We get plenty of calls from people with questions about leasing out a house. Often these people are looking to move to a new house while renting their current house. Other times, they are attempting to deal with a parent’s house. Sometimes these properties are paid off, and other times there are mortgages in place.
When these individuals have specific questions about leases, or whether to form a business entity, such as an LLC for their rental home, we are ready and able to help. When they are seeking overall business advice about rentals, we normally ask them to speak with a Property Manager.
That leads to other questions; What do Property Managers do? Do I need one? How do they charge? In keeping with the theme of this website, we believe that, in large part, landlords can handle their rental properties on their own. It’s a question of setting up the business properly and having reasonable, realistic expectations of the time, effort, and cost involved with being a landlord.
I reached out to Property Manager Adrian Flack of Flackwell Properties, and asked him if he would send me a little information for individuals interested in renting out a property for the first time. Here’s his advice:
Being a landlord is the equivalency of running a small business. You will be managing income and expenses, assets and liabilities, and sometimes making difficult decisions. In order to have the best possible chance of success, you will need to make an honest assessment of your home and of yourself. First, let’s talk about the house.
The first thing you should know is that there is no relationship between what your monthly costs for the property and what your home will lease for. The basic monthly costs that you should consider are all loans on the home, insurance, and HOA dues. Rent is based solely on market rates, so your costs simply don’t matter when it comes to pricing. Zillow.com does a pretty good job of estimating what rent for your home should be. Next, consider what the condition of the home is. I like a home to be as close to perfect as possible. The only way a tenant knows how to return a home is to see it in that condition to start with. If you have a rough home, you will only attract rough tenants. Finally be aware of the age and condition of the major components of your home. If you always have a problem with the AC at the beginning of summer, or if you know the dishwasher is on its last leg, you should be planning on those expenses. Murphy’s law is alive and well in rental homes.
Now let’s talk about you. Why are you leasing your home? Do you want to allow home values to increase and sell in a few years? Great. Do you see this as an additional revenue stream for your family? Outstanding. Are you in a bind and have to rent this out or you may lose the home? Stop reading and call a realtor to get this sold at any price. If you are a desperate landlord you will make desperate decisions. Once you go down that road, your situation will become much worse.
If you are still reading then let me tell you the big secret, I started the article with it. This is a business. You must have the ability to approach tenants in a business-like manner. You will have to verify tenant’s information to make informed decisions on leasing to them or not. You will need to keep your tenants happy with prompt service, but not bend to every unnecessary request. If a tenant is late with rent, you must be able to call them up and demand the rent. And if it all falls apart, you must be able to remove someone from your home no matter how sad their story is. As long as you keep everything in perspective that this is a business, you will be able to cross these hurdles.
Not everyone is cut out to be a landlord. If you are not, don’t fret. There are professional managers available to take on the burden if you don’t have the time or the stomach for it. Handling properties and tenants professionally allows a property manager to have the perspective and the time to keep things running smoothly. Property managers don’t really do anything you can’t do for yourself, they just do it full time. It is that experience that can often make the difference.
If you have questions about renting your property, please just let us hear from you!
We’ve put together a lot of our basic Landlord consultation information into a handy e-book. We find that a lot of landlords don’t need to hire an attorney for their entire case, but that they simply need a little bit of information or guidance. That’s what this little guide is for.
