Renting out a house

[EricU]

my other post was discouraging, I know.  Back when I was in the military, it was still common to buy a house when you moved and then rent it when you got moved the next time.  Not the most horrible retirement scheme.  RE prices being what they are, it might not be such a good idea any more, I don't know.  But I have known lots of people that did that, and I'm pretty sure they had to use management companies.  So it must work out if you find the right company

[Woodjets]

My experience is their cut is 50% first months and 10% on-going. For that, they basically insulate you from the renter, do the due diligence and credit checks and and broker the maintenance to the house.  Any maintenance is beyond the 10% and billed as it happens.  They also do evictions if necessary.  Otherwise, they are just another expense.

50% of one months rent is typical. 10% ongoing is high. It is a very competitive business and the ongoing charge can be negotiated to 4 or 5%. If you do pay a monthly management fee then when/if the property is subsequently rerented either to the same tenant or a new tenant, do not let the management co charge you another fee for the rerenting, that service should be part of the monthly fee.
Also, do not pay the 50% up front. Spread it over 6 months in case something unforeseeable occurs and rent is not paid.

[BrokenOlMarine]

We had TWO rental properties.
The first was a house we owned and lived in for several years.  We rented it out after we moved into the new house farther from the city, so that we could afford the move.  Our intent was to keep it as a rental to have a second income as the market improved, but to have the rental pay the PITI until that time.  The tenant came highly recommended from folks we knew.  He was in the house less than four months and left in the dead of night, about three weeks before Christmas.  I put the house on the market. "Priced to Sell" and sold it in less than two weeks.  I didn't make a lot, but I made enough to cover the closing costs and incidentals that had come out of savings on the purchase of the new home. 


The second rental was bought as an investment, and we bought it mainly for the acreage that joined our current property.  The rental on the home that sat on it paid for the property.  The tenant was in the house when we bought, and known to us for years.  She held a double masters degree, and a doctorate; and taught at a local college.  At the end of the first year, she had done 10k in damage to the house, and we didn't renew her contract.  Sold that one too, but just the house and three acres, keeping all the rest of the property that came with the initial purchase, including the pasture and natural creek... a win.

The best advice I ever got about owning a rental property, was ... "You have to be able to look at the rental as a PROPERTY without any emotional tie."
If you lived there for ten years and your kids have rooms in the house... and you will always think of the number two bedroom as Michael's room, and the basement as the Kid's Playroom, you need to sell the house.  When the tenant calls and wants to paint "michael's" room you can't be thinking, Michael loved the clouds we painted on that ceiling, or his height progression is still ticked on that doorway.

If you can't cut all emotional ties to the house you are thinking of renting out.. sell and move on.



Just something to think about.

[Pirate]

I've had rental houses until last year.
I have had a lot of dead beats. I managed the houses myself (1 or 2 houses)
Before you rent it, be sure it is perfectly clean, and take pictures of it (especially the corners) just before the tenant moves in. Print 2 copies of the pictures and have the tenant sign the copies you keep. This to compare to move out pictures. Tell the tenant return of security is based on cleanliness as well as other terms of the lease. Get at least 1st, last, and security. When I rented to an elderly couple known in the community, they didn't have all 3, So I made it, 1st, and 1.5 months security. No last month.
If they hadn't been well known and,both with SS, and did volunteer work (Ran a food pantry) if they didn't have 1st, last and security, I would never rent to them. Too much risk.
4 times in the last 16 years, I had to keep all the security, and usually had to spend more on repairs.
I have a pile of rental horror stories. It would make a good topic!
A friend with rentals collects the rent in person, and replaces the a/c filter for free, which gets him in for a look see. Great idea.

[Cooler]

I read, and it made sense to me, that you should always try to use upscale appliances and finishes in a rental.  It attracts upscale client who pay more, but more importantly are more likely to not abuse the house.

My friend rents out his Hamptons home for (the last I heard) $12,000.00 per month (but that was several years back).  He's been doing this for years and the only prep he needs for the following season is to have the house cleaned, and every few years to have it painted.

I would also suggest "non smokers only" stipulation.  The odor lingers and may make it harder to rent in the future.

[ElenaMarquez]

Thanks for sharing.

[Cooler]

There is a show on HGTV where an expert guides homeowners on adding a rental property to their existing home usually as a basement apartment.  In one episode he recommended that the owners make a one bedroom lux apartment with a large open space rather than a more pedestrian two bedroom apartment for which there was sufficient space.

He argued that they should get similar rental income, and the two bedroom apartment would attract new families while the upscale one bedroom one would attract business executives.

Obviously he thinks the wear and tear on the upscale apartment would be less than the two bedroom one.

[Admiral]

Get at least 1st, last, and security. When I rented to an elderly couple known in the community, they didn't have all 3, So I made it, 1st, and 1.5 months security. No last month.
If they hadn't been well known and,both with SS, and did volunteer work (Ran a food pantry) if they didn't have 1st, last and security, I would never rent to them. Too much risk.

Note that in some states, tenant laws restrict requiring more than first month in advance, and 1.5 month security, and a violation of this results in the security deposit being applied to rent due during the term, and you can lose your security deposit.  So check out local laws, they get squirrely.