How do I become a landlord?

[Rick Lee]

I think I need to rent my place out, since selling it now would not bring enough money to make it worth the hassle and I need a firm date by which I can start in AZ. Anyway, how to screen tenants? How can I run their credit reports? Do I just buy a plain jane lease from Office Depot? Do I need to do anything like get a permit from the county or file the lease somewhere? I used to rent out rooms in my first house, but I lived there and just kept everything on a handshake, since I was there to keep an eye on thigs. But with this one I will be living far, far away. I don't even know if I have any good enough friends in the immediate area whom I could designate to take care of emergencies for me. Is it worth paying a realtor 2 mos. of rent per year to manage it for me? I think I can rent it out for about $200 positive cash flow per month.

[azasadny]

My neighbor owns a "property management" company and I think that's what you need. They handle everything and charge a fee, but they are there to manage the property and that might work for you since you'll be in AZ (lucky you!).

[RoninLB]

around here a lease only protects the tenants.

you can get screwed by tenants big time if you're not careful.

[Rick Lee]

What is the typical fee a prop. mgt. co. charges? 10-20% of the lease?

[onewhippedpuppy]

Rick, if you're out of state, find a trusted (and handy) friend, or a property management company. Just leaving it in the hands of your tenants is asking for disaster.

In KS, HUD seems to be the law of the land, with the counties each having their own specific rules. If VA is similar it would be a good place for you to start.

[Laneco]

Rick,
You probably should use a property management service if you are not going to be nearby all of the time.

We have three rentals all thru a property management service. The standalone house is 10% of the rent to the management and the zero lot line duplex is 7% (attached dwellings get a lower rate).

I have an agreement with our property management (in writing) that they screen tenants but I give final approval. I have rejected people for criminal records, for being smokers and for very poor credit scores. Emerging credit is OK, but poor scores (we're talking low 400s here) are reasons to live at someone else's house... If you choose this route, be careful of the reasons you reject renters - you may easily run afoul of their "rights."

I do not fully trust my management company. They have very high turnover in their book-keeping department and were continuously billing me for bogus charges (gotten much better last 6 months). Once, I spent 3 days cleaning a rental and the property management BILLED ME FOR IT!!!! Took almost two months to get my money back. My parents had rented from the same property managers - they had charged the property owner for replacing cabinets in the kitchen. Unfortunately, the cabinets had never been replaced. The owner came down and met my parents in person - she was furious at having been charged $1500 two years ago for cabinet replacement and none had been done. If the property management advises you that damage has been done, have before/after pictures taken in any situation where you cannot personally visit the premises. This will help ensure that work you are charged for is actually done.

What the management does provide (and my current contact there is very good) is a screening for renter sniveling, bringing to my attention only those items that are legitimate complaints. They also notify tenants when I want to view the property or show the property (two are for sale). Also break the bad news when a rental is damaged and the renter is going to lose their deposit.

angela

[Seahawk]

Rick,

Since you are going to be far away, a property management group makes the most sense.
As you might guess, a lot of my navy friends rent and most use PM companies.
As with all businesses, the caliber of the companies can vary widely...look for one that know the military rental market: Mid to senior grade officers are generally trustworthy and, when they aren't, you have a hammer in the military system.
Plan on a total refurb of the house when you sell...even the best renters won't take the same care as you would. Also, make sure you have a "war reserve" for big ticket items...renters get very impatient when the HVAC goes out.

If still need the help, I'll be happy to drive one of your cars out, no need for the plane flight home.

[pwd72s]

Originally Posted by RoninLB

around here a lease only protects the tenants.

you can get screwed by tenants big time if you're not careful.

+1! Been there and done that. Learned my lesson. Currently, the only real estate I'm interested in is the real estate I live on.

[berettafan]

i have been told by my realtor in a nearby town that renting to military folks with housing allowances is the holy grail. rents get paid on time and if you have a problem you know where to go.

i recently started a property management company with a partner in Ocean City for the simple reason that so many unit owners were absolutely disgusted with their current company. phone calls not returned, bogus billing, mixed funds, etc. it appears that line of work attracts a shady sort (doesn't say much for me does it?). biggest concerns are jobs that are rebilled to you vs. the contractor billing direct.

[DARISC]

Originally Posted by pwd72s

+1! Been there and done that. Learned my lesson. Currently, the only real estate I'm interested in is the real estate I live on.

Likewise - never again!

[on2wheels52]

Rick
Hat's off if you can pull it off. I'd be horrible as a residential landlord. Commerical rental could possibly be a profitable venture for me but I'm aware of too many holes in my abilities to undertake what your're proposing.
Jim

[turbo6bar]

Originally Posted by Rick Lee

I think I need to rent my place out, since selling it now would not bring enough money to make it worth the hassle and I need a firm date by which I can start in AZ. Anyway, how to screen tenants?

Credit score at least 550. Income at least 3x monthly rent. Tenant must be able to communicate properly and present themselves in a non-dirtbag fashion. Strong preference towards non-smokers. Pets OK if the application checks out, but no large breeds or multiple animals. I would say my current ratio of approved:declined is about 9:1.

How can I run their credit reports?

I used amerusa.net for credit checks.

Do I just buy a plain jane lease from Office Depot?

I adopted a simple state-specific lease costing me $20 off a website (cannot remember where). It was written in understandable English, but still follows state law. No problems, so far.

Do I need to do anything like get a permit from the county or file the lease somewhere?

Beats me for Virginia.

I don't even know if I have any good enough friends in the immediate area whom I could designate to take care of emergencies for me. Is it worth paying a realtor 2 mos. of rent per year to manage it for me? I think I can rent it out for about $200 positive cash flow per month.

Unless you have really good, trustworthy friends (if this is a question, you probably don't), I would seriously consider a property management company. The tough part is finding a good property manager. I've been told most are worthless. You have to find a good compromise. I think going rate is 7-10%.

Your best resource may be your local landlord's club or RE investor's association. If you find their web site, you might find ads for property managers. They could be helpful in determining market rents, ensuring your numbers are not whack.

good luck.
jurgen

[Scooter]

You might also consider putting your property into an entity for liability issues. The right insurance policy is a must, but an entity may give you added protection.

[Rick Lee]

Thanks guys. I will call my old realtor and see what he says, since he's plugged in pretty well and we get along too. 7-10% is cheap enough that I would hand it off to let someone else worry about it. My place is an end unit condo, so there's not much maint. and I have a service contract and warranty on the HVAC now. Paul, I will probably take you up on that. Not sure if I'll give you the 993 or the BMW. Depends on how much I can get the company to pay for my move.

[Dottore]

10% for residential is the norm here. Go with a good, well-known manager if you can.

Residential tenacy laws are outrageous where I live. The tenant has all the rights. In the past few years I flipped all my residential into commercial - and it makes all the difference. No headaches. Motivated tenants. etc etc.

But on no account should you be doing this yourself. Life is too short.

[Rick Lee]

What does the mgt. co. actually do besides collect the rent and pass repair bills to me? Do they advertise, find tenants, handle everything?

[djmcmath]

What a timely thread! I'll be leaving this area in February (contrary to my original plans), after only 21 months in my house. A Realtor friend says the house could fetch roughly what I paid for it, which means that, after Realtor fees, I'm out my down payment. I'd be free of the house, yes, but I'd also be free of a lot of equity.

Given that the housing market eventually _has_ to recover, I'll be doing essentially the same thing: renting from afar. My situation is slightly different, as I'm currently a mid-grade officer. That means that I know a couple of other mid-grade officers, and I know where we generally look to find housing. I know that there are a few other submarine officers coming into the area every 6 weeks or so, and I know how to get in touch with them. It's like direct marketing to exactly the audience I'm seeking. While I may not establish a policy of "Military Only," I definitely plan on advertising heavily with the kind of people I'd like to live in my house.

I will probably end up renting for less than the mortgage in order to get a good renter in place with a relatively short vacancy. It's not a good answer, but it's the least bad of the answers, imho.

If I had a place in Fairfax that I was looking to rent, preferably to military, I'd try to figure out where officers going to the Pentagon look for housing. Seahawk, you might have a better idea about that, being in that area -- if you were heading for DC, are there any military publications you'd look at to find housing? Does the Pentagon run any kind of advertising boards?

Thanks for bringing this up. Great topic right now.

Dan

[Rick Lee]

Well, my house is in Fairfax regardless of where military folks want to live. I can't change that. Plenty of Pentagon employees live in Fairfax and farther out. I've been researching local rents on Craigslist. But unfortunately, it's impossible to know if each place has been rented out for what the ad asked for in rent. My mortgage payment with condo fee is about $1600 and I've seen plenty of places like mine in the immediate area rent for $1800. So I think I should be able to get enough to cover mortgage, condo and management. I'd just have to plan on new carpeting before I sell.

[john70t]

Make sure your homeowners policy includes rental coverage, and have a line in the lease where the renter agrees to get/have rental insurance.
-I recently saw a patch of brownish wall where a (good/nice/responsible) renter's candle had burned out while she was asleep or gone. As well as smoking inside, electric space heaters are also suspect.

Targeting advertising in local medical or buiness school newspapers might lead to responsible tenants as well.
http://bbs2.mrlandlord.com/ has some ideas and links to services.

[Rick Lee]

Can I just turn applicants away if I don't like them? I mean, if some Indian family wants to squeeze 10 of their clan into my house, which I'm sure is illegal anyway, can I turn them away just for suspecting that? Can I turn away someone who smells like an ashtray because I worry they might smoke in the house?