Post # 17
I’m not sure about the property management companies, I’ve never heard of those. We are currently renting our house, and here’s some things I’ve learned.
-We told our renter she could paint. We didn’t mention any other renos, cuz she’s renter and we’re the owners! Well…she ended up sawing part of our gate off (a big deal since we need the tall fence so our dog doesn’t get out, if we were to ever move back), without telling us. Make sure you are SUPER SPECIFIC in your contract, so if they breach it, you have that backing you up.
-Take pictures of everything before the renter moves in. I told DH to do this (as I was already living in our new city) and he didn’t, and this worries me.
-We posted on a site like craigslist…and what she pays just covers the mortgage, property tax, etc. We realize now that we definitely could’ve asked for more and actually be making money. So make sure you add up what taxes, etc. will cost and factor that into the rent cost. We had the time, so if I could do it again, I would’ve asked for $300-$400 more than we did, and lowered it if we didn’t get interest.
I think that’s all for now. Good luck!
Post # 18
My sister rents her home in Cali out while she’s in New England because they couldn’t sell it. A management company takes care of issues for them for one months rent I believe (may be additional if they need to bring in new tenants). I *think* they had an issue with a military couple claiming they needed to break lease with zero notice for the job, but refusing to show the orders that would demonstrate such. I don’t recall full details. My dad was military so we’re pretty savvy on how this all works, and they were tryng to put one over her and skip out.
My parents rented their house in New Husband out when we were out in Cali because the market sucked back then. (While in the Cali house it lost half its value so it was a good call.) A realtor handled it. They ended up havng to get a different manager because the agent was bad. Apparently the renter requested expensive modifications for handicap purposes and they lost a lot of money on it. I think the next set (police officers) also left the house a wreck, skipped out w/o paying last months rent and the deposit wasn’t enough to cover it all.
My friend rented his home in CT. The renter “helped him out” by cutting down some beautiful old trees on his property. (No, this was completely unrelated to storm damage – he just wanted to park his car where there were trees apparently.)
Post # 19
I just talked to our realtor about this and she recommended talking with our mortgage company to find out any implications about getting another mortgage for a new house, and mentioned all the damage considerations that we’ll need to factor in.
We’ll definitely be super picky about who we are willing to rent to, but it’s nice to get all this information so we know what pitfalls to look out for!
Post # 20
I would personally be uneasy with renting out the house for less than your mortgage and then paying 6% to a management company, particuarly if you live close enough that you could manage it (although I have no idea if 6% = $60 or $600). It’s more the idea that you will still be covering normal costs associated with the house in addition to anything that may go wrong in the time it is rented. I guess you have to decide if this additional cost is worth the shorter commute.
Also, keep in mind a security deposit can only cover so much damage and as PPs said, tenents can damage things that you can’t recover (i.e. old trees). DH’s best friend rented out his apartment for 2 years while he was overseas for his job and came back to an absolute disaster from a sloppy painting job that turned his formerly white bedroom a dark blue including the wooden window trim to a broken glass door pane to a toilet clogged beyond repair. His tenent left hours before they had agreed to meet for the turnover and took with him some of the light fixtures that belonged to our friend and were specifically covered int eh lease agreement that he was not to remove them. He also left a lot of his stuff in the apartment. Once our friend paid for the tenent’s stuff to be removed and dumped he had gone through the security deposit never mind the other damages. He talked to a lawyer but ultimately the renter didn’t have any money (he also defaulted on the last few months rent) to go after so it would have resulted in a lot of court costs with little return and our friend basically had no recourse. Yes, he could have potentially avoided this situation by screening tenents better but when he rented the place it was to this guy and his mother (she was the actual signatory on the lease but she died unpredictably during the second year of the lease) who seemed like a safe choice. I know this is absolute worst case scenario and I’m not trying to scare you but point out the risk involved.
Post # 21
I would never rent out my home. I’ve had too many bad neighbors and have heard too many horror stories. there are some tenants that will trash your property. also, if they are troublesome, it is SO hard to evict. to me, it’s not worth the risk of all the extra work and/or a potential financial risk (like if they break the appliances).
Post # 22
We spoke with our realtor about this and she provided good insight and also says she often works with clients who need to lease a property. DH is moving ahead with talking to the property management company because he doesn’t think we’ll sell the house this year, and wants to wait to re-list for 18 months to see if the market for starter homes gets better.
Good points about the appliances – depending on what all happens, maybe we’ll look into putting the “good appliances” into storage in our new basement, and get some workable appliances from craigslist for the renter to use.
We’ll definitely work on a good screening process, but I think he and I are both at the same point where the house is a huge stressor for each of us and for our relationship, and we both hate driving up to the place at night (as in, I love coming home to DH, I just HATE coming home to that house).
We have another showing on Friday though, so hopefully we’ll get an offer in the next 2 months and this will all be for naught!
Post # 23
We are getting ready to rent my current home and are building another. What PP have said is absolutley true in regards to funding. If you have less than 20% equity in your home, or have not had it rented out for 1 year or more, then you have to qualify with both mortgages (rental property + new house). This can present a challenge if you have any other debt and you aren’t making bookoo bucks every year. Just to give you a ballpark–FI and I make a combined $110k per year, my first mortgage is for $1150, and our second mortgage is going to be $2200. We have no credit card debt, and one car payment for $415, and we have impeccable credit. You have to look at the debt to income ratio’s for the new loan that you will be attempting to qualify for. Also, if your first mortgage is an FHA loan, you can’t have a second FHA loan, you have to qualify for a conventional mortgage, which brings a higher down payment (between 5-20%), so that often times messes people up as well, because they weren’t prepared to put that money down. While we haven’t rented our home out yet, our mortgage lender suggested to us to post a description on craigslist and attach a price to it (we put $1350 on ours) and just see what happens. I didn’t respond to any of the emails, because we weren’t prepared to rent yet–but it gave me a good idea of how many legitimate people would pay that price. Only one out of the probably ten responses that I got, asked me if I would decrease the monthly rent. Another thing to think about is Section 8 Renters…it’s a pretty controversial area, and we are currently researching it, but often times you are able to rent for a higher monthly payment than if renting outright, and the govt. pays 80% of the monthly rent, so often that will cover your mortgage, even if you do get shady tennants who don’t faithfully pay their 20% on time each month. And, I would NEVER, EVER rent my property for less that what my mortgage was. You need to take into consideration taxes, repairs, insurance, etc — and you might also want to consider investing in a home warranty, that price should also be passed down to your renters.
Post # 24
Definitely check the tenant laws for your state. Here in MA, tenant laws are very much to the benefit of the tenant. It’s an extremely complicated and long process to evict a tenant, even if they don’t pay rent.
We have space we could have rented out, but decided against it for the above reason. A friend of mine rented out his house. The lease specified 9 months, he wanted them out after that but they didn’t want to leave. They stayed for as long as THEY wanted. And finally left the house damaged. He kept the security deposit to cover the damage and they got a lawyer to get the deposit back. Big headache.
Post # 25
Unless the property management company handles the lease, and there are stipulations for damages (insurance etc to cover your investment for when you are actually able to sell the home) I would be leary.
There are too many bad renters out there. Sure it would be nice if everyone could have great tenants, like an older couple or a quiet younger couple wo children (kids are great, but they are havoc on homes) but unfortunately too many ppl end up with the tenants from hell.
weigh your options & make sure you are 100% covered if something goes terribly wrong while you have tenants living in the house.