Imagine the housing market tanks and you can’t sell your house. Is renting out your house an option?
If no buyers make any offers, that can put you in a bind. Unless you’re able to wait on a buyer for your house, your only other option may be to rent your house, to at least help cover the mortgage. Renting your house “under duress” is what we sometimes call a “reluctant landlord”.
Many people with transient jobs, last minute job transfers and especially military personnel, get caught trying to sell a house in a slow housing market. Many military members in the Warner Robins, Kathleen and Perry areas fall into this category.
When homeowners can’t sell their house and decide to rent the home instead, it’s critical they educate themselves on the basics of property management. It’s also vital that they take action to educate themselves on property management basics. Property management of a rental house can make the experience, for a “reluctant landlord”, the nightmare they were told it was or an investment they will be proud of forever.
Before you rent out your home, use these six tips to help make yourself an educated landlord.
1. Find a Good Tenant.
You can find tenants by advertising in local newspapers, both in print and online. Also spread the word through friends, relatives and coworkers. If you are military, word of mouth advertising can be very fast and easy.
Ask potential tenants to fill out an application form, listing their basic information: name, employer, salary, previous landlords and references. You’ll also need their Social Security number and signed authorization to check credit reports and criminal history. If you hire an online agency to provide background checks, make sure it is accredited by the Better Business Bureau.
Be aware that the federal Fair Housing Act has rules to follow when choosing a qualifying tenant. Denying an applicant for the wrong reason can cause fines to be filed on you. Also, there are rules to follow when having access to someone’s SSN. Make sure to do a good tenant screening, even if the house stays empty an extra month. Finding a good tenant is worth the extra time (Of course, if this sounds like more work than you have time for, call us).
If you feel comfortable doing your own background checks, you can:
- Pull credit reports. You can conduct your own research through one of the credit reporting agencies — Equifax, Experian or TransUnion — as long as you follow the guidelines of the Fair Credit Reporting Act, or FCRA.
- Check criminal history. Search state and local records online. Many websites offers tips on conducting tenant screening.
- Check references, contacting employers and talking to previous landlords.
2. Determine How Much Rent to Charge.
Get an idea of the local Warner Robins, Kathleen and Bonaire rent amounts by checking newspapers, online resources or calling other neighborhood rental signs. Be realistic about rent levels. Be aware that local rent may be lower than your mortgage payment, but if you want to find a tenant, the rent must be comparable to what’s in the market. It may not take away all the expense, but it will help you loss less. Also, talk to your tax expert about tax deductions that come with being an active landlord of a rental house.
3. Protect Your Rights with a Lease.
Georgia law requires a documented lease for any persons renting a house longer than six (6) months (although, it’s still up to you). A written lease is always a good idea so that each party understands their rights and obligations. A good rental contract will need to comply with fair housing, city and state rental laws of your region. These laws differ across states, counties and cities, so you are safer working with a local experienced Professional Landlord. Avoid using blank leases from the Internet because they may not comply with all the specifics you will need for your area.
A lease should spell out the following:
- Lease term: A month-to-month lease offers more flexibility if you are selling, while an annual lease provides more stability if you are holding on to the property.
- Security deposit: usually one month’s rent or more depending on the screening results.
- Rental due date and late penalties
- Repairs the property manager is responsible for and repairs the tenant is responsible for, including routine upkeep.
- List of tenants occupying the rental house.
- Tenant Conduct: noise levels, neighborly conduct and smoking
- Pet: policies and related deposits
- Association rules that the tenant must follow
- Early Cancelation of lease: Terms of tenant canceling, Terms if landlord needs to cancel to sell the house.
- Eviction terms, such as not paying the rent or damaging the property
4. Protect Your Property with Insurance.
Protecting your property with the correct insurance policy is extremely important. You need a different policy if you’re renting a property to a tenant versus using it as your primary residence. While you were living in the house, your insurance was a homeowner’s policy. Homeowner’s policies include coverage on items like personal property (clothes, jewelry, furniture, etc.) and outbuilding coverage. A landlord policy just covers the main structure. This policy covers your home’s main structure, legal costs, medical expenses and loss of rental income, if repairs are needed. Since you are not responsible for the tenant’s belongings, you should encourage tenants to buy renters insurance.
5. Hire a Management Company.
Fees are charged primarily for two services: finding a tenant, which includes advertising and background checks, and managing the property. The fee for filling a house can range from 50% to 150% of one month’s rent, depending on the area. Monthly management includes collecting the rent, charging late fees, handling repairs and dealing with early vacancies and evictions.
If you decide you want to hire a property manager, you have a couple choices. There are property manager agents that do basic management as part of their primary job of home sales. They advertise the house and get the house rented and evict tenants that don’t pay. The other choice is a Professional Landlord, like us. We do nothing but manage real estate. Our management package is custom made to the individual homeowner, depending on how much or little the homeowner wants to be involved.
One big advantage of using professional landlords or property managers is emotional distance. Tenants will produce a tear jerking story very fast when things go wrong. If you have built a relationship with the tenant, it’s hard to file charges or evict someone you “like”. Even though we take good care of the tenants and are sympathetic to every situation, our ultimate job is to make sure that owners get the rent and the rental house stays in good, top rent condition. In short, we can be the “bad guy”.
6. Prepare Properly for Evictions.
You don’t need an attorney to evict a tenant in Georgia if you know what to do. If the tenant doesn’t leave willingly, you can’t just go and move their personal property and kick them out. You do have to take them to court, and later, have them physically removed by the constable, if it goes that far.
How much is an eviction? Legal fees alone can range from $300 to $1,000. It can also cost two to four months in lost rent during the eviction and cleanup process is complete. That’s why we spend extra time on the screening process to get a tenant that are less likely to cause such problems. It’s cheaper.
Contact us for any advise you may need.