A few years ago, I wrote about my experience as a landlord. And, I want to revisit it and let you know about some more things that I've gathered as I've continued my journey as a landlord.
A little bit of background on my whole landlord situation. In 2009, I married my lovely wife and about 6 months later – we were feeling restless in Small Town, USA and decided to move back into Big City, USA. Needless to say, I had mixed feelings on the move – but we went ahead and starting looking around for another house that would suit our needs.
Though we were set on the move, I had taken the First-time Home Buyer Credit (or “Loan” as it should have been called) in 2008. The stipulations on taking this credit was that you had to live there for more than two years after the purchase OR you would need to pay the full $7,500 back. Well, there were several reasons necessitating the move so there was little I could do to avoid the repayment. The $7,500 was already tied up into the house and other investments so I knew it was going to hurt our pocketbook once the tax year rolled around.
Along with that, our house was going to be underwater due to home prices falling in our area (and, really, much of the US) – so it made more sense to hold on to the house than to sell it.
After buying a house in the Big City – we were able to rent out the Small City home fairly quickly. Overall, the experience of leasing the home has gone fairly smoothly, save for one deadbeat renter who shall remain nameless. ;) Through it all, I've learned a lot and want to offer some of those tips to you if you are considering leasing a property of your own.
Finding renters
There are quite a few ways to go about getting renters for your property. One that has worked the best for me thus far has been Craigslist. Because Craigslist is so widely used AND is free of charge, you have the opportunity to advertise to a very wide audience. And, especially in our case, this was important being in a smaller town. Generally, I've been able to find a renter within 1-2 weeks after advertising on Craigslist.
Other avenues you can try are friends, family, aquaintenances and sites like RentersWarehouse.com. This site (based out of MN) has really grown rapidly as more and more folks like myself need to move – but aren't in a position to sell. You do have to pay them monthly and upfront fees (typically one-months rent) – but it could be worth it if you are making a decent profit on the property and don't have the time/resources to manage it yourself.
When you find a renter, be sure to do your due diligence. Have an interested renter fill out an “intent to lease” or renters application form so you can get some initial information from them on their work history, past residences (former landlords) and even salary (you don't want someone who is just squeaking by to make monthly rent). Here's a form that I have used with past renters.
The lease
One of the most important things you can do when you have a renter is to get everything in writing. Not only can this protect you from future issues, but having everything in writing will clear up any misunderstandings that may arise. And, trust me, they will come up.
I use a standard residential lease put together by the MN State Bar Association. When you have an interested renter, be sure to send them a copy of it before they sign, so they can look it over and also notify them of any wording or verbiage that may confuse them. You could also have a lawyer draw one up – but this is costly and unnecessary given the free forms available to you.
With the lease I use from the Bar Association, they also have a handy household checklist that you can go over with your renters upon move-in and then move-out.
Checkups and maintenance
One of the things with renting out property is that at any time your renter could call you up with a problem and you'll need to solve it. Be it a light switch that breaks (has happened to me) or the furnace stops working (also has happened). You're on the hook. This is why its important to have some savings tucked away just in case. Fortunately for us, the home is newer – so we haven't really had to address any large expenditures. But, with age, this will change.
I also recommend a periodic check-up of the place – at least once a year (if not more frequently), just to make sure your renter isn't a hoarder or they're not trashing the place.
Insurance
Is your rental adequately insured? Obviously if you have a mortgage, you'll need to have insurance on the property. But I check-in with my insurance agent now and then to make sure that I have just the right insurance coverage on the house.
Be responsive and helpful
I think one of the things that has helped me the most during my tenure as a landlord is to be helpful, available and responsive. I never want to create an atmosphere of me vs. them. I want them to know that I'm available should they need me AND that when they do need me that I'm responsive and address any needs/concerns.
This not only helps to foster a good business relationship, it will bode well for your keeping the renter long-term. And, trust me, there is nothing more frustrating then having yearly turnover of renters. You want a good, consistent renter as long as you own your property. Having a good rapport with your renter is essential.
Is there anything you've learned from your season as a landlord?
3 Comments
Excellent tips, Aaron. A good friend of mine is really going through the ringer right now from a renter that bailed on them after two years, leaving the rent 2 months past due and several thousand dollars in damages for them to repair. This is why your advice of checking in once a year or so is so very valuable. Also, I would make sure and require a damage deposit of at least one months’ rent to cover at least some of any damage made by tentants. And always do a background check. Renting can be very profitable when done following the tips you recommended.
Yeah, you can really get into a pickle with renters. That’s too bad. Damage deposit/background checks are essential too – thanks for the reminder!