On of my major rules as a Rental Property Manger was simple: deal with the city as little as possible, and do whatever they say. It is not worth fighting City Hall. Maintain a good relationship with them, and your life will be much smoother.
I assume you’ve made an offer to pay the tenant to move out early, but they declined? As a renter, I happily took an offer like than once, so it’s worth asking.
Of the worries posted so far, this one right here is likely the biggest bugaboo. Having been in need of a hand up long ago, I would just love the opportunity to give some young family a massive break so they can focus their energy on tightening up their family and enjoying the daily gifts of life, and maybe one day we’d all sing kumbaya around a campfire and the world would be a slightly better place. Reality me knows it would just be a tragedy of ingrates devouring my goodwill and shitting all over me, resulting in financial and emotional devastation for me and the release of enabled and entitled fuckwits back into the world.
There really is no way the rental house doesn’t turn into my own psychotic murder trap. I should probably just drop the price and dump it.
An option I’ve had a few times as a renter is that, while the utilities were in the owner’s name, they were not part of the rent. Payment was handled in different ways: in some places the payment was directly put in my name, in others a certain amount was added to the rent to cover utilities and variations were assessed periodically (if the total was more than I’d paid I had to pay the difference, if the difference was in my favor I got a refund).
In Liège the gas company was running a (legal?) scam where they required a maintenance contract in order to provide service, and the maintenance contract stayed even if you left so if a home had had 4 people in 2 years they expected to get paid 4 times. That alone would be a good reason to make sure that you had only one person as the account holder. In other locations, the minimum time required by utility companies was shorter than the rental period (utilities requiring 18 months, rental for 12): a renter leaving at the end of the original lease would have been supposed to pay for several months’ worth of utility services they weren’t getting, so that utility was in the name of the owner or the managing company, but payment was by the renter.
Look into the benefit of transferring ownership of the rental to an LLC. That way the corporation gets sued and not you personally.
Lots of good advice already that I won’t repeat. One of the best suggestions I’ve seen is “Hire a bi-monthly maid service and make it part of the rent.” Work with a small, 2-3 person operation so that you can get to know their people and communicate easily. Teach them to look out for signs of water leakage, and make changing the furnace filter part of their service. If you can, get them to include twice-yearly dryer vent cleaning as well.
The worst of the harm can always be headed off if you know about it in time.
I would say that if you feel that you have to do this with someone, don’t let them rent from you.
I thought that was simply a given these days! I don’t remember the last time I saw a listing for a place where smoking was allowed.
Maybe that works for some, but I’d never agree to a lease that included maid service from a company I didn’t hire/couldn’t fire (if needed). IMHO, a better idea is to simply periodically inspect the property.
Something I saw at one place that I did appreciate very much was quarterly furnace/heat pump service (which the homeowner paid for). I still changed the filter every month, but the regular maintenance made me feel better. I’ve never even *seen *the furnace in my current place, because it’s up in the unfinished attic and I get vertigo whenever I try to climb those stairs. Thank goodness the filters are in the main house!
If you want to invest in single-family homes, buy stock in a single-family REIT. They exist now and there are a few of them. The reason I suggest this is to diversify your investment vehicles and not have a single piece of property be a significant portion of your investment assets. Additionally, your income will be much smoother and predictable, as opposed to not knowing how much money you need to set aside to take care of repairs if something major happens, which will likely coincide with the tenant leaving. I personally wouldn’t invest more than around 10% of my portfolio in real estate, and would want that 10% to be highly diversified as well, not just a single property. But I’m perhaps very risk averse and want my money in liquid investments.
As a tax professional, I highly advise that you get someone to do your taxes that does them professionally. If you don’t want to pay for that, be sure you familiarize yourself with all the rules regarding taxation of rental property and keep very good records. The one largest mistake I see people make is to move out of a home they’ve lived in for awhile, then rent it out a few years, and then after it’s a hassle, they sell it. Unfortunately, if you rent your old home out for too long, you lose the ability to exclude the gain on the sale of the property as a personal residence. This can cost you way more money than you made while renting it out. The exclusion of the gain on sale of personal residence is the most home-owner friendly part of the tax code, and you don’t want to lose it on a whim of trying to be a landlord. A good tax professional will be able to give you all sorts of useful advice, both in terms of taxes and in terms of what kind of things you should be consulting a lawyer about.
If you are determined to keep it around as an investment, understand that your main source of income will likely be the appreciation realized on the sale of the property unless you have a very steady tenant, don’t need to do any repairs, and don’t owe much on the mortgage. You are merely finding someone who will pay for the mortgage and upkeep of the house while it appreciates.
Even if you live down the street from the property, get a management company to deal with everything and leave you as an investor. If you want to put sweat equity into the house, make the renovations and then just sell it. You don’t know the rental market as well as a management company. You probably don’t know how to vet tenants or contractors for major repairs as well as they do either. They will most likely be worth every percent you give them just in the increased rent they’ll charge vs. the time the property sits empty for asking too much or having a tenant wreck things. Of course, you have to vet the management company somehow, which is why I think the best bet is to simply buy into a larger investment vehicle (REIT) that has its own management company with proven track record.
If it’s two months in a row, it’s also time to talk to the renter and find out that the property manager has been sitting on the rent for two months.
Trust your property manager like you trust your tenants.
Good point.
Double-checking/auditing keeps honest people honest and catches the non-honest.
Oh - and while I recommend insisting on checks/money order/etc. for rent payment, if you DO allow or accept cash rent payment insist on receipts/papertrails for all parties. ALWAYS. That will also solve he said/she said problems and avoid embezzlement by property managers and other employees.
On this point, technology helps. Its an incredibly easy matter to set up a deposit-only account at a bank, and then give out this account number to tenants to arrange direct deposit. That way, the tenant has a record of the transaction, the bank has a record, and the landlord has a record.
You can then set up a transfer from this deposit-only account into a regular account. This saves A LOT of hassle, as most folks prefer the electronic debiting for rent payment.
Yeah, but it’s not going to work for first month’s rent - it takes time to set up something like that, it’s not instant. Great option for once the person is settled but that first up front payment will still have to be in some other form.
Also, some of us don’t like automatic payments of any sort. That’s because we don’t have a crap-ton of margin and if I’m running low I’d rather wait until payday then pay a $10 late rent fee then get his with all the overdraft charges a bank will impose after it puts through X number of automatic payments whether or not you have sufficient funds that particular day. Or have the option to put something on a credit card if I’m having a bad cash flow week because of how my paydays/bills line up a particular month.
Of course, the landlord doesn’t* have to *give a damn about what’s convenient or works for the tenants.