- Business columnist Phil Hardwick says becoming a landlord can be a rewarding experience if there are good tenants and a market that is improving.
If you are thinking of becoming a landlord, selecting the right tenant is a high priority.
In today’s real estate market, many home sellers who must move are facing some tough choices. They can take a lower price for their property in the hope that it will sell sooner than later, they can wait in the hope that the market will improve, or they can rent.
For sellers who do not want to become landlords, it is best to shop around for a competent licensed real estate agent to handle the renting and maintenance of the property. It will cost more, but the best part of the deal may be transferring landlord headaches to someone else. On the other hand, becoming a landlord can be a rewarding experience if there are good tenants and a market that is improving. In an ideal world, the rent covers the owner’s mortgage, repairs, and maintenance, and allows the owner to hold onto the property while it appreciates in value.
One of the first considerations in deciding whether to rent one’s property, assuming the owner can afford to do so, is to think about how much knowledge the owner has about being a landlord. Many owners have never had experience with renting real estate except as tenants. That perspective is only one side of the landlord-tenant relationship, and it is a different perspective. Renting real estate as a tenant involves finding a suitable property, contacting the landlord or owner, signing a lease, and moving in. For the owner/landlord, it can be a bit more complicated.
Properly marketing one’s home involves more than just running an ad in the local newspaper or putting a “house for rent” sign in the front yard. There as several ascending levels of marketing.
The first step is to make your neighbors aware that you will be moving and intend to rent your house. Your neighbors have a vested interest in having a good tenant live in your house because the care and maintenance of your property affect their property. They are also somewhat familiar with your property and able to describe it and the neighborhood to someone whom they would want as a new neighbor.
Next, tell your co-workers and your friends about your house. They also will be careful to recommend persons who would be good tenants because of their relationship with you.
By now it is time to market the house to the world. Consider the below steps.
- Create a website for the house, including photos, pertinent details, and the rental amount.
- Post details on social media.
- Once it goes on the market, announce that you will be taking applications from a certain date to a certain date. Also, set a date or dates that the property will be available for viewing.
- Review the applications you have received. Check out applicants. Call their previous landlords.
- Even though you are a single owner and may not be subject to the entire litany of federal fair housing regulations, do not refuse to rent based on the race, religion, sex, family status, disability, national origin, or handicap of the person who makes an offer.
- Carefully choose the rental agreement. Sure, you can get one at the local office supply store, but having your lawyer look it over is better.
- Collect at least one month’s security deposit.
It is now time for this writer to reveal a personal experience about marketing a home as a rental property.
When my wife and I decided to buy another home several years ago the market was in a downturn. Fortunately, we were able to obtain financing on the new home without needing to sell our existing home. We decided to become landlords and wait for an improving market to sell. We advertised the property for rent, stating in the ads that it would be available for inspection on a certain day. My wife agreed to stay at the house all day and show it to prospective renters. I emphasized that she should take applications and show the property. We would then evaluate prospective tenants and decide whom to rent to.
At the end of the day, I returned home and asked, “Did anyone come by and look at the house?”
“Yes,” she replied. “I rented it already.”
What about our plan to take applications? Did she not hear my instruction about not renting to the first person who looked at the property?
“You did what?” I asked incredulously.
“Here is the signed rental agreement,” she said, handing me the document. “And here is the check for the security deposit plus six months’ rent in advance. Our new tenants are two medical students who plan to live here for two years. They prefer peace and quiet so they can study, and they said that when they leave, they can recommend new tenants who are students to us.”
Now dumbstruck, I said, “What took you so long to rent this place?”
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