My wife and I recently purchased and moved into a house. It has a full apartment in the basement with a separate entrance, and we’ll be renting it out, while living in the rest of the house. We’re thinking of trying to rent to active military for a variety of reasons, but especially because we can contact their commanding officer if their rent is late or they cause damage or some other problem. What else should we keep in mind, based on your experience as a landlord?
Learn to do credit checks, and definitely call references. Find out what the local ordinances say about security deposits: in some municipalities, they are more trouble than they are worth.
In my experience, having one rental property isn’t too much of a hassle, especially if it is close to you, in decent shape, and you are at all handy. But if you get three or more rental units, definitely hire a professional property manager.
Definitely find out about local laws and ordinances. For example, where my property is I need to get a landlord license and have the place inspected for habitability. In this case, they are basically taxes on being a landlord, but come with some severe penalties for not following the rules.
Also, familiarize yourself with the fair housing rules. You can’t discriminate against potential renters for certain reasons. I don’t know what affect that has on your plan to rent to active duty military. You may not be able to exclude a potential tenant for being active duty military, but I don’t know if you can only consider military personnel.
As this will be somebody sharing a building with you, my recommendation is to look for tenants that will be compatible with your lifestyle. Which means, either they’re quiet, or they don’t care about your late night parties.
My first piece of advice is always to get a property manager. They will take a percentage of your rent each month, but they will also handle screening prospective tenants (you get final say), and they are on the front line for those emergency phone calls when you’re just settling in at the movie theater.
Renting to people with pets may, or may not, allow you to charge more rent. I like to do it if I can, because I feel it’s harder for those with pets to rent. If you do rent with those with pets, do a pet application, check references (call their vet, pet sitter, etc), make sure the animals are fully vaccinated, that there is a back up person to call if they are not available in a pet emergency, that you are authorized to enter the unit to deal with the animal if needed, that you are authorized to take the animal to the vet, etc. The net of all of that hopefully is that you will get a responsible owner.
I don’t know that you need to look for military tenants to get the leverage of the CO. The downside might be faster turnover.
ETA: Another good reason for a property manager is that they will be up to speed on rental laws in your area.
Also, make sure you adjust your property and liability insurance.
I will say right off the bat that I’ve never been a landlord - but I know a lot of people with two-family houses (including my former landlord) and I haven’t known one who hired a property manager. I mean, they may have the real estate agency screen prospective tenants or do credit checks right at the beginning , but that’s it. Do you really know people who hire a property manager for a house they are living in?
our first 4 roommates were great it was the last ones that sucked …(one dumbass got the house raided by the sheriff dept )see the economy’s supposedly good so you’ll get the dregs that are either starting out or been kicked out of 50 places deadbeats or fixed income people like we did
One thing you want to do if you can say you have a security deposit even if you don’t plan on having one because it scares off a lot of the people i mentioned above
Thanks for the responses so far. We don’t plan to hire a property manager since the apartment is in our house and I’m moderately handy.
At least here, I think the laws/regulations are different for an owner-occupied property than for a property that is purely rental, but check.
Also, if there is a tenants rights organization in your state/town that publishes resources like this pdf booklet about renting in Vermont, find it and read everything they’ve got.
I worked in rental property management for 26 years.
First and foremost, work with the government. Go to the building, introduce yourself, and explain your situation. Do whatever they say. It will save you time and money–they can hold you up and put some heavy fines for illegal rentals.
Credit check and references. And in this day and age, make sure you are talking to the former landlord, and not a friend with a cell phone.
And the biggest thing of all: PUT EVERYTHING IN WRITING.
Get a lease. State who is living in the apartment, when the rent is due and th amount, late fees (5% after five days; 10% after 10 days, eviction costs after 15 days). Don’t accept any excuses for late rent. Some tenants will snow you for weeks.
And state “Any illegal activity is grounds for immediate eviction.”
This is completely different from your situation, but nine months ago I bought a condo that already had a tenant whose lease expires Sunday and I had to tread very carefully around local laws on giving proper notice and getting her to acknowledge that notice to be sure she actually leaves at the end of the lease. The laws here are very strict and a minimum of 6 months notice is required, failing which the lease renews automatically. And I could get rid of her only if I (or one of my children) is planning to move in. Since my house is already sold, this was crucial.
Always take a phone number for viewings. Otherwise you’ll be waiting around for people who don’t show!
Lease must include, ‘sublet subject to landlords approval’, or they can sublet to a biker!
Before they sign the lease, always ask if they’ve read it. Make them read it, right then, (wait as long as it takes), before they sign.
When checking their references, ask a couple of easy questions, ‘How do you know A?’, ‘How long have you known them?’, etc, then ask, ‘Have you ever known them not to fulfill a financial obligation?’ If there is a long pause, while they’re considering how to be honest and not screw their friend, that’s your clue!
Tell them you live on premise, you’re looking for someone mature and quiet, not into loud music or parties. You’re only looking at good tenants, etc. Let slip you’d consider a $50 a month rent deduction for very good tenants, (inflate the stated rent $50 obviously). By this point, good folks are falling over themselves to assure you that they’ve ALWAYS been star tenants, the are very quiet, etc, etc. It should be quite easy to sense how authentic they are being at this point.
The discount will encourage them not to fuss you over every tiny thing. When they do need something they will be polite and accommodating. Once they get the discount they kinda feel obligated to live up to that. When you ask, ‘Please don’t put your bike/garbage…’, they’ll likely oblige first ask. That’s pretty good value for an imaginary rent reduction, worth ever penny!
You’re BEST opportunity to set protocols is before the first check is cashed, after that it gets a LOT harder. If they are young people, ask for a parents phone number, in case of an emergency. Their behaviour will be much easier to check if you can contact their parents, and when they realize you have the number, they’ll check themselves!
Whatever rules you want, where this goes, late payment fee, snow removal, garbage, notice to move, etc, need to be thought out and typed up, and handed out with the lease. Be prepared. Just telling them, as they move in will prove ineffective.
Late payment penalty best practise is, let them off the first time, make much of giving them a break, and make sure they understand, next time, full fee, don’t bother asking to have it waived! My experience is, if they don’t pay once, they will ALWAYS do it again!
But rule number one is, School’s never out when you’re a landlord! If you remember only that, you’ll be okay!
Good Luck!
I did it both ways for a second unit on a property I was living on - we managed it and we had a manager. It was much easier to have them handle the tenant placement and the ongoing rent collection and property management. At the time, we were both working full-time and property emergencies are like children. They’re not going to be convenient. Plus she already knew reliable contractors for problems we couldn’t handle ourselves.
My MIL rents out her condo in Tower Villas (near Va. Square/Ballston). She has dementia so my wife and I manage it, and we use a property manager because they are professionals and this stuff takes time. There is more to being a landlord than fixing stuff. They know the market and the laws, and they can handle every aspect of leasing and maintenance. They find and screen tenants, arrange repairs, and even appliance replacement if needed (subject to our approval). Their fee can be hefty but is deductible from your rental income as a business expense. You can still do your own repairs to save money, but any money you would spend on repairs is deductible. If you have a lot of time on your hands and have a high tolerance for pains in the ass then you probably want to manage it yourself.
Also I rented my own condo out for two years, two different tenants. One was easy, one was a little harder at move-out time.
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[li]Let’s assume you will be fully legal, which means you are going to declare the business income on your taxes. That means that you can deduct all expenses from your business income, even if you do not itemize your income taxes. I am not sure how depreciation would work when the rental is the basement of your house, but a tax expert could tell you.[/li][li]You will need a lease that has been reviewed by a lawyer familiar with Va. and Arlington tenant law. I started out with a lease from a software package and then my lawyer told me that it would be at least partly unenforceable in my county (Montgomery, Md. at the time) because each state and county have specifics in their laws regarding leases and the software was one-size-fits-none.[/li][li]Use a move-in checklist to have the tenant document any flaws that you will not hold them responsible for. Without that there will contention at move-out time. The lease should make it clear what condition the apartment must be in when they move out. You should do your own documentation by taking photos before they move in.[/li][li]You will need to clean when they move out, unless they are exceptional. Either plan to do it yourself or hire a service (deductible cost). Determine if local laws require you to paint between tenants. Be prepared to paint if it needs it, regardless of the laws.[/li][li]Decide if you will allow pets. You may want to if you are very pet-friendly, but personally I don’t think it’s worth it to allow pets. My tenant’s dog destroyed the carpet in one room and tore up some molding by the front door. I recovered some costs through the security deposit but the hassle wasn’t worth it. Worse cases involve cat urine and flea infestations.[/li][li]Determine how the tenant will pay for utilities (gas, electric, water). If it’s an apartment in your house, you may not have separately metered utilities and will have to bake it into the rent. Determine if you will share your Internet/cable TV with them and whether you will charge for that. Determine if you will allow them to have their own landline phone installed, if they want that (I guess not many people do that anymore).[/li][li]Determine how you will handle guests. What is the parking situation at your house? Where will your tenants and their guests park? [/li][li]Come to an agreement about noise, both from you upstairs and from the apartment. Do you like to play your stereo at midnight? Do you go to bed early and don’t like noise after 9:30 PM? The house’s upper floors and basement almost certainly do not have the kind of sound insulation as found between units of an apartment building. I rented a basement apartment once myself and I was really pissed off once when the owner had a big party upstairs, kept me up half the night. He didn’t invite me, which was OK, but he didn’t even tell me in advance. This works both ways–you may not be happy if you tenant has 20 cars pull up and cranks the audio up to 11 until 2:00 AM, but make sure you have an agreement in advance.[/li][/ul]
Being a landlord is difficult. Being a landlord when they are attached to your house can be even more difficult.
We have 24 units, so our experiences will differ between what is expected. But I can tell you that there never was a family gathering, or holiday, that wasn’t disrupted by a tenant issue - clogged toilet, clogged sink, lockout, fire alarm, etc.
With a tenant who has an issue at 2 a.m., when they are attached to you, they may think nothing of beating on your door to wake you up because their carpet has become un-nailed from the subframe near the kitchen, and they want it fixed RIGHT NOW. Or if you share a water heater, they want to know immediately why you used all the hot water.
If you get the right tenant, it may work. If you get an average or shitty tenant, I can see a world of issues.
With regard to your desire to rent to a military tenant - You will need to establish a criteria of how you are evaluating your tenants, and why you chose the person you did. If you review three prospects for the area, and you decide on the one tenant you like. one of the other two tenants could possibly sue you for rental discrimination if you don’t have a basis for why you preferred one over the other. A simple questionnaire showing their employment history, credit report, local references, etc, can clear this up in a court of law - “I didn’t rent to him because his credit was 220, and the other guy was 780”, with the sheet of paper to prove it, holds up a lot better than “I liked that he calls his momma every week, as opposed to that guy who is an orphan”. Measureable, categorical things hold up a lot better than speculation. A charge of “He didn’t rent to me because I’m gay” is more easily defeated if you can show the credit score difference, or rental history difference, on paper instead of just having a verbal description of why you chose what you did.
A property manager is silly for one unit in the basement.
Make sure they are good tenants. Check references, and maybe even call a past next door neighbor.
Another possibility is to check a social group you belong to, church, clubs, Elks, etc. You might also rent for less in exchange for gardening or handyman services.
A few people mentioned not having a security deposit, which seems crazy to me. Are there a lot of regulatory hoops to jump through in some states with regard to security deposits?
The amount of damage a renter could potentially do to your house is way larger than any deposit you’re going to get, so it’s unlikely to make you whole against the worst renters, but it sure is nice to not have to chase after someone for all the minor crap that even normal tenants brake, or the last month’s rent when they vanish into the wind.
Well, my experience was not good at all, but that’s because we moved out of the area and could no longer inspect the house on a regular basis. My tenants just about destroyed my house.
Holes in the walls, filthy everything. They parked a motorcycle on the carpet. Ruined that.
She had the audacity to ask for her deposit back.
Get a deposit and make sure you check the place every now and again. I’m sure you’ll be fine.
I agree with those who say that it’s silly to get a property manager for a single unit in your basement.
The main problem with security deposits (besides for the need to set up a separate interest-bearing account - at least in NJ) is that the type of people who make the security deposit most necessary are the exact same type who render it moot by simply not paying the last month’s rent and saying to take it from their security deposit. So you’d be left in the exact position as if you would be without the deposit - trying to go after deadbeats in small claims court.
That said, there’s probably some marginal advantage in having one, and I’ve always done this.
But the main thing - as others have alluded - is decent tenants. My most recent tenant to move out gave me a tour of the apartment, pointing out all sorts of minor damages so that I could decide what to deduct from the security deposit. Naturally, dealing with that type of guy, I didn’t deduct anything at all (he and his wife were very good people in general, and I was pleased to have had them, and the various damages - probably a few hundred dollars, some hard-to-determine part of which might have been covered by “normal wear and tear” anyway - was well worth it).
You should also check to see if the prospective tenants have been evicted in the past. You can probably get this information on-line or at your local City Hall.
Needless to say, if there is any eviction activity against a prospective tenant, DO NOT RENT TO THEM.