Renting a higher end home

[HardDrive]

I'm sure the guys living in $5 million dollar homes will laugh at me calling our humble shack 'higher end'.......

My wife and I are looking at the very real possibility of having to move to Denver. We bought our current home in 2005 for $500k, and could likely sell for $700k. Even with the down market, we have massively renovated the home, thus the increase in value. I've confirmed with a couple RE agent friends that our expectations are in line. Seattle is an odd bubble where prices are actually going up in some areas.

We could sell, but we don't want to. We love our home, and longer term would like to end up back in Seattle. If we have enough $ to put 20% down on a new home, and we could get sufficient rent to cover the mortgage on our current home, it seems like a no brainer to keep the place.....but.....

I have heard TONS of horror stories about renting. We just did a 'cost no object' renovation to the kitchen and I worry about it getting trashed. I'm pretty good about spotting maintenance issues and tackling that stuff, but we won't be in the same state.

So what could I do to mitigate my worries? Specifically:

1) Can we insure the home against damage caused by renters?

2) What is the best way to deal with property management if you are not in the same state?

3) What is the best source for quality renters?

4) How do you go about doing a detailed back ground check on potential renters?

Any input very much appreciated.

[kaisen]

I would think you'd have three categories of renters:

1) Transferees who are in town on assignment for a year or two. That's the reason they're renting and not buying. They likely own their own high-end home somewhere else and are faced with the same fears. I'd think they would take care of your home as well as they would their own.

2) Short-sale / Foreclosure types. They may have owned a 'high-end' home that they had to sell or walk away from and no longer have the credit to make another purchase. They still have the income and the taste, so they'd love to have your $700K home and they're willing to sign a lease with high payments (they have little other choice). The highest 'risk' for trashing your place, but I think you'd be able to tell in an interview. There's a LOT of these people out there.

3) The Waynes that sold their home at the peak and are holding off on buying another home until the time is right. I don't think there are too many of these people out there, but they will want a rent that is lower than buying the same home. Probably little risk in trashing the place.

[Noah930]

Unless you have the time and/or energy to do so, there are property management firms that will do that stuff for you. As in, they'll find answers to all 4 of your questions. For insurance, just have some stipulation that the renters need to carry $500K of insurance, or something like that. The rental agency will list your property, do the credit checks, handle property management issues like repairmen/gardener/pool guy/etc.

[LWJ]

I know a firm in Portland (not sure about Seattle but soon to come if not already) that is renting high end homes. There are a ton of homes in Portland where folks are a little upside down and need some income but don't want to sell. It is a big market to rent these places.

PM me if you want me to connect you.

Good luck.
Larry

[LakeCleElum]

HD - Not sure if high end, but upper medium end for sure: I could sell my house in Maple Valley on an acre & half when I moved to Cle Elum in 2008. Hired a Prop Mgt company. For a fee of the 1st month's rent, they advertise, show, screen and do back ground checks on potential tennants. The collect the 1st mo rent and deposit........After that, if you want for 10%, they do everything; collect rent, repairs, inspections, etc. We used "Windermere Prop Mgt".

Been 2.5 yrs now and very happy, I make a profit of over $1,000/mo.....Great tennants. The more you charge for rent, the better class of tennants you get. Yes on the insurance....G'luck.

[HardDrive]

Thanks all.

Bob, thats great info.

[Zeke]

Originally Posted by kaisen

I would think you'd have three categories of renters:

1) Transferees who are in town on assignment for a year or two. That's the reason they're renting and not buying. They likely own their own high-end home somewhere else and are faced with the same fears. I'd think they would take care of your home as well as they would their own.

2) Short-sale / Foreclosure types. They may have owned a 'high-end' home that they had to sell or walk away from and no longer have the credit to make another purchase. They still have the income and the taste, so they'd love to have your $700K home and they're willing to sign a lease with high payments (they have little other choice). The highest 'risk' for trashing your place, but I think you'd be able to tell in an interview. There's a LOT of these people out there.

3) The Waynes that sold their home at the peak and are holding off on buying another home until the time is right. I don't think there are too many of these people out there, but they will want a rent that is lower than buying the same home. Probably little risk in trashing the place.

I guess you missed where Wayne bought back in at a higher price than what he could get now.

[HHI944]

The house I'm renting (and have been for 3.5 years) is in that price range and initially was handled by a property management company. I got the address, looked up the owner and contacted him directly. Paid my first year rent in advance, no background/credit BS and have been on yearly leases since with everyone reasonably happy.