Buying A Home
kmc217
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About to be a landlord... any tips?
I haven't posted here but am looking for advice. We are "this close" to signing a tenant for our condo and purchasing our dream home. I've been very wary about renting our condo but we cannot sell in this market and have happened upon the perfect house at a perfect price that is too hard to say no to. That said... I'm wondering if anyone has tips for how to be a "good" landlord. As far as finding a good tenant -- I think we are there-- our realtor has found a young family (he is a college basketball coach -- so that means passed a CORI, with at least 2 more years on his contract with a SAHM wife and a 20 month old son). They have good credit, good references and solid work history with good checking and savings accounts. I'm more looking for tips as far as communication, records keeping (do you need a separate account for rent, how do you track rental-home related expenses, etc), and anything else you experienced landlords care to share. TIA!!!
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Re: About to be a landlord... any tips?
DH and I are in the same spot as you. We're moving into our new constuction house on Thursday and have renters moving into our current house next Monday. I've very nervous about renting, but we seem to have good renters moving in (cept for they have 2 cats
)
I'm interested to hear what people say.
I think the thing our tenants appreciate most is our quick response when things go wrong. We have had a series of things happen (our dumb luck) and a couple of them were quite extensive and required significant repairs. In every case we have had someone come out immediately to take care of the problems.
We do not have a separate account. DH uses a spreadsheet to keep up with all expenses, and we just print it out at tax time and give it to our accountant.
One of the things we did prior to the tenants moving in was take TONS of pictures of the house. We had spent a great deal of money fixing up the house trying to sell it, so we wanted to document the condition it was in when they moved in. They are fantastic tenants and we don't anticipate any problems, but just in case we wanted the pictures.
I have to second this first paragraph. As a renter, there is nothing worse than having a landlord who doesn't respond immediately. With every issue we've had, our landlord has really stepped up and been super helpful in getting everything fixed quickly when we've needed to call him.
Also, it may seem a little silly, but our landlord and his wife gave us a bottle of wine and card when we moved in, a wedding gift, and a Christmas gift. They were all small, but the fact that they show they care about their tenants is a big deal to me. It really makes me want to go that extra mile to take great care of their home. Just something for you to consider now that you'll be in the landlord position.
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We've been renting our condo out for almost 4 years now. We're on our 2nd tenant and have had a great relationship with both tenants. We are managing the property ourselves from a few hours away. We have a home warranty on the appliances (including a/c and furnace). So, when our tenant calls or emails with a problem we contact the home warranty company and they call her back directly to set up a time to come out. We could obviously just have her call home warranty company herself, but we like to be in the loop with exactly what's going wrong in the property.
DH set up a separate bank account that's just for her to deposit her rent into. It makes it easy for her to pay since most people pay everything online anyhow. We just move them money over to our main account once she pays and we send her a quick email to confirm we've received the money.
You may be required by law to keep the security deposit in a separate account. Check your state's Landlord-Tenant Act.
We have had AWFUL tenants that seemed great on paper. How they seem on paper means nothing. How they seem when you meet them means nothing. How they seem after they've lived there for 60 days and you've done an inspection means everything. I will be a polite *** to all my tenants until they prove they deserve otherwise.
Both of our houses are high-end houses in exclusive neighborhoods. In one house, we had a female CEO and her daughter at the math & science magnet. When she left, the cat stench (from one cat!) was so bad we had to repaint the entire house, recarpet the entire house, and have the garage where she kept the litter box professionally sanitized.
The other house, the grander of the two (and the one in the cosmetic repairs link in my siggy), had the owner of a major multi-million dollar construction company in it for 18 months. They had a special needs teenager whom they allowed to paint on the carpet; color on EVERY wall, ceiling, and even on light switches and windows; tackle the upstairs toilet and knock it over, causing water damage to the ceiling and floors downstairs; and EAT the window moldings. The PM company said that was normal wear and tear. Like hell it was!!
Both tenants paid rent on time, had good credit, appeared to be quality citizens. I can honestly say I would rather have a sex offender rent my house if I knew that person would take care of it than "good on paper" average people.
So my advice?
1) When getting references, be nosy as hell and specifically ask about housekeeping, pet odors, cleanliness, etc. Tell the tenants that their references must return your call within 48 hours or their application is canceled.
2) INSPECT YOUR PROPERTY. I don't give a damn that it feels awkward. It's your $X00k investment, they don't have any skin in the game. I do it at 60 days - that gives them enough time to settle in so they will have gotten comfortable in the house and live how they're really going to live, but not so much time that they will have done irreparable damage.
3) Speaking of skin in the game, charge as big a security deposit as the local market will support. If the market will support 2 months' rent, do it.
4) Bump up the rent to include yard care, if applicable. No one will care for your yard like you will, and remedial yard care is incredibly expensive. (We paid $2100 after the construction people left to get the acre back in shape.)
5) Make a video walk-thru of your house before they move in. I have half an hour of footage of every inch of the one house. I'm narrating and I point out every flaw. It protects them, but it's awesome for me as the landlord as well.
My Pinterest
The Googlesites Paint Bio
Thinking of doing cosmetic updates to a dated home? These were our costs.
Definitely get a copy of the landlord tenant laws for your state. You can usually find them online. There should be information there about whether you have to set up a separate escrow account for security deposit and what you can charge for security deposit. Some states only allow you to collect 1 month security while others will let you collect more than 1 month.
We have a separate account for rent deposits, but we have but we also have well over a dozen residential and commercial rentals that are self managed.
We track expenses using a spreadsheet and then give all that to our accountant for tax prep. You probably won't need an accountant for just 1 rental property.
When you get someone you think will be good tenant make sure you do credit and criminal background checks. Definitely verify employment, ask for copies of pay stubs and contact previous landlords.
We respond to communication from tenants same day and repairs are usually made within 24 hours unless special part needs to be ordered, obviously emergency repairs are done immediately.
Good luck
We've had 2 rental properties (condo and a house) for several years. Both have gone really well, but here are some things I've done or have learned:
If you are at all able, do NOT use a property management company. I interviewed a few, and realized that I hold much more interest in my property than they do, and they'll never work as hard as I think they should, and as I would myself. It can be a good amount of work to get new tenants in, but once they are stable, I've put in almost no work at all. I'd hate to think I was paying a PM company to sit around and collect 10% every month.
Be ready to be strict and professional. You may need to charge late fees or damage to people you like, or who seem to have good excuses. I have not been as strict as I should have, and I do regret some of it. For this reason, it is highly unlikely that I would ever rent to a friend/family.
I give gifts to the renters at lease renewal, if things have gone well over the year. This past year, both renters paid on time, and I had no upkeep for the property. I sent a $50 gift card back with the new lease.
Include a clause in the lease for minor repairs/replacements. I did not do this the first year and was constantly called for light bulbs, batteries, air filters, etc. I now have a clause stating that any repairs under $25 are the responsibility of the tenant. This has saved a lot of work for me.
We have a seperate account for the deposits, but rent goes right into our regular checking account. I keep detailed records of everything, so taxes are easy. I also use Turbo Tax, which does a great job of walking you through everything you need to do. I was quoted over $600 by every CPA I called, and decided just to figure it out on my own with TT. As far as I know, it's gone well :-)
Make sure you have good insurance on the property (condo landlord, not the same policy you currently should have). We also have an umbrella policy, just for added security. If anything happens on your property, you could be sued. For me, the peace of mind is worth the $25/month for $1mil worth of coverage, which also covers the other property, and anything else we have insured.
I could go on and on, but you'll learn as you go. Make sure to adjust new leases as necessary, and add additional information that you didn't realize was important before.
Good advice all around
This is a business, run it as such. I would suggest opening a separate account for everything dealing with the rental (income/expenses). You can pay yourself each month but it gives you a very clear accounting and makes it easier to track. Security deposits: in many states, an owner does not have to put the deposit in a separate trust account for their own property but check with your state.
Easy quick tip: charge a different amount for rent and the security deposit. There will be no confusion as to what a deposit was for when looking back (ie $2000/mon for rent, security deposit of $2500).
Make sure you have all the state mandated disclosures and forms. Find out if you are in a rent control city/district. Learn the rules & laws and save yourself a lot of headaches in the future. There are landlord/apartment associations that are very valuable and provide outstanding information and they are very affordable. Find one in your area or state and join them, it is a great asset, esp if you have never managed property before.
Just like the others said, respond right away and don't just go for the 'cheap fixes'. Show your client that you respect them and the property - in turn they will respect you and your property even more
Good luck and congrats on the dream house!
Lighthouse State Beach, Santa Cruz.