Quote:
Originally Posted by Run Silent
1) I hope that the house you are planning on renting out is paid for. If not, I don't typically recommend financing a rental property. If you are financing, then at bare minimum, don’t count on the rent from a tenant to cover the deficit in your budget if you can’t afford a mortgage.
2) The minute you rent out your home, it becomes an investment property. Investment properties come with state-specific insurance and lease agreements. You’ll need to understand the rules and regulations in your state regarding rental properties first.
3) Renters should be aware of your expectations upfront and understand the consequences of not abiding by those rules.
4) Ongoing upkeep and maintenance could be a chore. Renting out a home in theory sounds great—but throw in the cost of unexpected repairs on electrical panels, appliances or hot water heaters, and renting might not sound so appealing after all.
Regarding tips on securing quality tenants:
1) I check the place they used to live before. We pull a credit bureau on them. We get a huge deposit upfront—at least a month but usually two months’ rent in addition to the first month’s rent to be paid. We interview them. We talk to them. We want to see how they converse. They’ve got to be pretty good con artists to get past me now. You just spend more time screening your tenants and digging into what’s going on there.
2) I’ll tell you another trick I learned. Depending on the type of property you are and where the people live that are moving, you can drive by the place they live in now. I’d like to see what it looks like—how they’re maintaining it. If they’ve got a bunch of junk sitting in the front yard and the grass is grown up around the windows where they’re living now, I don’t want them in my house. That’s another indication of how good a care they’re going to take of your property. But more than anything, if you just do a good, strong interview with the tenant, dig in, and be sure you are pulling up the checks for previous rentals. Show me some proof of the actual payments being made on time.
3) The big thing is that people who are landlords are just like people that are employers. They don’t take enough time screening the relationship meaning that most people who do hiring don’t spend enough time doing the hiring. Most people that put tenants in their homes don’t spend enough time interviewing the tenant and digging into what’s going on there.
Overall, I think it is okay if done correctly, but I strongly recommend against having a tenant in a home with a mortgage. The same question reversed would sound like this: if you had your new house built and had the cash to pay for it without a mortgage, would you borrow on it to purchase a rental house in the neighborhood you live in now? The answer should be “no” because you don’t want debt. You should build wealth slowly and take the risk out of it.
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I rented my Townhome which was 3000 miles away when it was not worth selling when we moved across the county, we did not want to take the loss and pay the bank to get out.
I had a friend who did property management and managed the property for me. As Run Silent point out, my friend would do exactly this, go see where the person is currently living. My friend would have perspective renters fill out an application which listed their current place. She would then drove by where they lived and check out how they keep the current property. She would also talk to the neighbors about the perspective renter. She would do this as quietly as possible, since in some states you're not allow to do this kind of checking on people since it is seen as discrimination. Because of this I never had a renter issue, hell one I had use to include the 10% late fee if they paid one day late, never had to chase them for it.
Here is another tip and this varies by state so check the laws. A friend of mine who had a number of rental properties use to put in the lease that all appliances in the property are there as a courtesy and if they break the renter needs to replace them. He also would list items which are general maintenance items which the renter is responsible to handle and pay for on their own like lights burning out, toilets getting stuffed up. He would make sure a renter understood this before he would rent. He always said this part of the lease usually got rid of the flaky ones which you do not want to deal with.
This one applies in Calf when I lived out there, I was told never rent to a single women or one which was pregnant. The reason being, it is next to impossible to evict a single mom, even if they hadn't paid rent in a while. The Courts do not take kindly to someone trying to evict a single mom and most cases will find in her favor.
The way to avoid all of this is to tell any perspective renter there are others who have already looked at the property and you waiting to hear back if they do not want it you will get back to the person. Tell everyone this so if you find out something bad about them they can not claim you agree to rent to them and then discriminated against them.
This is basically saying do whatever you need to ensure you do not rent to someone who is going to cause you problems.