How to rent a house?
June 5, 2007 6:37 PM Subscribe
So we're looking to rent out our place...
So my wife and I are desperately trying to vacate our current residence (2 bed/2bath townhome). The rental market has been improving significantly in our area and we have an opportunity to stay basically rent-free for some time with a family member so we're looking to make the dive into being landlords. Being new to this I'm looking for the hive's insight on some various elements surrounding renting out property.
1. How to go about doing background checks and are they worth it?
2. What type of things do you do to ensure you get the maximum amount of rent each month out of the locations?
3. What marketing tactics have you used to attract tenants? One month free, rent to own, etc... and what pitfalls have you ran into using them?
4. What's the best place to get basic legal documents, specifically a lease. Nothing fancy and the cheaper the better.
5. I'm fairly sure we'll be pushing it to get the full mortgage plus HOA costs recouped via rent however we will be close (within 10%). I have heard that the loss is potentially tax deductible as well as the loan interest but can anyone verify the specifics?
6. If you were to do it over again what would you do differently or would have liked to know.
Thanks!
So my wife and I are desperately trying to vacate our current residence (2 bed/2bath townhome). The rental market has been improving significantly in our area and we have an opportunity to stay basically rent-free for some time with a family member so we're looking to make the dive into being landlords. Being new to this I'm looking for the hive's insight on some various elements surrounding renting out property.
1. How to go about doing background checks and are they worth it?
2. What type of things do you do to ensure you get the maximum amount of rent each month out of the locations?
3. What marketing tactics have you used to attract tenants? One month free, rent to own, etc... and what pitfalls have you ran into using them?
4. What's the best place to get basic legal documents, specifically a lease. Nothing fancy and the cheaper the better.
5. I'm fairly sure we'll be pushing it to get the full mortgage plus HOA costs recouped via rent however we will be close (within 10%). I have heard that the loss is potentially tax deductible as well as the loan interest but can anyone verify the specifics?
6. If you were to do it over again what would you do differently or would have liked to know.
Thanks!
Also, look at various sources to be sure you understand all your legal obligations (eg do you have to put the security deposit in an escrow account? can you charge a deposit plus first and last months' rent, or only some lower amount? what kinds of fire safety, lead paint, carbon monoxide, radon, etc measures must you take? what kind of insurance must you carry on the house?). Google "your location + landlord" for specifics.
posted by LobsterMitten at 7:40 PM on June 5, 2007
posted by LobsterMitten at 7:40 PM on June 5, 2007
Response by poster: Probably lower mid-range if that makes sense. Suitable for kids (in fact we have one here). I hadn't thought about Craigslist or other free posting sites but that's a great idea.
posted by Octoparrot at 7:40 PM on June 5, 2007
posted by Octoparrot at 7:40 PM on June 5, 2007
Wow, that's a lot of questions. You want to start by getting a decent book or two, it will be worth the investment. Get a general book, and try to find a book specific to Colorado -- there may be one from the CO attorney general, or a Denver tenant-landlord resource center or landlord organization might have one.
1) Background checks are essential. Colorado probably has a computer look-up of criminal records. Find out where they lived, look up what they did. Most people have a few driving demerits, but watch out for property damage, violent crime, or fraud charges. Call the old landlord, and make sure they aren't a relative or other cover. Check out personal references if you feel uncomfortable. A full professional backgrounder is probably not necessary, though.
2/3) Do your research. Find out what similar homes are renting for, basically. If you want it filled fast, knock the rent down a bit. Free months, paid utilities, all depends on you and the market, though. Rental is not a business that derives its profit from the tenants, but from the eventual sale of the property for a profit. Many rentals operate, for tax purposes, at a net loss.
4) See the same sources for a CO rental manual, it may have copies built in or available at the same place. You can pay websites for this sort of thing, but they may be out of date or not suit your purposes; you can make your own in some cases, as long as you know CO law.
5) Your specific tax situation iis unique, and property rental, especially the conversion of a primary residence, is messy tax-wise. I strongly recommend you consult an accountant.
6) The biggest thing about landlording is that you own every problem. Be prepared for the middle-of-the-night call about a burst water heater or a bird's nest burning up inside the chimney. Invest in a decent tool set, buy a plumber's snake, and have a Reader's Digest Fix-It-Yourself Manual close at hand. Or have a good relationship with a hungry jack-of-all-trades. Try not to get stuck paying someone's emergency holiday rates. (But you will.)
posted by dhartung at 7:58 PM on June 5, 2007
1) Background checks are essential. Colorado probably has a computer look-up of criminal records. Find out where they lived, look up what they did. Most people have a few driving demerits, but watch out for property damage, violent crime, or fraud charges. Call the old landlord, and make sure they aren't a relative or other cover. Check out personal references if you feel uncomfortable. A full professional backgrounder is probably not necessary, though.
2/3) Do your research. Find out what similar homes are renting for, basically. If you want it filled fast, knock the rent down a bit. Free months, paid utilities, all depends on you and the market, though. Rental is not a business that derives its profit from the tenants, but from the eventual sale of the property for a profit. Many rentals operate, for tax purposes, at a net loss.
4) See the same sources for a CO rental manual, it may have copies built in or available at the same place. You can pay websites for this sort of thing, but they may be out of date or not suit your purposes; you can make your own in some cases, as long as you know CO law.
5) Your specific tax situation iis unique, and property rental, especially the conversion of a primary residence, is messy tax-wise. I strongly recommend you consult an accountant.
6) The biggest thing about landlording is that you own every problem. Be prepared for the middle-of-the-night call about a burst water heater or a bird's nest burning up inside the chimney. Invest in a decent tool set, buy a plumber's snake, and have a Reader's Digest Fix-It-Yourself Manual close at hand. Or have a good relationship with a hungry jack-of-all-trades. Try not to get stuck paying someone's emergency holiday rates. (But you will.)
posted by dhartung at 7:58 PM on June 5, 2007
Best answer: There are property management companies that can answer your questions, provide the legal forms, do the background check, collect the rent, perform maintenance, and otherwise make your life a lot easier. But if you're determined to go it alone, here are a few answers:
1. How to go about doing background checks and are they worth it?
DEFINITELY WORTH IT. I know a landlord whose house was damaged and then abandoned, whose shed was broken into, and whose property was stolen by a tenant who gave false identifying information. The fake identity would have been uncovered with a background check.
How do do it? You can do it yourself. Make up a form asking for current employer and two years past employment history, banks where accounts are held, and current living arrangements, with contact numbers for each. Do a little googling to make sure the information you're given is legit, then call each place: verify employment and salary info with the employer, verify the existence of a bank account with the bank, verify that rent is paid on time with the current landlord. You'll want the applicant to sign something that gives you permission to contact these people.
2. What type of things do you do to ensure you get the maximum amount of rent each month out of the locations?
Assuming you're in an urban area, go to craigslist and do a search for your neighborhood to see what other people are asking. Look in your local paper, too. You're probably better of asking slightly less than the most you can get away with, because then you're less likely to have long-term vacancies and steady moderate income is better than occasional higher income.
3. What marketing tactics have you used to attract tenants? One month free, rent to own, etc... and what pitfalls have you ran into using them?
Allow small pets. The portion of the renting population with pets is greater than the portion of the landlord population that allows pets. It's OK to charge a deposit ($100-$200 per animal seems typical) and pet rent ($5-$10 per month per animal), and to limit number of pets and total size (maybe 35 pounds).
Post pictures on craigslist. That will get people's attention.
4. What's the best place to get basic legal documents, specifically a lease. Nothing fancy and the cheaper the better.
In Oregon, there is a landlord's association that has generic forms available for its members. There's probably something similar where you live. Ask a librarian, or google it. There are also books thathave these forms in them.
posted by croutonsupafreak at 8:02 PM on June 5, 2007
1. How to go about doing background checks and are they worth it?
DEFINITELY WORTH IT. I know a landlord whose house was damaged and then abandoned, whose shed was broken into, and whose property was stolen by a tenant who gave false identifying information. The fake identity would have been uncovered with a background check.
How do do it? You can do it yourself. Make up a form asking for current employer and two years past employment history, banks where accounts are held, and current living arrangements, with contact numbers for each. Do a little googling to make sure the information you're given is legit, then call each place: verify employment and salary info with the employer, verify the existence of a bank account with the bank, verify that rent is paid on time with the current landlord. You'll want the applicant to sign something that gives you permission to contact these people.
2. What type of things do you do to ensure you get the maximum amount of rent each month out of the locations?
Assuming you're in an urban area, go to craigslist and do a search for your neighborhood to see what other people are asking. Look in your local paper, too. You're probably better of asking slightly less than the most you can get away with, because then you're less likely to have long-term vacancies and steady moderate income is better than occasional higher income.
3. What marketing tactics have you used to attract tenants? One month free, rent to own, etc... and what pitfalls have you ran into using them?
Allow small pets. The portion of the renting population with pets is greater than the portion of the landlord population that allows pets. It's OK to charge a deposit ($100-$200 per animal seems typical) and pet rent ($5-$10 per month per animal), and to limit number of pets and total size (maybe 35 pounds).
Post pictures on craigslist. That will get people's attention.
4. What's the best place to get basic legal documents, specifically a lease. Nothing fancy and the cheaper the better.
In Oregon, there is a landlord's association that has generic forms available for its members. There's probably something similar where you live. Ask a librarian, or google it. There are also books thathave these forms in them.
posted by croutonsupafreak at 8:02 PM on June 5, 2007
Think about who you would like to see in the unit. Write your Craigslist ad to appeal to them. eg:
"2 bed/2 bath townhouse, in neighborhood with good schools, near shops, churches and parks, available. Nice backyard. Great for a family with kids!"
vs
"2 bed/2bath townhouse, in sought-after neighborhood with privacy, available. Near BigOfficeParkCorp, restaurants, skiing. Landscaping included. Great for busy professionals!"
vs.
"2 bed/2 bath townhouse, in laid-back neighborhood. Near the university, nightlife. Back deck for grilling. Great for students!"
posted by LobsterMitten at 8:02 PM on June 5, 2007
"2 bed/2 bath townhouse, in neighborhood with good schools, near shops, churches and parks, available. Nice backyard. Great for a family with kids!"
vs
"2 bed/2bath townhouse, in sought-after neighborhood with privacy, available. Near BigOfficeParkCorp, restaurants, skiing. Landscaping included. Great for busy professionals!"
vs.
"2 bed/2 bath townhouse, in laid-back neighborhood. Near the university, nightlife. Back deck for grilling. Great for students!"
posted by LobsterMitten at 8:02 PM on June 5, 2007
Lobster Mitten has good advice about targeting your demographic, but be careful: age, race and certain other types of discrimination are illegal, and even if it's not your intent you can be breaking the law by sending certain signals about your ideal tenant.
posted by croutonsupafreak at 8:20 PM on June 5, 2007
posted by croutonsupafreak at 8:20 PM on June 5, 2007
Yes. Hell yes. Be aware of what you're allowed to say in ads, and be aware of questions you are not allowed to ask tenants when they come to see the place. I think the suggestion to get a book on rental law in your state is an excellent one, for exactly this reason.
posted by LobsterMitten at 8:40 PM on June 5, 2007
posted by LobsterMitten at 8:40 PM on June 5, 2007
Craigslist has a link which gives an overview of the Federal Fair Housing Act that's worthwhile to read. I did notice that there's more concern about discriminating against parents of small children, or against elders, than against, say, partying college students.
posted by truenorth at 8:54 PM on June 5, 2007
posted by truenorth at 8:54 PM on June 5, 2007
"Fair Housing" is the phrase you'll want to google regarding illegal discrimination in targeting ads or asking questions of potential tenants. You might be exempt from the Federal statute, but you may have local laws to contend with.
posted by chiababe at 9:05 PM on June 5, 2007
posted by chiababe at 9:05 PM on June 5, 2007
If you're in Colorado as your profile says, you might want to get in contact with Community Housing Services, Inc.
You can also order "Know Your Rights: The Colorado Guide for Tenants and Landlords." According to the website, the book is "written by a lawyer for regular people, and it addresses everything from deposits and leases to evictions and damages in plain and easy to understand language."
posted by chiababe at 9:12 PM on June 5, 2007
You can also order "Know Your Rights: The Colorado Guide for Tenants and Landlords." According to the website, the book is "written by a lawyer for regular people, and it addresses everything from deposits and leases to evictions and damages in plain and easy to understand language."
posted by chiababe at 9:12 PM on June 5, 2007
Remember that not only do you want to find good tenants, you want to be a good landlord. If you can remember back to when you rented, try to be the landlord you always wanted.
If you are unable/unwilling to answer those late night calls or if you want to stop by and "just see how things are doing" with the house on a regular basis, don't be a landlord.
We had a nightmare house rental where the homeowner would be out in the garden first thing in the morning, unannounced, just checking up on things. It was very creepy and we took the first legal opportunity to break our lease. If I were to rent a house in the future, it would only be through a property management agency.
I don't know what the rates are for using an agency, but I would agree with the others who have mentioned it as an option.
Finally, what amount of time will the house be available? Is this going to be an ongoing income property, or just for a while? The renter is going to need to know the term and feel comfortable that you aren't going to sell the house out from under them, try to move back in early, etc.
posted by sciatica at 11:05 PM on June 5, 2007
If you are unable/unwilling to answer those late night calls or if you want to stop by and "just see how things are doing" with the house on a regular basis, don't be a landlord.
We had a nightmare house rental where the homeowner would be out in the garden first thing in the morning, unannounced, just checking up on things. It was very creepy and we took the first legal opportunity to break our lease. If I were to rent a house in the future, it would only be through a property management agency.
I don't know what the rates are for using an agency, but I would agree with the others who have mentioned it as an option.
Finally, what amount of time will the house be available? Is this going to be an ongoing income property, or just for a while? The renter is going to need to know the term and feel comfortable that you aren't going to sell the house out from under them, try to move back in early, etc.
posted by sciatica at 11:05 PM on June 5, 2007
Please don't forget to talk to your insurance agent. The policy you have in place is, undoubtedly, for an owner occupied residence. Renting this property will void the coverage and if you have a loss you'll be out of luck. Look into dwelling fire and or commercial package policies to protect your investment.
posted by digiFramph at 5:58 AM on June 6, 2007
posted by digiFramph at 5:58 AM on June 6, 2007
Best answer: 1. How to go about doing background checks and are they worth it?
Get the potential tenants to fill out an application to rent. Go to a property management website and look at their online application forms, and copy into your own Word document. Make the applicants fill it out in full. Get a credit check on good potential renters.
Check what applicants put on the form versus what their landlords say. People lie. Wow, people really lie a lot.
Verify income and references, including their work. Call employers and verify what's stated. If they're not working, get copies of bank statements, student loans, or accountant's letter of income statement or tax returns for self-employed people.
Have parents go on as guarantors for first-time renters/students.
Realise that people lie. A lot.
Get personal references for previous homeowners who don't have current landlord references.
2. What type of things do you do to ensure you get the maximum amount of rent each month out of the locations?
Market research. Check all ads in all local media for similiar properties as yours, do a drive by to make sure what's advertised is like your property. You have to do your homework, and this involves legwork and reading. You want rent to be on the high end for your kind of property. Too high, you can bring it down if you get no response. Too low, and it's hard to advertise again at a higher rent and you may attract less than desirable tenants. If you find good tenants, keep rent rate the same, no increases yearly. Good tenants are gold.
3. What marketing tactics have you used to attract tenants?
One month free, rent to own, etc... and what pitfalls have you ran into using them?
Not needed in our market, but half-month's free rent if a suite just isn't moving.
4. What's the best place to get basic legal documents, specifically a lease. Nothing fancy and the cheaper the better.
Not sure; I work in a property management office, and we have access to all documents and forms through the provincial government and the local landlords' association.
Oh. Join a landlords' assocation. Hugely valuable resource, especially for non-professionals.
5. I'm fairly sure we'll be pushing it to get the full mortgage plus HOA costs recouped via rent however we will be close (within 10%). I have heard that the loss is potentially tax deductible as well as the loan interest but can anyone verify the specifics?
Can't tell you that; not my area.
6. If you were to do it over again what would you do differently or would have liked to know.
Use a property management company. :)
Other advice:
Get to know the state/provincial tenant/landlord laws. Very important. Really, really important to know your local law.
You will need to be able to respond to all emergency calls and be able to arrange for emergency repairs. This can be a huge pain when your tenants call you at 2:00 a.m. because the hot water tank's burst.
Tenants aren't always the brightest, especially young people. They can be destructive, clueless, and irresponsible.
Ask for post-dated rent cheques. Have a plan to follow up when those cheques bounce.
Have a plan for skips.
I agree with the other advice posted upthread for the most part.
posted by Savannah at 7:31 AM on June 6, 2007
Get the potential tenants to fill out an application to rent. Go to a property management website and look at their online application forms, and copy into your own Word document. Make the applicants fill it out in full. Get a credit check on good potential renters.
Check what applicants put on the form versus what their landlords say. People lie. Wow, people really lie a lot.
Verify income and references, including their work. Call employers and verify what's stated. If they're not working, get copies of bank statements, student loans, or accountant's letter of income statement or tax returns for self-employed people.
Have parents go on as guarantors for first-time renters/students.
Realise that people lie. A lot.
Get personal references for previous homeowners who don't have current landlord references.
2. What type of things do you do to ensure you get the maximum amount of rent each month out of the locations?
Market research. Check all ads in all local media for similiar properties as yours, do a drive by to make sure what's advertised is like your property. You have to do your homework, and this involves legwork and reading. You want rent to be on the high end for your kind of property. Too high, you can bring it down if you get no response. Too low, and it's hard to advertise again at a higher rent and you may attract less than desirable tenants. If you find good tenants, keep rent rate the same, no increases yearly. Good tenants are gold.
3. What marketing tactics have you used to attract tenants?
One month free, rent to own, etc... and what pitfalls have you ran into using them?
Not needed in our market, but half-month's free rent if a suite just isn't moving.
4. What's the best place to get basic legal documents, specifically a lease. Nothing fancy and the cheaper the better.
Not sure; I work in a property management office, and we have access to all documents and forms through the provincial government and the local landlords' association.
Oh. Join a landlords' assocation. Hugely valuable resource, especially for non-professionals.
5. I'm fairly sure we'll be pushing it to get the full mortgage plus HOA costs recouped via rent however we will be close (within 10%). I have heard that the loss is potentially tax deductible as well as the loan interest but can anyone verify the specifics?
Can't tell you that; not my area.
6. If you were to do it over again what would you do differently or would have liked to know.
Use a property management company. :)
Other advice:
Get to know the state/provincial tenant/landlord laws. Very important. Really, really important to know your local law.
You will need to be able to respond to all emergency calls and be able to arrange for emergency repairs. This can be a huge pain when your tenants call you at 2:00 a.m. because the hot water tank's burst.
Tenants aren't always the brightest, especially young people. They can be destructive, clueless, and irresponsible.
Ask for post-dated rent cheques. Have a plan to follow up when those cheques bounce.
Have a plan for skips.
I agree with the other advice posted upthread for the most part.
posted by Savannah at 7:31 AM on June 6, 2007
I thought of another thing--if you're not going to be in the same city as your rental property, make sure your neighbours on either side have your phone number, and let them know they can contact you if they have concerns about your tenants or if they notice something that your tenants are doing/not doing and think you should know about it.
If your townhouse is a strata (I'm not sure what the US term is) make sure that you are allowed to rent it out! Here in BC, Canada, some condominium/townhouse stratas' bylaws prohibit renting out units, and some are fine with it. Here in BC, if you rent out a strata unit, you have to have tenants sign a Form K, and be given a copy of the strata bylaws, which they agree to follow, and the Form K has to be given to the strata managers or property managers for the strata.
posted by Savannah at 7:45 AM on June 6, 2007
If your townhouse is a strata (I'm not sure what the US term is) make sure that you are allowed to rent it out! Here in BC, Canada, some condominium/townhouse stratas' bylaws prohibit renting out units, and some are fine with it. Here in BC, if you rent out a strata unit, you have to have tenants sign a Form K, and be given a copy of the strata bylaws, which they agree to follow, and the Form K has to be given to the strata managers or property managers for the strata.
posted by Savannah at 7:45 AM on June 6, 2007
Require references and actually call each one listed. I always asked for a prior landlord and suggested a coworker/employer and a friend. I paid each and every time I didn't make the calls.
Don't be so desperate for the rental income that you take anyone*. I didn't heed this advice and ended up talking to the FBI (renter suspected of attempted murder 3000 miles away), the police (different renter had rifle, knives & Nazi propaganda), Social Services (elderly alcoholic renter who fell down front stairs) and the County Housing Commission (Rifle & Knife guy skipped out then complained a month later that he couldn't get back in to get his stuff after I changed the locks).
Read and understand the rental laws for your area. Know how and when you can evict. Don't do business on a handshake - put everything in writing. Insist that your renters put everything in writing (for their own protection).
Explain any neighborhood rules & regulations to your renters and outline the penalty for not abiding by them. (One of my renters insisted on hanging out her laundry, something expressly forbidden by the HOA. She wasn't happy but she did pay the fine).
Don't leave anything of yours on the property - not even in a 'secure' storage area. Even the most trustworthy renters can have not so trustworthy friends and relatives.
Set aside funds to change all the locks between renters.
You may or may not want to discuss your rental plan with your neighbors. If they're friends, they might agree to keep an eye on the property for you but be wary. Most property owners don't like the idea of renters in the neighborhood.
*my situation was slightly different as I was renting out rooms and acting as a manager for an out-of-state owner.
posted by jaimystery at 8:20 AM on June 6, 2007
Don't be so desperate for the rental income that you take anyone*. I didn't heed this advice and ended up talking to the FBI (renter suspected of attempted murder 3000 miles away), the police (different renter had rifle, knives & Nazi propaganda), Social Services (elderly alcoholic renter who fell down front stairs) and the County Housing Commission (Rifle & Knife guy skipped out then complained a month later that he couldn't get back in to get his stuff after I changed the locks).
Read and understand the rental laws for your area. Know how and when you can evict. Don't do business on a handshake - put everything in writing. Insist that your renters put everything in writing (for their own protection).
Explain any neighborhood rules & regulations to your renters and outline the penalty for not abiding by them. (One of my renters insisted on hanging out her laundry, something expressly forbidden by the HOA. She wasn't happy but she did pay the fine).
Don't leave anything of yours on the property - not even in a 'secure' storage area. Even the most trustworthy renters can have not so trustworthy friends and relatives.
Set aside funds to change all the locks between renters.
You may or may not want to discuss your rental plan with your neighbors. If they're friends, they might agree to keep an eye on the property for you but be wary. Most property owners don't like the idea of renters in the neighborhood.
*my situation was slightly different as I was renting out rooms and acting as a manager for an out-of-state owner.
posted by jaimystery at 8:20 AM on June 6, 2007
This thread is closed to new comments.
If I were renting a place I would advertise it on Craigslist.com, with a thorough and grammatically correct ad, with pictures.
Another method is to contact local universities or other big employers and ask if they maintain a housing listing for new employees who are moving to the area. That can be a way to advertise selectively to people who will have real jobs.
In many markets credit checks are standard, even for landlords who only have one property. Take a look at the rental listings for your area and see if they say "credit check required". That may give you a sense of what landlords in your area have found to be worth doing.
posted by LobsterMitten at 7:34 PM on June 5, 2007