Rental Property Advice

[Jinx]

Hey Guys,
It looks like I will be trying to rent a property and just looking for advice. I know quite a few of you have rental properties so I hope you have some good info.

Tell me the things that are working well.
Lease Contracts?
Background Checks?
Anything else?

What not to do?
Past experience with resolutions?

Thanks in advance for your help,

 

[jeeper]

Tenants are liars. They always are and always will be. Trust your gut, not their words.
below market rental rates attracts more people, gives you more options. Higher rental rates give you very few applicants, usually desperate people, and causes issues, but you get more money.

Back ground and credit checks give you a heads up on who they really are. I usually don't do them, and often get screwed because of it.

I am a push over as a land lord. I let them get away with way to much. It helps me avoid conflict in the moment but almost always costs me money in the end.

Pets are always destructive. get a larger deposit and extra monthly of you allow pets.

We do a 1 year lease, with a month to month after that. seems to work well.

If you are not handy with sheetrock, plumbing, home repair, etc, it is going to cost you a LOT.

 

[skeptic]

We sold our property due to 3 of the 4 couples we rented to were bad renters and my wife didn't want to deal with yet another set of new ones. All my wife cared about was getting someone in to rent it and not let it go a month or two empty. I'll give you the same advice I tried to give my wife (she didn't listen and as it was her house she did what she wanted). Number 1, use a property management company. Yes, it costs money but then they deal with all the BS. If that isn't an option, do a credit check and pay attention to it!!! Don't do what my wife did and listen to a song and dance about how their bad credit is from a divorce and lost job and everything is back on track... Finally, check references for the last place or two they lived. Trust me when I say this - it's better in the long run to let the house go unrented for a month or two and end up with good renters than to just take the first bad renter that comes along.

 

[Jinx]

Tenants are liars. They always are and always will be. Trust your gut, not their words.
below market rental rates attracts more people, gives you more options. Higher rental rates give you very few applicants, usually desperate people, and causes issues, but you get more money.

Back ground and credit checks give you a heads up on who they really are. I usually don't do them, and often get screwed because of it.

I am a push over as a land lord. I let them get away with way to much. It helps me avoid conflict in the moment but almost always costs me money in the end.

Pets are always destructive. get a larger deposit and extra monthly of you allow pets.

We do a 1 year lease, with a month to month after that. seems to work well.

If you are not handy with sheetrock, plumbing, home repair, etc, it is going to cost you a LOT.

Perfect, this is the kind of stuff, I need.

I do pretty well with home improvement, and things I don't do I have friends/contacts that do.

Great call on the pets clause.

Anyone/Anything else?

 

[Jinx]

We sold our property due to 3 of the 4 couples we rented to were bad renters and my wife didn't want to deal with yet another set of new ones. All my wife cared about was getting someone in to rent it and not let it go a month or two empty. I'll give you the same advice I tried to give my wife (she didn't listen and as it was her house she did what she wanted). Number 1, use a property management company. Yes, it costs money but then they deal with all the BS. If that isn't an option, do a credit check and pay attention to it!!! Don't do what my wife did and listen to a song and dance about how their bad credit is from a divorce and lost job and everything is back on track... Finally, check references for the last place or two they lived. Trust me when I say this - it's better in the long run to let the house go unrented for a month or two and end up with good renters than to just take the first bad renter that comes along.

That is another question to ask...
Any recommendations for property management companies?

 

[Cody]

My advice is not to do it. If you can make 20+% on top of your mortgage, and you can get a good, respectful tenant, then great. But neither of those are guarantees, particularly the 2nd one.

I've had a couple good tenants, and a really bad one. The bad one cost me about 20k to fix, on top of the loss I take on the house each month. When it's not rented out, it's a giant PITA dealing with getting it rented out. When something goes wrong, you have to deal with it obviously, and it doesn't matter if you're on vacation or busy or at work or broke or any of that stuff. When you have a good tenant that takes care of things and isn't high maintenance, it's really nice. From my experience those situations aren't that common or long lasting.

I guess just get a good feel about people. If their car is clean and clean inside (doesn't look like a homeless person is dwelling in it), then they probably take care of things. If they are excited about the place, that's probably a good thing. If it's just another stepping stone or another place to live, they aren't going to give a shit. I have a friend that is a property manager, so I do back ground checks on the people I decide on and have a solid lease contract. In the end, renters have all the rights it seems like. It's a giant process to kick them out. It's basically impossible to collect damages beyond their deposit should things go south (insurance won't do anything unless it's vandalism, and people living in it aren't considered vandals), and even if you were to take them to court, you still can't collect form someone if they don't have anything.

I make about 10% now, which is awesome I guess compared to losing 15% for the last 4 years, but for what it costs to fix things it really isn't worth the head ache for me.

 

[jeeper]

If you are renting to wait until you can sell, just sell and take a loss now. It will be less painful.

If you are in it for the future benefits, and can deal with headaches keep it.

We are 9 years into rentals, and are finally to a point where it is starting to show positive effects.
Rentals are every bit as much as a real job, and the pay can be good.. But it takes work and effort and time.

 

[Cody]

If you are renting to wait until you can sell, just sell and take a loss now. It will be less painful.

If you are in it for the future benefits, and can deal with headaches keep it.

We are 9 years into rentals, and are finally to a point where it is starting to show positive effects.
Rentals are every bit as much as a real job, and the pay can be good.. But it takes work and effort and time.

That's good advice. I'm 4.5 years in and finally starting to see a tiny amount of income, but not enough to offset the cost or work. I would sell it if I could, but haven't had the money to cover the difference between what I owe and what I can sell for. I'm actually pretty close now, and will probably try and sell again once my current tenant moves out.

Cody

 

[Jinx]

I am hoping to keep it for the long haul...

I don't work for a government agency with a kick butt pension program so I am looking at the rental game as a potential retirement income.

The house is in a great location, with everything is close,

The advice and conversation is great, keep it coming.

 

[mesha]

My parents rented their basement out. It was a great experience. The people were good honest people that took very good care of everything. That is not always the case though. Even with the super awesome renters stuff will still go wrong and you will have to fix things. Houses break.

I will get into rentals eventually. I will not be looking for short term positive cash flow out of them. I will be looking for them to make me some long term money. I have several family members that have various types of rental properties and they will all admit they are hard work and not as easy as they might seem. My uncle used them for a vehicle to help him in retirement. He recently retired and makes more retired than he did working.

 

[ricsrx]

I have a few years under my belt. at one time I had 3 houses going, i'm down to one, if that says anything, I started out like you thinking this would be a good investment and use it into retirement, if I didn't land this sweet government slug job I would still have all of them. I have lost thousands and made thousands, btw even having just one rental is a fabulous investment at tax time, its all about the money.


1. in the end its all about the money
2. don't feel bad being a slum lord, its all about the money
3. don't fix it up real nice before your rent it each time, it will get destroyed, don't let the tenant talk you into this or that, it is what it is, after all your just a slum lord and its all about the money
4. all money up front, make sure you tell them up front, if the money stops, there will be no negotiations and you will start the eviction process and follow thru with it. its all about the money and your just a slum lord.
5. never ever allow pets, EVER, they will destroy! use your right for inspections, start the eviction process if you find any thing different, this is no debate. your just a slum lord.
6. Tell them up front before moving in you are a slum lord and its all about the money, if they have problems they can tell their efing sob story to Jerry Springer, Ohpera whinfry or who ever the hell they can find but you are not interested.

did I cover everything! rant over..

seriously, every time the tenants moved out the unit was down for at least 1 month or longer for repairs, so expect the lost revenue plus $1 -2 k out of your pocket every time.
I made sure I had at least $5k on hand for emergencies at all times, I also pulled a home equity on the property before I rented it to help with costs (I lived in 2 of them prior to renting so I could do it)

I am sure I will think of more stuff but now I am all worked up, maybe the management company option would be worth it to you if you don't mind sharing most of your profits. I hired one for two of the properties but it cost me way more than I was making, that was more stress than dealing with the tenants. watching the management company draining my bank account...

Rick

 

[Pile of parts]

All of the above is great advice. I'll just reiterate, NEVER be in a hurry to get a renter in to cover the rent!!!! It will cost you way more in the long run. Month to month leases may be the way to go. Not very attractive to renters but easier for you if you have a bad experience.

 

[Jinx]

Lets talk about the eviction process.

It looks like I need to be pretty good at it...

 

[Unimog]

Getting really good renters is like finding gold. Give them concessions to get them in. The problem is, the best renters should own a home, so they either want to buy it or move...

The first time you get a check from a church ward or some housing agency, start the eviction paperwork and start saving money, cause that "free" money your renters are getting is going to cost you in then end.

We are actually looking at getting into renting again after saying "never again" last time. This time it's not as a way of making money, but a way to save on housing costs while the kids are at school as well as a tax shelter. We will see where it ends up. Reread Rick's advice up above. Lots of wisdom there.

 

[Pike2350]

Getting really good renters is like finding gold. Give them concessions to get them in. The problem is, the best renters should own a home, so they either want to buy it or move...

The first time you get a check from a church ward or some housing agency, start the eviction paperwork and start saving money, cause that "free" money your renters are getting is going to cost you in then end.

We are actually looking at getting into renting again after saying "never again" last time. This time it's not as a way of making money, but a way to save on housing costs while the kids are at school as well as a tax shelter. We will see where it ends up. Reread Rick's advice up above. Lots of wisdom there.

Not true....the best renters you can have IMHO is grad students....at that point you know they are serious about school and are generally quite, and take care of things. I also prefer young families with good jobs. They are working to buy a house, but need the space to live.

I have WAY different experiences then most it seems. I've had my rental for the past 10 years and NEVER had a single problem. My dad has had rentals for 40-50 years and has probably had less then 20 bad tenants, that did any larger damage. It really does depend on your gut. That is key in determining a good/bad renter I believe. The few bad tenants my dad has had were bad and cost him a fair bit...but nothing major...I would say his worse loss on a place is his current one. He let the tenants get behind (kind of a push over) by almost $7k, and when they finally moved out they had done some damage....all together it will be maybe $5K to fix (more like 2-3) This was his fault IMHO. He rented to a group of guys in their 30's and 40's. To me, right off the bat that screams something is wrong. The problem was, the main guy he dealt with was the nicest, and on top of it...but my dad let them break the rent up...so while the main guy was caught up, it was his deadbeat roommates that got behind.....something I'd never let happen....I'd make them pay me in full and deal with breaking it up among themselves.

As for my rentals...I go overboard on making them nice...however, this allows you to charge more rent.....and generally those that you can charge more rent to, are more likely to take care of the place. I have 1 duplex right now....and since I've rented out 1 side in 10 years, I've only had 4 tenants...and that's including the one that was renting there when I bought it...but she bought a house shortly after I bought it, so really it's only been 3 tenants in 10 years....all have been really great. I go with my gut, don't do background checks, other then references with both past places they lived and their jobs to see how secure, and what type of employee they are...other then that, that's all I have done....and that's all my dad has done.

Being handy is the biggest thing.....if the place is in a good starting position (no major issues with plumbing, electrical, HVAC, etc) it makes it a lot easier. Just make sure you get a deposit....and that's where some issues arise. A lot of places charge 1st & last month's rent & a security deposit...and that's hard for a lot of people to come up with....what I do, is make them do 1st & last, then break out the security deposit over a few months....so if I charge $1K in rent, they have to give me $2200 at move in, and then $1200 for the first 4 months. Then there is a portion that is non-refundable, and covers cleaning and such.

Anyway...I love it, it's a great investment...after 10 years of investing a lot into the property (well into the $50K+ range) I rent the side I was in (well ex-gf and daughter) to my sister for now....she is looking to buy a house, but as it is now I cash flow $300/month. If I move back in I may refi it and shorten the term and will only be paying about $300 to live there....if not, I can rent that side out and cash flow almost $600/month.

I am actually looking and hoping to save to buy another property in the next few years....and that's a whole nother issue....I am VERY picky with what I will buy....my philosophy is If I wouldn't live there I won't rent it out to someone. So far it's worked for me.

 

[Jinx]

https://www.utcourts.gov/howto/landlord/docs/Eviction_Summary.pdf

This is good info.

Thank you!

 

[joshbmx1201]

i have one in colorado springs, didnt buy it intending to be a rental so profit margin is small, lived in it for about 5 years before moving. like someone else said unless your making 20 percent over your mortgage every month id find a different way to invest. nothing but headaches.

are you moving out of it to a new house? if its your primary residence now your tax liability is different than 2 years from now when its been a rental if you ever decide to sell if you have any equity in it.

the only way id buy another rental is if it was a 4plex or duplex that showed at least 20 percent return.

 

[skeptic]

Getting really good renters is like finding gold. Give them concessions to get them in. The problem is, the best renters should own a home, so they either want to buy it or move...

This describes our one good renter. She was finishing her nursing degree (or something like that) and her fiance had some kind of decent job. Auto-deposited their rent in our account before the end of every month, and overall perfect renters. Unfortunately for us, when she graduated and got a real job they got married and bought a house.

I will say we got lucky with one of our bad renters. Turns out he was in the meth business, but lucky for us they were cooking the meth somewhere else. The girlfriend/wife tried to keep the place relatively clean and the interior wasn't completely destroyed. They painted the inside of the garage dark brown, including the windows. One interior door was taken off the hinges. Another door had a dead-bolt on it (guessing that room was used for drug related activities).. In the end we didn't have to evict, we found out about all that stuff when the police came looking for him - he was on the run and the girlfriend/wife's family helped her move out. That could have gone really bad for us, but ultimately just minor repairs and some lost rent money. I suppose that describes all our bad renters, lost rent and minor repairs (had to repaint the entire interior with special paint and replace all the carpets from one couple that was smoking in the house which was against the lease agreement). The house was never completely trashed.

 

[sixstringsteve]

So much good advice in this thread. I was considering a rental, but with my current situation, it doesn't sound like it's worth the effort for me right now.

 

[UNSTUCK]

Not true....the best renters you can have IMHO is grad students....at that point you know they are serious about school and are generally quite, and take care of things. I also prefer young families with good jobs. They are working to buy a house, but need the space to live.

I have WAY different experiences then most it seems. I've had my rental for the past 10 years and NEVER had a single problem. My dad has had rentals for 40-50 years and has probably had less then 20 bad tenants, that did any larger damage. It really does depend on your gut. That is key in determining a good/bad renter I believe. The few bad tenants my dad has had were bad and cost him a fair bit...but nothing major...I would say his worse loss on a place is his current one. He let the tenants get behind (kind of a push over) by almost $7k, and when they finally moved out they had done some damage....all together it will be maybe $5K to fix (more like 2-3) This was his fault IMHO. He rented to a group of guys in their 30's and 40's. To me, right off the bat that screams something is wrong. The problem was, the main guy he dealt with was the nicest, and on top of it...but my dad let them break the rent up...so while the main guy was caught up, it was his deadbeat roommates that got behind.....something I'd never let happen....I'd make them pay me in full and deal with breaking it up among themselves.

As for my rentals...I go overboard on making them nice...however, this allows you to charge more rent.....and generally those that you can charge more rent to, are more likely to take care of the place. I have 1 duplex right now....and since I've rented out 1 side in 10 years, I've only had 4 tenants...and that's including the one that was renting there when I bought it...but she bought a house shortly after I bought it, so really it's only been 3 tenants in 10 years....all have been really great. I go with my gut, don't do background checks, other then references with both past places they lived and their jobs to see how secure, and what type of employee they are...other then that, that's all I have done....and that's all my dad has done.

Being handy is the biggest thing.....if the place is in a good starting position (no major issues with plumbing, electrical, HVAC, etc) it makes it a lot easier. Just make sure you get a deposit....and that's where some issues arise. A lot of places charge 1st & last month's rent & a security deposit...and that's hard for a lot of people to come up with....what I do, is make them do 1st & last, then break out the security deposit over a few months....so if I charge $1K in rent, they have to give me $2200 at move in, and then $1200 for the first 4 months. Then there is a portion that is non-refundable, and covers cleaning and such.

Anyway...I love it, it's a great investment...after 10 years of investing a lot into the property (well into the $50K+ range) I rent the side I was in (well ex-gf and daughter) to my sister for now....she is looking to buy a house, but as it is now I cash flow $300/month. If I move back in I may refi it and shorten the term and will only be paying about $300 to live there....if not, I can rent that side out and cash flow almost $600/month.

I am actually looking and hoping to save to buy another property in the next few years....and that's a whole nother issue....I am VERY picky with what I will buy....my philosophy is If I wouldn't live there I won't rent it out to someone. So far it's worked for me.

Can I borrow your gut? I need to make a few life decisions and I think yours is better than mine.