Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
We've had my husband's duplex rented out since 1999. For the first 10 years we managed it ourselves and only rented to family friends whom we knew well enough to trust that they wouldn't make us sorry. We had very few problems. Around 2010 we engaged a property manager so that we wouldn't have to be so hands on. Our experience with the mgmt. company has been good and we've had 2 tenants since then. The first tenant pulled a fast one and let someone move in and take over, unbeknownst to anyone. The person they moved in abandoned the place and an old neighbor called us to tell us. The place was messy but not horrible and we let the mgmt. company handle the situation. Our next tenant has been there five years without any problems. I want to sell now, DH is dragging his feet. We could put the money into something with a greater cash flow, but he's always had to be pushed into anything resembling change.
If you get a good property manager, it's not a bad thing to do at all.
Renting a house is the easiest money I've every made. The biggest concern I'd have for you is that you want to move away. Being an absentee landlord can be difficult and expensive.
However, if you are living close by it's totally doable. People talk about crazy tenants all the time. You need to use judgement when scanning tenants. My wife and I rent our homes, and we've done so very differently in the past. I would get credit checks and want to know how much they made. We'd sign a boiler plate contract. I'd supply nice items.
She would read their "face" and the often verbally agree. She was great at finding cheap off the clock tradesmen for fixes and improvements.
We've learned from each other.
We agree that the key for the facilities is to not be cheap. If I don't want the stove to get destroyed, I should make it a nice one that self-cleans and has the easy clean stovetop. I should have a dishwasher so things don't get piled up somewhere and moldy. I should have things that are energy efficient so my tenant isn't paying all their money to the utility companies. Plus, it gives the tenants a chance to show off something nice they have. The difference between remarkable and cheap items is maybe $1-2K. That may sound like a lot of unnecessary spend, but consider how much an unoccupied month costs?
The tenant is key. The mix that works is to find a tenant who isn't acting shady. They have a story that makes sense. I like renting to old immigrant couples with a small cash jobs nearby. They often don't like to drive so they want to live close to their work and aren't looking to buy a home. They will rent for the rest of their lives. All apartment buildings will require taxable documentation, so they don't have many options. My wife prefers couples with special needs children. She's great with contractors and they can do nice work inexpensively, and a couple that has an accessible home that is near the accessible school is not going to move anytime soon. The story is the most important. The background check is basically to validate the story.
Finally, there's the respect. We still use the boiler plate contract for the first 12 months, but it comes with a verbal tell. Change your own lightbulbs please but feel free to paint if you want. I've placed nicer appliances, fixtures in the place because I know you need a home of dignity. I know I don't need me to tell you to respect your home, but if you reach a time when you don't want it, please show the future tenant the courtesy the prior one has shown you. I'm busy with my job (true) but if you don't remind me that you're here and taking my time, I may well forget to raise your rent. After a year, with nothing changed, they start to believe me.
I've never raised rent on someone. I wait for them to move and then adjust. I've thought about breaking that as my properties haven't turned over in years, but then I remember that my properties haven't turned over in years and I haven't had so much as a phone call from tenants except to ask if we have other properties we would rent to someone they know that is looking.
Check shows up, money is passed on to the bank and depreciation gives me a passive tax loss. Easiest money I've ever made. The net effect is me not doing anything most months for a salary's worth of income that goes to the banks today, but will go to me when when I'm no longer working myself.
I have to agree with TheShadow, we used a property management company and it's not bad at all. If you're in a situation where you have to rent your house because of a move, you may consider doing it while putting it on the market and letting a property management company handle everything. They're not that expensive and if you get a good company they will take away a lot of the stress of dealing with bad tenants.
You say you would need a rental agent? No, what you will need is a property manager. An honest, tough as nails, take no prisoners property manager with plenty of experience; big city experience preferred. You do not need a real estate agent to get you a tenant. Get the experienced property manager first, and let the property manager find you a tenant. I suggest this because most professional property managers will not take on the management of a property with a tenant that they did not select.
As for the all of the sad stories and naysayers so far on this thread, I have to wonder how many went about renting their property the right way with professional property management, or signed the first tenant that came along with a lease from Staples.
Yes, this is what I meant--a property manager. Thank you for the clarification. A year and a half ago when we were first thinking about moving, we contacted a real estate agent who told us we would take a huge hit if we sold and directed us to a property manager. He seemed exactly as you described--and, yes, he did say he would be selecting the tenants.
Our house currently has an underwater mortgage. It would likely be 2-3 more years before we could get out free and clear. We would be moving out of state and renting with an eye toward buying again (with a mortgage) in a year or so. We have very little cushion and not much left over month to month. We could tighten our belts a little, but not much.
Renting locally to a local renter can be manageable if one gets a good tenant. Still, there will always be problems and repair/maintenance issues.
Absentee property management automatically increases the room for problems and difficulty in dealing with them by a factor of 2:1. Still, if you have an established cadre of trustworthy tradesmen and friends/family in the area who can keep an eye on things (and perhaps know the renter) -- it can be manageable.
If you are a first-time landlord and will be doing so on an absentee basis, you really want to think about the hassle factor versus the potential upside. If you have some reason to believe the property may appreciate substantially over the next few years -- or you are otherwise left with an empty house in a remote area, there may be some advantages to renting, but a local property management company (at 20% cost) may be worth considering.
If you have a long-term underwater property, it might be worthwhile to buy another property in your new location before making a decision regarding the disposition of the old property. (A lease with an option to buy ... or even forfeiting the old property). I guess the question in this scenario is, "Can you qualify to buy a new property or can you afford to carry both?"
For those of you who are saying don't do it, have you ever rented in your lives? Were you that terrible? We rented a total of 2 1/2 yrs in the recent past. The place in Hawaii for a year was reputed to be awful at returning deposits and raising rents but we got our full deposit and they offered us a rent reduction plus no pet rent if we stayed. Very tempting if we weren't leaving the island. ($50/pet/mo)
In Atlanta, we got our full deposit and left the place much better than we found it. The landlady didn't have to lift a finger to get it ready to rent back out.
So there are good renters out there.
Can you get your mortgage payment in rent? If so, then why not? As long as you're not emotionally attached to your house. If they ran it down it wouldn't hurt your feelings. There are some good tax breaks to renting, the upkeep is tax deductible. I don't recommend Section 8 but they pay a few months if a tenant leaves while you await a new tenant.
Just because someone works in a law firm or is a lawyer it does not mean that they can violate the lease or leave in 6 months if they signed for a year.
Of course it doesn't, but it helps when they know exactly how to go about it all and what their (legal) obligations are as well as the LL's. I don't remember what our lease looked like back then, I'm pretty sure it was purchased at a book store. They gave us notice, paid for advertising (newspaper classified ads back in the late 90's) and confirmed that they would pay rent until the condo was re-rented. That wasn't necessary because we found a new tenant (single guy in his 30's) before they even moved out.
I'd be considering the option of selling the house in order to invest the proceeds in stocks and bonds. How much in capital gains would you pay? First 500K is tax free for married couples.
8 yrs and you still owe more on the house than it is worth? Renting would allow you to build equity and generate some income if the rent is more than your mortgage payments.
Will the bank to agree to a short sale? If you are going to rent, make sure your house can attract good tenants. Good tenants are picky. It's possible you can deduct your losses if you sell much later after you have rented it out. Consult a tax consultant.
Quote:
Originally Posted by Isabella Tiger Moth
Yes, this is what I meant--a property manager. Thank you for the clarification. A year and a half ago when we were first thinking about moving, we contacted a real estate agent who told us we would take a huge hit if we sold and directed us to a property manager. He seemed exactly as you described--and, yes, he did say he would be selecting the tenants.
Our house currently has an underwater mortgage. It would likely be 2-3 more years before we could get out free and clear. We would be moving out of state and renting with an eye toward buying again (with a mortgage) in a year or so. We have very little cushion and not much left over month to month. We could tighten our belts a little, but not much.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
Renting doesn't have to be painful
