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Becoming a Landlord
We are pretty set that we will rent our house for at least a year maybe two when we move. I know some of you on here are landlords, would you mind imparting your wisdom?
1. Did you notify your mortgage company? We poured over our loan documents yesterday it said that they couldn't do anything as long as we had lived in the house for over a year (which we have). I'm thinking that if we call them first they are going to give us a list of a thousand things or try to decline it, but if we just do it they have no recourse, Thoughts?
2. I know we need to change to landlord insurance.
3. How do we figure out how much to charge for rent? I know what the going rate is for this neighborhood/area. Do we include sanitation and water?
4. What if anything do we need to do for the borough? county?
Re: Becoming a Landlord
Have you considered using a property management company? If you're a landlord you either have to be able to fix stuff that comes up or have someone who can - kind of hard to do if you're far away.
I used to handle landlord/tenant evictions at a law firm. This is solid advice. You want an advocate, especially if you're not in town personally. I'm not sure if you're in Philly or the suburbs but if you're in the city proper, you need to secure a rental peppery license first and foremost.
ETA: I'm not a lawyer so it's not legal advice
1. Did you notify your mortgage company? We poured over our loan documents yesterday it said that they couldn't do anything as long as we had lived in the house for over a year (which we have). I'm thinking that if we call them first they are going to give us a list of a thousand things or try to decline it, but if we just do it they have no recourse, Thoughts? No. You don't need to. If you escrow your homeowner's insurance, you will likely receive an amended escrow statement some time (6-12 months after changing your policy).
2. I know we need to change to landlord insurance. Your homeowner's policy will likely go up.
3. How do we figure out how much to charge for rent? Craigslist is an OK barometer. I know what the going rate is for this neighborhood/area. Do we include sanitation and water? Overestimate the annual cost and just bundle it into the monthly rent. In PA, you are required to provide access to clean water and sanitary facilities.
4. What if anything do we need to do for the borough? county?
County: You don't need to notify the county of the change to a rental, but you will want your Real Estate Tax bills to be forwarded to your new address or a PO Box
Borough: you need to get an annual Rental Permit through the borough. It is $60 and they will inspect the property once (it is an objective list of safety requirements--working smoke detectors in every bedroom, and on each floor of the home, secured railings, etc.) and if you need to rectify anything, they'll come back to confirm that you've done what is needed to bring the house to compliance for a rental (the second visit is included in your $60 payment). I know the rental inspector, he's a nice guy and will not make your life hell. I also happen to know his boss.
I just want to agree that a propert management company is probably best since you will not be local to take care of it.
Yes. And the annual rate for a PM company (usually a real estate agency) in our borough is equal to what you charge for one month's rent.
Any fixed utility costs, I would probably include with the rent. Utilities, such as water and electric, I would not include. It's very common to see rental properties state 'utilities not included'.
Check with a local realtor too. Some of them also handle rentals similar to a property management company, and it may be a little cheaper. They can help you set a price for the rent based on your mortgage, management fees, etc. and may even take care of the listing and showings for you.
We have a rental in Michigan and definitely use a management company to handle everything. We pay one full months rent for them to fill it and then 10% of rent a month. It is well worth the cost to have someone else worry about all the crap that comes up.
Also, I go into ours that if it pays for itself, I am happy; it has not provided us with extra spending money. I say this to make sure you set realistic expectations. You may not have the same experience as me, but it is something to think about.
DD: 6-24-11
EDD: 9-20-14
Also, being a rental is hard on the property. I
Know you guys did a ton of upgrading so I would be worried about depreciation of those upgrades like floors and new kitchen if you just plan on selling anyways.
We rent out our house in Baltimore and live in Philly now. We used a real estate agent to rent out our house the first year and she walked us through everything we needed to prepare to rent out the house (rental license, etc) It cost us one month rent. We decided not to use them for property management and it has been just fine. We save up the money for if something goes wrong. Then we find a contractor from Angie's list and that has worked nicely. The 2nd year we used Craig's list to rent our house out and that worked out fine. We made one trip to b-more to show the house and the first people who saw it rented it. We plan on handling everything ourselves until we can sell it and get what we paid for it. Luckily we break even every month. Overall it's been easy (fingers crossed). Good luck!