant number of their cases are landlord-tenant disputes and it can give you an idea of just how difficult and nutty tenants can be.
I managed rental properties for 26 years. A property manager is a good idea.
Put everything in writing. The lease should specify who is living in the property, and who is paying the rent. The tenant has the 5th to pay the rent, then a 5% late fee is added. After the 10th, a 10% late fee. After the 15th, eviction will be filed, and the tenant will pay all eviction costs.
We rent out our old condo and actually don’t use a property manager. But I think we are able to do this for a couple of reasons:
- We live nearby
- We have a realtor we’ve worked with in the past who handles looking for new tenants and signing the lease and whatnot.
- It’s in a building that has it’s own maintenance.
- I’m handy enough to deal with most minor repairs.
We’ve kept the place for about 4 years now and there have been relatively few headaches for us.
I guess I’ve been doing it wrong for almost 40 years, then. 5 properties, no property manager. I have a great cadre of tradesmen and a contractor boy-friend these last 13 years.
I allow pets, with restrictions. Pet owners have fewer options and stay longer. I kind of need tenants to stay at least 5 years for a break even on refurbishing.
No leases. Honestly, I can’t imagine a lease that would include every weird assed thing tenants get up to. I collect rent in person to help keep an eye on things. Month to month agreements allow me to ask people to leave, or them to leave at will with 30 day notice.
Pro tip-local landlord references are a must. And do visit the prior LL, people will tell you things in person they’d never write down on a standard request for reference. Saved my ass a couple of times. Check the court system too, when you’re checking, and their social media too. I don’t check credit, as that’s never done me any good. Shit happens to good people.
I provide HVAC filters and not changing them is a big no-no.
I’ve had 4 evictions in my years, one to a “friend” so that rule stands.
I have one unit, a condo, that I’ve been renting for about 12 years. I do not use a management company. The unit is fairly close to my home so I can respond to emergencies pretty quickly. I don’t know how Dummy gets by without a lease. If you ever have to evict, having some sort of contract in writing would seem to be essential. You can get them on-line for free or little cost and then tailor it to your needs. Depending on where you live, it can be a real battle and not having a lease can make it that much more difficult. I had to go through one eviction but it was fairly easy. The tenants didn’t show up for the first hearing and I won a summary judgement. I still had to get a court officer to actually kick them out but they went without much fuss. It sounds like your property is not a condo but if it is, be sure to include lease language that says they are responsible for any fines levied by the HOA for action by them or their guests. my HOA fines the owner, not the occupants. If you are not going to do repairs yourself use only licensed and insured contractors. You can save a little by using Craigslist handyman types but its worth spending the extra money on “real” contractors. Be sure to have enough money/time set aside for the “between tenants” painting, carpet cleaning etc.
I just bought a condo that has a tenant until June 30, 2019, so I will be a landlord till then. Then we will move in. The condo manager will take care of most things. I will be happy when the tenant is out and we can sell our house and move in.