Renting out a house

[atgcpaul]

We are thinking about renting out our house instead of selling.  We've got several months to a year to get things fixed up, etc.  I do plan on using a property management company to handle the renting, etc.  What kind of things do you look for in that agreement with them?  What's their typical cut?  What services do they provide?

Thanks,
Paul

[Mr_Mike]

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.

[Bob10]

I have several rentals and my experience with managers has been not awful but nothing I want to do again.  I see them as an added expense and while acting as a buffer they can often be the reason you don't hear complaints from tenants that should be addressed.  The results being an empty rental in need of repairs, possible court case with a new start up fee from them.  Think of them as something similar to a stock broker while you might think you need one finding one that has your best interests to heart is darn rare

[daddo]

Finding good responsible renters is worth 3 property managements.
A complete and total contract/agreement and background checks are worth another 3.

Check with your insurance company and advise them- so they can advise you.
If you are used to doing your own repairs, you'll not like the cost of paying others to do them. Just one repair can mean 1,2,4,8 months lost rent.
If I get great renters and they always pay on time and take care of things the first year, I will actually lower their rent to keep them- provisionally.
They can do thousands worth of damage in a very short time- do your research as listed above. The biggest expense and hassle can be dogs. I don't allow them anymore.

[EricU]

a co-worker's brother is going through some really disastrous problems with his management company. Apparently it was fine and they sold out and now the problems are just mounting up.  I don't know how you avoid that.  I think if I was going to be local to the property then I couldn't handle a middleman.  I can see if you are moving away, you need one.

[Snipe Hunter]

Paul,
Which county in Maryland is the home in? Some counties require you to get a rental license. It's not difficult but you will need to prove insurance and have a rental inspection done. The inspection is not as detailed as a real-estate transaction inspection but it is required and it needs to be done by a licensed inspector. The cost is about 1/4 to 1/3 of a real-estate transaction inspection. I charge a flat $100 if I don't have to drive too far to do it. Check your county requirements. I posted a link below to a copy of Balt County's inspection sheet. If your county requires one, get a copy of the sheet and get it all done before the inspector does his inspection or he'll charge you twice to come out and re-inspect.

Maybe Bob10 can give you some guidance on obtaining a credit report. Experian is the easiest to read for a novice. One way to get a report is to go to your or his bank and have the loan officer run one. The customer will have to sign the application. They may charge you, they aren't free, call ahead to make sure they will do it for you. You don't want to allow the tenant to get his own report.

Balt Cty Inspection Sheet

[atgcpaul]

Paul,
Which county in Maryland is the home in? Some counties require you to get a rental license. It's not difficult but you will need to prove insurance and have a rental inspection done.

Balt Cty Inspection Sheet

Everyone, thanks for the info so far.  Very helpful (if not a little discouraging).

Snipe, thanks for the heads up on that.  I am in Montgomery County.  Those are some pretty low thresholds.  I think I'm good there.

I won't be close to maintain the house myself--kills me because I do all my own work--and I wouldn't want to burden my Dad (lives in DE) with it even if he offered.  We have to keep a base of operations for this move so it might as well be here, but that doesn't mean we'll be kicking out renters (especially if they're good) when we do have to come back periodically.  House value is almost back to where it was when we bought and it's a nice area so the long term prospect here is good.  If I do sell in this area, I doubt I would ever buy here again--too expensive.

Some more questions for the seasoned pros.  If I was renting a house, I'd expect a washer, drier, stove, refrigerator, and maybe a microwave.  I've wired the house for cable and Ethernet to the living room.  There are some higher end apartments in our area probably with some nice appliances.  Should I plan on upgrading all of our appliances to be competitive?  Our fridge, washer, and drier all work but are outdated, but the only thing I think that really needs updating is the fridge.  Anything else?

I turned my 2 car detached garage into my shop.  Subpanel, outlets, etc.  Would you permit your renters to setup shop, too?

Would this house become a "business" for me and do those property management expenses and future expenses become business deductions?

Thanks,
Paul

[Snipe Hunter]

Many of your questions are out of my league but the business question I can shed some light on. My father owned properties. He had some good renters and he had renters he had to evict. You never know. But, his philosophy was to break even the first few years. After a few years, you make some money. He was in the south bay area of Ca. So it was a no brainer. Rental property was scarce so he always had renters. He became wealthy when he sold the properties. I was his handy-man till I moved away at 25.

My RE agent works out of Laurel. She owns several rental properties in the area and is very shrewd. She might be able to recommend a handyman to you if you need it or even a property management company who she knows. Let me know and I'll give you her email address. She might even be of help with finding the right renter or directing you in the right direction. Like I said, she's very shrewd and I trust here completely. We've done three RE transactions with her but her main focus these says is her rental properties. She a bit older but is full of energy. .

[daddo]

Any appliance you supply, you will be expected to keep up- some are optional according to your agreement..

[Bob10]

 If I was renting a house, I'd expect a stove and dishwasher

I turned my 2 car detached garage into my shop.  Subpanel, outlets, etc.  Would you permit your renters to setup shop, too?

If you allow them to set up shop there is always a good chance they will leave it a mess when they leave.  I mean wiring rigged, chemicals and debris.  
Also there is a good chance it might be used to grow or bake.  If it were me I would remove the connection to the panel or the panel entirely.
I make sure to keep poor lighting in garages as I don't want to encourage turning them into shops

Would this house become a "business" for me and do those property management expenses and future expenses become business deductions?
It is a business once you take money or trade.  Repairs and improvements will be deductible as business expenses.  You will need to talk to a tax guy for specifics.  If the place needs exterior paint, roof or anything major do it just before or after you place it up for rent.  As for conversations with prospective tenants if you promise to make a repair get it done quick.  Also small improvements once they are in place that are unexpected tend to get a lot of appreciation.   
Thanks,
Paul