3 Important Tips For Accidental Landlords
Posted on: 3 March 2015
What do you do when you have to move out of the area and your old house just won't sell? If you have the money, you could maintain the old house from a distance while moving into a new one, but few people have the cash to pay mortgage and maintenance costs for two households, especially when the two are a great distance apart. For many people, the solution seems simple: just rent out the old house. That way, you get at least enough money to cover the mortgage every month, and you have someone in the home to keep it up for you. That line of thinking leads many people into becoming landlords when they never would have thought of it before. But renting your home is not a simple as just putting up a for-rent sign and collecting a monthly fee. If you've found yourself in the position of being a landlord by default, here are a few tips that can help you in your new role.
Screen Your Tenants
If you're in a hurry, you may be tempted to approve the first potential tenants to come along with the rent and deposit money in their hands. Or, you might feel obligated to do a favor for a friend or acquaintance that's looking for a place to stay, and let them move in without proper screening or deposit money. It's in your best interests to resist these temptations.
Instead, have any interested applicants fill out a complete application that lists their name, Social Security number, employers, salary, and a list of previous landlords and references. Take your time and call previous landlords, employers, and personal references, and make sure that the information that you've been given is complete and correct. Run credit screenings and criminal history checks. You need to be as sure as you can be that you'll get the agreed upon rental fees, and that your property will be maintained conscientiously. Background checks aren't a guarantee, but they're definitely a start.
Remember to be careful to comply with the Fair Housing Laws in your state. You must require the same information from all types of applicants, and there are certain things that you can't inquire about or base a decision on, like religion. Keeping good records will help you prove that you complied with the law, should any questions arise.
Set a Realistic Rental Rate
Deciding how much to charge for rent can be tricky. If your price is too high, you may find yourself with a home that you can't sell and you also can't rent. On the other hand, if it's too low, you'll end up losing money on the house every month.
You can arrive at a reasonable rental rate by researching the rents for other, similar homes in your area. Check online classified listings and newspapers, and talk to other landlords if you can, or neighbors that rent homes in your area. If the average rent in your area is less than what you will need to cover the mortgage and maintenance costs for the home, you may have to compromise. A monthly rent that covers some or most of the mortgage is still better than none.
Consider a Property Management Service
A property management service is a good idea for any inexperienced landlord, and if you're going to be living far enough out of the area that you couldn't easily return in the event of an emergency, a property management service is vital.
Management tenant services companies collect rent, charge and collect late fees when necessary, and handle evictions or unexpected vacancies. This protects you from having to be the "bad guy" – something that is difficult for many landlords. Problem tenants count on that difficulty, but using a property management company makes it difficult for problem tenants to cause problems. Property management companies can also provide tenant services like maintenance, repairs, and response to emergencies like floods or fires – things that might be difficult for you to handle from a distance.
Renting out your home may not have been your ideal plan, but when you can't sell your house, renting it out is better than letting it sit empty. Just take steps to ensure that you're well-prepared and well-protected before you hand over the keys.
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