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One reason I've been reluctant to rent out my mother's house is finding a reputable property management co. On Yelp 90% of them have 3 stars or less. The few who are 5 star do not do single family dwellings. I'm afraid if I hire the wrong one (an excellent chance) they'll either put in unqualified tenants or just let the place sit empty while they drain the expense account of their monthly fee. Are my fears unjustified? I saw some real ugly stuff in property management when I was in real estate years ago .
Is there some reason you're not just SELLING the house?
I have a rental property, a house I lived in for 9 years, but I am very lucky in that the city where that house is and especially the particular NEIGHBORHOOD where the house is has a VERY strong rental market (local elementary school is the highest ranked out of 7 or 8 schools). The rental house is also less than 10 minutes' drive from my current house, so I can easily pop over there in case of emergency. Is your mother's house far away from where you live? If so, I would think that that is even MORE reason to sell instead of rent.
In addition, if you are not an "active" LL -- i.e., if you use a property management company (that is one of the primary factors that the IRS uses) -- then you won't even get some of the LL benefits on your taxes (e.g., I can deduct my paper losses from my "regular job" pay because I do NOT use a property management company, I do all that work myself). So again, not sure why you would want to rent it out instead of just selling?
Is there some reason you're not just SELLING the house?
I have a rental property, a house I lived in for 9 years, but I am very lucky in that the city where that house is and especially the particular NEIGHBORHOOD where the house is has a VERY strong rental market (local elementary school is the highest ranked out of 7 or 8 schools). The rental house is also less than 10 minutes' drive from my current house, so I can easily pop over there in case of emergency. Is your mother's house far away from where you live? If so, I would think that that is even MORE reason to sell instead of rent.
In addition, if you are not an "active" LL -- i.e., if you use a property management company (that is one of the primary factors that the IRS uses) -- then you won't even get some of the LL benefits on your taxes (e.g., I can deduct my paper losses from my "regular job" pay because I do NOT use a property management company, I do all that work myself). So again, not sure why you would want to rent it out instead of just selling?
More details, please.
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Is there some reason you're not just SELLING the house?
Yes. My mother has a life estate and the house will pass to me upon her death. It's about 15 minutes away. I cannot sell while she is alive. Otherwise if I sold I'd have roughly 38% in capital gains taxes. California combined with the Fed has the 2nd highest capital gains payout in the world.
Take those star ratings with a large grain of salt. In the 16 years I've worked at the property management I'm at, with thousands of tenants and over 100 owners, I would say that 90% of our tenants, and all except one or two of our owners have left happy with the arrangement. The tenants who aren't happy are the ones who trashed the house and got a bill at move out, or paid rent late every month and didn't have their lease renewed. The owners were ones who wanted to be slumlords and let the properties get run down with no repairs, so we didn't agree with their philosophy and parted ways.
Guess which ones post reviews about us online? If you guessed the good ones, you are living in a fairy tale world. If you looked only at our online reviews, you would never want to work with us, but we are actually really good at our jobs and as honest as they get (perhaps to a fault).
Take those star ratings with a large grain of salt. In the 16 years I've worked at the property management I'm at, with thousands of tenants and over 100 owners, I would say that 90% of our tenants, and all except one or two of our owners have left happy with the arrangement. The tenants who aren't happy are the ones who trashed the house and got a bill at move out, or paid rent late every month and didn't have their lease renewed. The owners were ones who wanted to be slumlords and let the properties get run down with no repairs, so we didn't agree with their philosophy and parted ways.
Guess which ones post reviews about us online? If you guessed the good ones, you are living in a fairy tale world. If you looked only at our online reviews, you would never want to work with us, but we are actually really good at our jobs and as honest as they get (perhaps to a fault).
So how is an outsider like myself supposed to decide? I mean I don't have any referrals. I've never used a PM before. Real estate agents i call for a referral never call back...only if i say i want to sell.
I'm far from a slumlord. I put roughly 60K into the house to fix it up. New roof, new paint, new carpet, new fixtures, upgrade the electrical, new wall AC's. It looks pretty much like a new house. I'd hate to have the wrong tenant go in and trash it after a year and then just have the PM sit on his hands while he collects his monthly fee while I put another 60K in to fix the damage that a month's deposit would never cover. You may be good but you're a diamond in the rough.
It's about impossible for a PM company to get 5 star reviews. You commonly deal with people that don't have money. Owners that can't afford repairs, tenants that are one broken down car away from not being able to pay rent, etc.
The first time something goes wrong the PM gets blamed. Repairs are too slow, owner won't approve or can't afford repairs and they don't get done. Boom-tenant gives 1 star reviews. This sucks because the PM works for the owner and not the tenant so they must represent the owners interests.
Tenant is late or doesn't pay, tenant doesn't take care of the home, something breaks and the owner can't afford it and boom-owner gives a 1 star review.
PM are really almost a no win situation. We have a PM division so I see both sides. I get blamed for things I can't control frequently. The good news is that I think most PM companies only collect based on income. Ask your friends for recommendations or just call a few and talk the PM to find out. FYI-it is hard to find good property managers. You really want to make sure they place a good tenant in the home. That is the most important thing. Too many rental companies slap the first warm body they get in a home and then act surprised when that 480 credit score with 3 evictions on record doesn't pay and leaves the home trashed after the eviction.
It's easier to find a good tenant than a good PM.
But do take the time to really check the applicants.
I think in today's climate with all the laws being passed to protect the tenant, not the LL I think a person who's not an experienced PM would have to be nuts to rent/management themselves. The laws fills an entire volume on what a LL can do and cannot do.
This is only 1 subsection of about 300 pages of laws a LL has to be careful not to break, purposely or inadvertently:
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Refusing to sell, rent, or lease.
Refusing to negotiate for a sale, rental, or lease.
Representing that housing is not available for inspection, sale, or rental when it is, in fact, available.
Otherwise denying or withholding housing accommodations.
Providing inferior housing terms, conditions, privileges, facilities, or services.
Harassing a person in connection with housing accommodations.
Canceling or terminating a sale or rental agreement.
Providing segregated or separated housing accommodations.
Refusing to permit a person with a disability, at the person with a disability's own expense, to make reasonable modifications to a rental unit that are necessary to allow the person with a disability "full enjoyment of the premises." As a condition of making the modifications, the landlord may require the person with a disability to enter into an agreement to restore the interior of the rental unit to its previous condition at the end of the tenancy (excluding reasonable wear and tear).
Refusing to make reasonable accommodations in rules, policies, practices, or services when necessary to allow a person with a disability "equal opportunity to use and enjoy a dwelling" (for example, refusing to allow a person with a disability's companion or service dog).
I understand tenants have to be protected but when the laws are so rigid and nit-picking it hamstrings a LL to be able to choose the right tenants, then it's out of hand. If they haven't got a service dog, they have a companion dog. If they haven't got a child, they have a disabled spouse. If they're not LGBT, they're necrophiliacs who want to engage in their religious rites pertinent to their belief system and on and on. Nobody should be a LL nowadays unless they are wealthy and can absorb hundreds of thousands of dollars loss on 5 out of 10 units that get trashed, flooded and everything in between.
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