Advice on going through an agent to rent my place out (lease, tenant)
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Seven years ago, I bought my condo which is a two bedroom. I live over an hour from work and made the decision this weekend to relocate closer to work. I've decided to rent my place out and look for places closer to the city.
I have no experience as a landlord so my best bet is to have an agency/realtor handle this instead. Does anyone have any advice on the pros/cons of going this route?
Seven years ago, I bought my condo which is a two bedroom. I live over an hour from work and made the decision this weekend to relocate closer to work. I've decided to rent my place out and look for places closer to the city.
I have no experience as a landlord so my best bet is to have an agency/realtor handle this instead. Does anyone have any advice on the pros/cons of going this route?
We use property managers. Notice that 's' at the word. We have bought property anytime we were to be stationed a place at least two years and then rented it out. If you are going this route a good property manager makes all the difference. We looked for agents/companies that seemed to have a large number of varied property in the rental ads, called them up and first engaged with them as if we were renters. We struck names off if they did any of the following:
Were rude to potential renters
Acted like they were too busy to answer questions
Had trouble finding time to show the place
Trashed the actual owner
Trashed the place they were showing
Talked bad about other renters or neighbors
Told us things that contradicted the lease
Didn't try to gauge the renter's suitability before handing out the application
Used an application that didn't help with the process to weed out bad applicants
Used a lease that didn't cover all the potential financial pitfalls
Lied
Simply gave us bad vibes
If they passed our standards then we told them what we were really looking for and started interveiwing them from the landlord's perspective:
Are they standard in fees (8-10% and one month's rent to get it rented)
Do they have handymen and what are their price ranges
What are their steps for dealing with problem tenants
How many properties do they manage
How many people work in their office
How often to they visit the property
What is their procedure for tenant complaints and/or problems with the property
What is their procedure for late rent
How big of a contingency fund do they need
What problems do they address immediately without first notifying us
What do they typically recommend for raising the rent and how do they go about doing it
Then we ask for a reference of a property owner who they have been serving at least 5 years and actually do talk to them. The first couple of years it isn't always a break even process but that does change as the years go by. Many people are surprised by what it costs to have a property manager and you could potentially make more if you do it yourself. Notice I said potentially. A good property manager will help you avoid most of the headaches and financial risks associated with rental property.
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My advice is that novice landlords should FORGET IT!!! After 3 years of endless tenant problems, I have yet to make a profit. My only chance of profiting from my venture is capital gains when I sell my properties. Meanwhile my life is hell.
If I got a property manager I would just have bigger losses. I'm renting out the properties for as much as comparative properties rent at. When I ask for more I get no interested applicants.
I too live at a distance and use a Realtor to advertise, show, take applications, write the lease. Well worth the $1,000 commission although some charge more and there are cut-rate agents too.
If I had it all over to do again I'd stuff the money under my bed. Or if I already owned the property I'd sell it. In fact I'm selling my properties and will be out of the business about 2020.
p.s. If you have pets, it might be better to shrink wrap the money and put it in your freezer!
My advice is that novice landlords should FORGET IT!!! After 3 years of endless tenant problems, I have yet to make a profit. My only chance of profiting from my venture is capital gains when I sell my properties. Meanwhile my life is hell.
If I got a property manager I would just have bigger losses. I'm renting out the properties for as much as comparative properties rent at. When I ask for more I get no interested applicants.
I too live at a distance and use a Realtor to advertise, show, take applications, write the lease. Well worth the $1,000 commission although some charge more and there are cut-rate agents too.
If I had it all over to do again I'd stuff the money under my bed. Or if I already owned the property I'd sell it. In fact I'm selling my properties and will be out of the business about 2020.
p.s. If you have pets, it might be better to shrink wrap the money and put it in your freezer!
If you have a mortgage on the property chances are you are not going to make much money the first couple of years. What happens is that inflation eventually makes the mortgage payments a lot smaller in comparison to the rent you receive. Once property is owned free and clear it turns into a reliable source of passive income. Having rental property as a source of income is a long haul endeavor. And if you are one of those investors who "milk" their property it is unlikely to ever happen.
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Biggerpockets.com is a good site to go to get info. EVERY LL at one time was a new LL. Myself included. But over time everyone (hopefully) learns what not to do.
YOU have a great tool at your disposal. The internet. You can easily research the process and set yourself up to be a LL and be profitable. You need to have a procedure for everything.
I now I do. You will also learn a new bad word. That is NO. please feel free to use it anytime you get a applicant that doesn't pass the requirements you set. I use it all the time. I have no problem using it now. I let someone else deal with potential trouble tenants.
Start researching. If you get into being a property owner and rent out property if you're not making money you are doing something wrong.
If you have a mortgage on the property chances are you are not going to make much money the first couple of years. What happens is that inflation eventually makes the mortgage payments a lot smaller in comparison to the rent you receive. Once property is owned free and clear it turns into a reliable source of passive income. Having rental property as a source of income is a long haul endeavor. And if you are one of those investors who "milk" their property it is unlikely to ever happen.
I understand all that. The problem is that I doubt my sanity will last long enough.
I don't know what happened but mid last year all my tenants suddenly developed a lack of understanding of what constitutes "rent is due on the 1st of the month." I find myself engaged in lengthy email conversations trying to get them to pay their late fees. Just this month I finally settled for half a late fee payment from late last summer. What are you going to do, evict them because of non-payment of a late fee? It's a bigger hassle to find a new tenant.
The simple fact is that some people do not have the temperament to be landlords. I've realized I'm one of them. I've decided my sanity is more important to me than the money.
I just want to figuratively go off to an island with a nice sandy beach to laze upon, maybe sip drinks with little umbrellas. And an Internet connection solely for downloading ebooks.
I understand all that. The problem is that I doubt my sanity will last long enough.
I don't know what happened but mid last year all my tenants suddenly developed a lack of understanding of what constitutes "rent is due on the 1st of the month." I find myself engaged in lengthy email conversations trying to get them to pay their late fees. Just this month I finally settled for half a late fee payment from late last summer. What are you going to do, evict them because of non-payment of a late fee? It's a bigger hassle to find a new tenant
The simple fact is that some people do not have the temperament to be landlords. I've realized I'm one of them. I've decided my sanity is more important to me than the money.
I just want to figuratively go off to an island with a nice sandy beach to laze upon, maybe sip drinks with little umbrellas. And an Internet connection solely for downloading ebooks.
Absolutely. That's EXACTLY what you do. Right now the tenants know that they can push you around that's why you're having such problems. Especially since you're finding yourself in these lengthy conversations (probably heated conversations) about what you are owed. You're probably trying to be the "nice" guy.
Does your lease have a provision for late fees if tenant does not make the full payment by x date? Then you tell them that they need to pay the rent PLUS the late fee. If they don't you simply send three day pay or notice and if they ignore you you start eviction. You can be nice but firm. I can understand wanting to keep your sanity
It's not a bigger hassle to find a great new tenant. That should be your first priority. Look at it as you're getting rid of a bad tenant and starting fresh. After doing this for 23/24 years I have absolutely nothing to complain about. It can be very rewarding. This experience should help you do your homework before you choose a tenant. Bud, I decline 80% of applicants right off the bat. Usually due to bad credit or not enough income or combo of the two. The other 15% get declined at some point past initial review, due to misrepresenting or finding things they did not disclose. Sure it's not easy to process applicants but I'll do it all day long before I just take someone that won't pass the tenant requirements.
I've never enforced stage 2 of my late fees as stated in the lease. Late fees continue until you are 100% paid up, even full payment of rent but also full payment of late fees.
My properties are in a different state. I can't show them myself. It costs me $1K commissions + lost rent + continuing mortgage etc. fees + fixing the mess the last tenant left behind, screening tenants and tossing the dice, before I can have new tenants -- who may be just as bad as the previous tenants.
Don't think I'm not paying attention to you. I have a tenant who has been ideal for 1-1/2 years but suddenly turned bad. What happened? I don't know, none of my business. It's my favorite SFR which I think has great value increase potential over the next few years, I don't want to sell.
I think it may be time to drop the hammer on this tenant and simply inform him that I'm declining the MTM transition, bye bye, take the loss and get new tenants.
If I'm lucky (and skillful) I may find a good long term tenant who will allow me to own this property a few (or several) years more, and it could become my best property.
I do have similar rejection statistics although not quite as harsh as yours. I think it's time to steel my heart and tough it out another month until I find a solid tenant. -- I still don't understand how tenants could be solid for 18 months and then turn into losers so quickly.
You have helped me. I do not want to lose this property. I was thinking of selling it but now more inclined to re-tenant it.
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