Renting out a townhouse. Can I do on my own or go with an agency? (apartment, renter)

[dude_reino]

Originally Posted by Mystery123

I may have a place to invest and get at least around 8% return that'll come to around $500/month after taxes but I agree renting is safer.

An equity return of 8% sounds nice on paper, but once you do the math, renting may still be a good option. On an equity investment, will have to pay a flat capital gains tax on all returns every year. With a rental, you can deduct nearly all of your expenses (including HOA fees), which will greatly lower your adjusted gross income on the rental.

Secondly, in addition to the revenue you are getting every month, your property is still appreciating each year. So you can think of this as an equity that grows in value AND also pays a dividend.

Some things to think about.

[Mystery123]

It's a townhouse so appreciation is not like a house.
Even if it goes up by 10%, it's only 10K compared to an average house, it'll be a 30K difference.

[Mystery123]

BTW, what's the risk of non-payment?
What if they don't pay and don't move out?

[Galaxie Girl]

Originally Posted by Mystery123

BTW, what's the risk of non-payment?
What if they don't pay and don't move out?

The chances of that happening are higher if you don't screen prospective tenants. You should check credit (minimum credit score of 600, if not higher) and background reports, check for past evictions (past eviction = do not accept as a tenant), require gross income to be at least 3x the rent you are asking, verify employment, contact current/previous landlord for feedback on how they have been as tenants, and check their cleanliness (if they or their car looks like a slob, they'll probably treat your unit the same way). That should weed out the vast majority (though not all) of the major problem tenants. Oh, also, don't allow dogs, they'll wreck your place.

If they don't pay and don't leave after you serve them a pay or quit notice, you'll need to evict them. Based on my research of CO, sounds like that takes about 3-4 weeks to complete. Not sure of the costs. You should find a local attorney who specializes in evictions if you need to do that.

[Pahn]

Factor in depreciation when figuring your tax liability. This can often put you at a loss on paper, actually lowering your tax bill. This means more money in your pocket.

Of course, depreciation lowers your basis, likely increasing your tax bill when you sell the house. Of course, I'd rather pay at the long term capital gain rate than the regular rate.

[goodlife36]

Originally Posted by Mystery123

I'll be moving into a single family house soon and want to rent out the townhouse to see if it's worthwhile instead of selling it.
Can I do on my own or go with an agency?
What are the things to consider?
Credit check, deposit, HOA issues, contracts etc...
Thanks for comments.

Do it yourself! I did. I am so glad I did. I tried to use a broker but she did not have my best interest at heart. There is so much you can learn by speaking directly to prospective tenants. It is tough and time consuming but it is worth it. I have had my tenant for 7 months and things are going well. The screening process consisted of the following:

Detailed Craigslist ad with pictures. I also posted my ad on Zillow.

Application
Credit Check
Landlord/ Employer Reference... Check the references. It is important.
Pay stubs
Copy of ID
Signed 12 Month lease

When I found a tenant, I got a deposit in cash. I would not recommend any other form of payment. I gave the tenant a signed lease and the keys after I received first month's rent in cash.

I notified my HOA by requesting parking tags and a change of address. HOA is incorporated in the rent. Do not involve the tenant in this. They just need to know what they are entitled to.

I changed my home insurance to a rental policy. The mortgage company will notify your bank. Do not play around with this. They will find out if you move. While in the process of switching my policy, I received a call from the insurance company inquiring about my residence. I guess they were somehow alerted when I submitted a change of address form.

Be clear about utilities especially water.

Do not concern yourself with hard luck stories. People will try you. This is a business and it is important to understand that it is not personal.

I know this may sound like a lot and it is. A good tenant will make being a landlord easy. Good luck to you!

[Mystery123]

Originally Posted by Galaxie Girl

You should find a local attorney who specializes in evictions if you need to do that.

Hopefully, that situation will not happen.
No pets allowed is good idea.

Originally Posted by Pahn

Factor in depreciation when figuring your tax liability. This can often put you at a loss on paper, actually lowering your tax bill. This means more money in your pocket.

No idea what that means.

Originally Posted by goodlife36

Application
Credit Check
Landlord/ Employer Reference... Check the references. It is important.
Pay stubs
Copy of ID
Signed 12 Month lease

When I found a tenant, I got a deposit in cash. I would not recommend any other form of payment. I gave the tenant a signed lease and the keys after I received first month's rent in cash.

What about deposit amount?
Should it be same as monthly rent and paid at the time of 1st payment?
So they end up paying double the 1st time.

Mortgage is no issue as it's paid off so all I have to do is get renter's insurance for the inside since HOA fee ($20/month) covers exterior as well as water bill.
Renters will be responsible for electricity and gas plus any HOA fines if they don't keep their front yard backyard free of trash or violate HOA rules.

This townhouse is right next to Bear Creek School that is considered very good so renting out is no issue. It's just the matter of finding good renters.

[mic111]

It makes me nervous that you keep saying renter's insurance. What you need is landlord's insurance. Renter's insurance is something your tenant should get to cover their belongings. Landlord's insurance will cover your liability and damage to the inside of the property.

[Mystery123]

Originally Posted by mic111

It makes me nervous that you keep saying renter's insurance. What you need is landlord's insurance. Renter's insurance is something your tenant should get to cover their belongings. Landlord's insurance will cover your liability and damage to the inside of the property.

Yes, that's what I meant to say.
Insurance for the house when I have renters living there.
Insurance because of renters to cover me just in case.

So yes, it's landlord's insurance.

[Dreaming of Hawaii]

Originally Posted by Mystery123

What about deposit amount?
Should it be same as monthly rent and paid at the time of 1st payment?
So they end up paying double the 1st time.

When we rented out our house we required that they paid us the first month's rent, plus a security deposit equal to another month's rent. So if the tenant skips out, you have at least one month's rent while you look for a new tenant.

So, yes, they end up paying double the first time.