Guest post by Erica from Ze Petite Mama
When a job changed forced us to move across country last summer, we needed to decide what to do with our home. Like many Americans, we were underwater on our mortgage, but we also wanted to be responsible homeowners and to do everything we could to avoid a short sale or foreclosure when we moved.
Through some hard work, and careful research we were able to rent our home in less than a week. Although we are not experts in being landlords or real estate, we feel like we learned some important lessons that helped us rent our home quickly to a quality renter.
Prepare Your Rental
Although we were not trying to sell our home, we knew that whoever rented it needed to be able to picture themselves living there long term. We de-cluttered, stored extra furniture in a friend’s basement, and deep cleaned every room.
Every person who toured our home commented on how clean and spacious it felt compared to other rentals they had seen!
Research the Market
Just as in selling a home it is important to know what your competition is. A clean and spacious overpriced home will not rent no matter how desirable it is. I researched online and found what other comparable properties in our community were being listed for. I added up our costs to maintain our mortgage, tax payments, and association fees. This gave us a baseline for what to charge for rent.
We were able to list our property for $100 less a month than other rentals, and still meet our baseline needs. This gave us a small profit, and guaranteed that we not only had the nicest home on the rental market, but also the cheapest. It was tempting to charge more in an attempt to make more money, but we knew that increased our chances of our home sitting empty.
Advertise
Once we had our home in rental condition, we began to advertise. I used our camera to take pictures of each room. I then typed up a flier about the house. I not only included the facts such as square footage and number of rooms, but also pointed out the upgrades in the house, such as the location in the neighborhood and the gas fireplace. Highlighting what you love about your home will pique renters’ interests, and helps them move from simply viewing your ad to scheduling a showing.
We chose to advertise on two websites — one was free, and the other charged a fee per month. We found that the investment in the website designed specifically for renting homes provided us with the highest quality applicants.
We are so thankful that we were able to navigate this process of becoming landlords. It has truly freed us to follow our passions and opportunities even when the economy seemed to have us stuck.
Erica blogs at Ze Petite Mama. Her blog has always attempted to be a place where she can not only celebrate the fun, happy, and precious of parenthood, but also be brutally honest about the really hard “I don’t like my kids right now” moments as well.
My only advice would be that if you choose to rent, also figure in depreciation into the rental fee. We rented our home to someone we knew who seemed he would be a great renters, but in the end was not. We could have avoided a lot of issues by stopping by the property on a regular basis. Instead, we trusted that since we were receiving timely payments that all was well. Make sure you can still check up on your home.
If you are looking to rent out your home and live near a military base, check out ahrn.com. We are a military family, and when relocating this is one of the first places we check. You do not have to be military to list on the site and its free!
We decided to move last year and we rented out our old home as well. What you have listed here is great advice. I would also suggest that you look into any government assistant housing programs in your area as well. Where we live (Arizona), there is a program called Section 8 that helps pay rent for low income families. We were nervous about it at first, but the more we investigated, the more it seemed like a good idea.
The applicants go through a screening process to qualify for the the program. If they have any kind of criminal record, or if they have ever been evicted from a Section 8 home, they are not accepted. And we were able to screen the applicants ourselves as well, so we knew who we were getting. There is a required annual inspection – by the city – to make sure that the tenants are not destroying the place. And the city sends the check directly to us, so we never have to worry about getting paid.
We posted an ad on Rent.com and within a couple of weeks, we had several applicants. The tenant that we have is a single mom who wanted to live in a good neighborhood where she could send her kids to a good school. We feel very blessed and happy with the way things have worked out for us.
We are still responsible for repairs, but we only live about 3 miles away, so it hasn’t been much of a problem.
Great article! When we decided to enter full-time youth ministry and move to China in 2007, we tried unsuccessfully to sell our house. We finally decided to rent, and ended up with a fantastic renter with three children and a dog. My father-in-law manages the property, as we have since lived in China, Minnesota, and now California….all far from our home in Maryland.
We’ve had to replace a few things over the past five years….including an appliance and the furnace. But overall, I think she takes better care of the place than we did. She pays everything on-time and in full. Her rent doesn’t cover the cost of the mortgage, but we started with the cost of the mortgage, and slowly lowered it until the renters started calling.
I would definitely encourage you to try this if you can’t sell your house. Our house was (and is) “upside-down” and is only worth 2/3 of what we paid for it. Renting it saved us from a far worse financial situation. Do your homework. Get everything in writing, be thorough in checking out your renter, and have someone trustworthy manage the property for you if you cannot. Good luck!
You must be in the same mode of thought as I am- decluttering on the mind! I think it is the new year- Great article for preparing to rent. Funny thing is people think to do all this when they want to sell a home, but often when they try to rent they just think..well I don’t know what they think, because often the home is very shabby- and has not even had so much as a broom and vac done in the last 2 months. You are fortunate to have good people to count on near to the house- wish you best as a long distance landlord- it is a tough gig, but with the right tenants it is a win win for everyone!!
I’m not sure what is going on in central Indiana. I have a 3 bedroom, 2 bath modular home. Very neat and clean. We have so many rentals in town and so many people out of work most people feel like they can tell us what they will and won’t do. It often takes a year to find a renter and many times they only stay a year. The good ones stay longer. It’s been hard to rent to people. I would never do it as an income maker because it isn’t. This was in my family and I’m just trying to keep renting it for a while longer. Many leave to move in with family. I’m only asking $500. a month.
We moved from Illinois to Oregon last summer and left our old house behind as a rental. We looked into property management but had various issues (poor communication, charged too much, etc.). In the end, we arranged to pay a friend who lives in the neighborhood a monthly fee to keep an eye on the property and help out if anything comes up (e.g., in November we had a problem with the furnace and she arranged for the repair).
In addition to the advice above, I would emphasize checking your tennents’ background and references.
Note the condition of every room before you leave town. You can download condition/inspection reports from various sites. Fill one out, noting what appliances you’re leaving and what kind of shape they’re in, what kind of window treatments you’re leaving, if there are scratches on the floor, marks on the wall, etc. so there aren’t misunderstandings later.
Take lots of photos, inside and out, both to note any damaged areas and for advertising.
Get a home inspection (ours cost about $300). We got one when we were still thinking about selling; we figured it would be cheaper/easier to deal with any issues ourselves before we left than pay someone else to fix things up after we left. We ended up making a ton of repairs and most importantly making sure all the smoke alarms/carbon monoxide detector were where they should be. The inspector allowed us to send him photos of the fixes we made and he updated the report at no extra charge so we have that to show both buyers and renters if needed.
If you have a local tennent’s union, it can be a great resource for finding out about local/state rental laws. It can also give you information about property managers, who they are and who’s had complaints filed against them.
So far, it’s worked out for us–good luck to anyone else in this situation!
PS–Couple of other things: A credit check costs about $25-$35 per person on the lease. You can ask your tenants to pay for the credit check when they fill out an application, though of course you can’t charge them if you don’t end up running the check. I used Amerusa.com and got the results back in less than a day (your tenants will need to fill out information online). (Also check whatever other references they give you. )
Don’t forget to update your homeowner’s policy to reflect that it’s now a rental, not your primary residence.
We are in a similar situation right now as well. We have two houses to rent out and will be moving across the country. And I too would love some more clarity.
Where did you get the contract? How are you managing it from across country to be sure there is no damage? How did you screen you renters? Did you do a back round check? How do you enforce if they don’t pay? What do you do if there is a major water leak at 3 am? How do you sign a contract from across country? How do you give them the keys from across country? Do you hire a cleaning company when you change renters?
Just a few of the millions of questions I have 🙂
Jessica, it is different state to state. First you need to find out what the laws are in your area. The contract you can find online but be VERY careful with it. Some people here mentioned writing their’s to bennifit the landlord but that it very difficult to do and it be legal. We didn’t know that until our renters stopped paying. Legally, you can’t enter the premises without prior notice and the law states what that is. Ours was 48 hours. Then you can’t evict someone without getting a legal judgement against them. Then they are served orders by the court and if they don’t move out then you have to get the police.
We were awarded payment through the courts for six months rent(they lived there but it took us that long to get them evicted) and damages (thousands).
We had a heating and air company that we had on contract as well as a plumber.
Hope that helps! 🙂
Excellent way to problem solve!! We sort of did the same thing except we did that before we bought a house. We looked for a home with a rental already attached to it so we could always rent it in order to save us more money, especially with this bad economy. We still made sure that we could afford to pay for the entire mortgage in case we found ourselves without renters, but the help we get now pays off BIG TIME!!!
I’m so happy for you!!
My parents did this, and you’re absolutely right that you need to be able to afford the property without rental income. There were even renters there when they bought the property, but a few weeks after the sale went through the renters vanished suddenly (along with all the door knobs, electrical plates, and anything else they could carry away!).
It was several months to find renters, and my parents did a background check but not a credit check. Ended up having to evict the renter, which took months (during which they weren’t paid), then clean up the mess they made of the place. And the apartment was over our garage, so we saw the renter every day! At one point, she got mad that she was getting evicted and tried to run over my little brother with her car! Had to get a restraining order on her.
Now they have 2 great tenants that pay on time (one of them even prepays rent months in advance). But it took a couple of years to find those. Needless to say, they’re nervous of raising the rent at all and scaring the great tenants off!
OMG! That’s terrible! Thankfully we ended up with absolutely wonderful tenants that came when we bought the place. They pay on time every month and they plan to be moving any time soon.
I’m going to keep in mind that we need to not only do a background check but a credit check as well. Thanks so much for the info!
We were in the same position. We are renting our home, but charged a little more than market rate for rent, hoping to draw good renters, and make sure we could cover our mortgage, taxes, etc. We listed our house in the local paper and craigslist, and all of the calls we got on it were from the Craigslist ad (who knew)! We wrote the lease ourselves, drawing from samples we found online for our state. We wrote it favoring the landlord, and stipulated that the tenants are responsible for ALL routine maintenance, lawn care, snow removal, etc. Also, there is also a clause that allows us or our ‘agent’ (my dad) to inspect the premises with 24 hr. notice, and we told them we would be doing so every 3-6 months or so. So far it is working out well. We did both background and credit checks. In that area, houses are renting very well because lots of people can’t get a mortgage right now, plus apartments in the area are pretty expensive anyway.
Good for you! I was a landlord (landlady?) for several years with 13 rental houses. I would recommend exactly what you did. Fabulous that your dad is nearby to be your agent, too. AND you budgeted for maintenance! Kudos!
Water heaters are as fickle as light bulbs… and burn out without warning. We had a heating oil tank show that it was 1/3 full, but the water pipes froze and burst. It turned out the tank was 1/3 full of sludge that couldn’t get to the furnace.
Even the brand new houses that we built had things happen. Our rule of thumb was $100/month for maintenance/emergencies.
Landlords should also have the homeowner’s insurance deductible set aside in an emergency fund.
Really, only $100 per month for emergency repairs for a house? In the 7 years we’ve owned our home, we’ve had tree roots clog the sewer twice ($500 plumber job first time, $800 second time); basement repairs $5400; hot water tank went out $650; we’re on our second washing machine; garbage disposal and garage door problems; two roof repairs due to storm damage – one from a hurricane that came through Ohio- each repair about $1200 not covered by insurance; and the HVAC system went out $7700. We also replaced the 40 year old windows and fenced the yard because a rapist lives in the house katy-corner to ours. So even without the windows and fence, a $100 per month savings for emergencies woudl come nowhere close to what we’ve spent on an average sized, 40 year home in 7 years of home ownership.
$100/month covered water heaters, cracked window panes, etc. Improvements is a completely different budget. And any damage done by tenants came out of their security deposit.
In addition to the 13 rental houses, I’ve owned 5 houses that I’ve lived in. I’ve never had the run of luck you’ve had. Yikes! You make my case better than I did to budget for maintenance and emergencies.
Owning a house costs so much more than mortgage, insurance, taxes and association fees.
I hope your home brings you heaps of joy, to offset the headaches.
“Owning a house costs so much more than mortgage, insurance, taxes and association fees.”
Yes, a thousand times over!!
“peak” should be “pique”
The peak/pique mistake is one of my grammar pet peeves. Right up there with “all intensive purposes.” 🙂
Thanks for catching the mistake!
We did this twice. There are a lot of things to seriously consider before renting out your home whether you are still in the area or out of state. Remember to consider tax information. Some states require that you pay a portion to them if you own a home there. The biggest issue we ran into was when the state our last house was in changed their laws about homeowner’s insurance and we could no longer insure a house we didn’t live in without fileing for a business liscense, etc.
In the end we sold our house to the last renters and they were wonderful!
Please do a lot of research before jumping in though. We did loose thousands to home repairs from our renters twice before finding the ones that eventually bought our house.
Yes, check into insurance! We required our tenants to carry renter’s insurance. When they moved out, our insurance company refused to insure our property (I think it was after a certain amount of days) because a vacant property is much more likely to be vandalized. I am not sure what we ended up doing to ‘cover’ ourselves til we sold the house, but it was a major headache.
Thank you for taking the time and care to do all of that. We are on the hunt for a rental house to move into (currently living on a military base and want off-base ASAP) and the vast majority of what we find has poor pictures, poor descriptions and if we end up making an appointment, it’s in much worse condition than the pictures show. We’ve been looking for 8 months now!
I wanted to add my two cents, since we were in the same position. We wanted to move into a better district, but knew we couldn’t sell our house quickly due to the economy. We did everything right, background checks, rental references, etc.. Everything checked out just fine. The tenants moved in, and over the course of a year completely destroyed it. And I mean completely…broken windows, every floor in the house but one was completely ruined, damaged electrical wiring and plumbing, everything was filthy, etc…I could go on and on. The tenants did a very good job of keeping the damage hidden and we only saw the living room. Even if we had known just how bad it was, eviction is not a simple process and can take a long time. Laws favor tenants unfortunately. The house was very bad, and it took a hundreds of hours and money to fix it up. We ended up paying two mortgages for six months before we were finally able to get it back into selling condition. (Thank God for savings!) It seems that most people who tout rental properties seem to have had a good experience. Unfortunately, that is not always the case and you MUST be financially prepared if things go bad. If we had not had savings, we could have lost both houses. We also found that the hidden costs of having a rental property (e.i. rental permits, rental inspections, township requirements such as new paint and cleaned carpets throughout, chimney inspection, etc….really add up and can quickly eat away any profit you might have dreamed of making) I am not trying to kill anyone’s dreams, just to give a realistic view of what can and does happen. The other thing we learned is that in a difficult economy, renting a house (as apposed to an apartment) is difficult…if people can afford to buy, they have. People who can’t afford it will rent an apartment typically (so we are told by prospective tenants) I am sure this varies by area, but something to consider.
The same thing happened to us, even with screening tenants. The completely trashed our place, causing thousands of dollars in damage plus lawyer fees we had to pay in order to evict them. Add to this the stress of trying to take care of all of this, plus fix it up, and coordinate everything from out of state. It only takes one bad set of tenants to ruin the whole landlord experience.
Meg is right – you have to really do your homework. Having said that, though – we aren’t landlords because we’re looking to make a profit, but because we weren’t able to sell the house (and that was before the economy turned!). If you need to rent out a property, check state and local laws very carefully and be sure that you can comfortably follow them.
We live 350 miles from our rental property, so we have developed relationships with handymen and cleaners whom we trust. I also have family in the area who are “on call” in case of true emergency, but just making those arrangements seems to have been enough to keep Murphy at bay. So far. (knocks wood)
Thank you so much for sharing your experience, Meg!
To be completely honest, it bothers when I read this type of post. Experiencing something once does not make a person qualified to recommend it to thousands of other people!
I agree. I know it can work out, but it can also go very wrong, even if you do everything ‘right.’ It is not a ‘quick fix’ in my opinion, and there is just a very real possibility that things can go badly. It is also not as easy as cleaning it up and listing it on craigslist. There is so much more involved. I could go on and on…:)
We are renting out our home that is more than 2000 miles away from us now! It is not ideal, but seeing as we couldn’t afford to keep making the mortgage payments without the rent money, we are blessed to have it rented with renters that pay on time every month.
We were in a similar situation almost a year ago when my husband took a job a state away. We put our house on the market but after 6 months of it not selling we decided to rent our house out. We were lucky and were able to rent our house to a family that we had been very close to. We now charge a rent…very close to our mortgage and if a problem arises with the house they simply let us know and either they take care of it or we hire someone local. So far it hasn’t been too hard. We’ve had to fix the garage door, blow out the sprinklers for winter etc. \
If/when this family decides to move out we may try to place it back on the market…or keep renting we can’t really decide. We both hate selling the house for less than we bought…but it is a liability to keep around also. I’d love to know the authors long-term plans? Will they continue to rent until they own the house? Do they intent to put the house back on the market soon? Thanks
We have a great rent situation as well. For the first time in our marriage we are renters, but actually put a contract to buy on our home. They were friends of friends and moving to Germany. There house didn’t sell so we just pay their mortage payment. We fix anything unless it’s something huge. We have also added upgrades, like new carpet, because as I said we are buying it. We also didn’t pay ANY security deposit b/c our friends vouched for us. I would have HATED standard renting, not being able to paint and so fourth, especially since we have never rented before. However, God knew what BOTH of our families needed at time and has been a great blessing. All this to say it sometimes works really well. 🙂
I would be interested in knowing the websites you used just from the other side of looking for a place to rent. We have our house up for sale and if it is to sale we need to find a place to rent for the time being while we get our new house built. I have not had much looking on line for houses for rent, so would appreciate any websites that might be a source to look into.
Apartments.com, ForRent.com, Realtor.com, Zillow.com
should all have rental houses. You should be able to sort by price, # of BR, # of baths, etc. And don’t discount a townhouse instead of a detached home if you just need to rent while your house is being built.
Of course, there is Craigslist.org, too.
Thanks so much. I like the idea of a townhouse for the cost of rent being cheaper. However,I have six children age nine and down 🙂 and I think for the sanity of all, having a space outside to play might be helpful. There were two places you suggested that I had not thought of so thanks again!
Melissa
I would add trulia.com & rentals.com.
Last fall, we looked at a home where the owners were willing to rent it back from us until their new home was built.
Not sure if that is an option for you or not?
We are in a very similar situation. We’ve had great luck with renters so far and it has been a blessing to have someone there so that our home isn’t standing empty.
I would be careful, however, about being the least expensive rental in the area…that might not be the best situation. We tried to keep our rent somewhere in the middle. We didn’t necessarily want renters who were just looking for the cheapest rent.
Also, be careful about checking references. It can be very hard to evict a bad renter, even if they aren’t paying their rent, especially in the winter. You want to make sure the person in your home will be holding up their end of the bargain…and taking care of your property because someday you’ll want to sell it!
Finally, you might look in to a property management company of some kind. We moved far enough away from our house that it is difficult to go back and take care of things. Responding to renter problems speedily is part of being a good landlord and having someone else handle property management can really take away from your burden. It’s not free but I think it’s worth it!
My fiance just joined the army and we also just bought a house a year ago ( bad timing I know) but I’m wondering how hard it is to take care of a rental property from another state?
It depends, of course. We live in Virginia and rent out a home in Oregon. We tried a property management company and they were horrible, horrible–unprofessional, cost us money, and we still did all the work even though we were paying them 10% of the gross rent each month! So we dropped the management company and are much happier (and make more money)……BUT, we are fortunate to have amazing neighbors who have stepped in to help when we had to turn over the rental (taking pictures for us, recommending local vendors they trusted, etc.) and who generally keep an eye on the house day and night. 🙂
Also, we are a military family and we are renting to a military family–there are a lot of safeguards for landlords when the tenant is in the military. If they don’t pay the rent, if they cause a lot of damage…..that can all negatively affect their military career, so they have real incentive to be good tenants (and most military families are, anyways!)
Where were you in Oregon? We had a similar experience trying to rent out our house in Eugene when we needed to move–the property management company was TERRIBLE, did nothing to get the house rented other than to throw it up on Craigslist (um, why am I paying you to do this, guys?), and ultimately cost us the entire summer, which is the only time people really start leases in that market. The house never rented and it was a really unhappy ending. Which is to say, if you need to go with an agency because you’re living elsewhere, get as many references as you can and document, document, document!
I will say that I was a DIY landlord several years ago (in LA) and had a great experience. The tenants were wonderful and actually left the house better than they found it! But that was a whole lot of luck I know….
Best way to do it when you are in the Army is def. a Property Manager, since you most likely wont stay long at one Duty station, we rented our House almost a year ago, make sure to have the Property Manager screen every Applicant, we rented to another soldier and he has never paid his rent on time
I am curious, though… how do you manage your rental when you live across country? We also moved to another state last year because of a job. Our house went on the market April 25 and still has not sold. We get asked all the time whether we have thought about renting it. We have not considered that a viable option because we cannot oversee it and take care of “landlordly” duties from 600+ miles away, but paying someone else to manage it means even less money in our pockets. As it is, with the area it’s in we cannot charge for rent what we pay in mortgage, and we would hate for someone to mess up the hard work we put in filling nail holes, painting every single wall, cleaning carpets, etc.
Congrats on renting your place. I agree with Jessica, though, that there are often unseen costs with rentals, which may be why other units were renting for more. If you’re living across the country someone has to be available to check on the house and do service – repairs, and routine maintenance. Stuff falls apart when it’s not maintained, and renters don’t always do that. We bought a house last year that was rented out for about 2 years before that, and we’ve been doing all sorts of repairs for things that more regular maintenance during that time might have prevented (fortunately we built that into our price negotiations).
We became unintentional landlords 9 years ago, and I want to just add one thing about pricing your home: remember that potential renters often search by price. We had priced our fairly sizable home at what we knew was a very reasonable price, but it took us months to rent it the first time. Our renters told us they had only seen the ad because they forgot to put a “Minimum” price in on one of their searches. We actually increased the price $100 when they moved out and got dozens more applicants – nobody searches for 5+ bedroom homes below a certain price point because they figure anything so inexpensive will be a mess 🙂
So it’s worth thinking not only about what makes your home special – great details about that, Erica – but also about positioning it in your particular market.
This is what I’m about to do. The house is being readied for a required pre-inspection now. I’m hoping to have it rented by March.
EXCELLENT advice. Not only can this be a great way to get you out of the pinch you might be in with your mortgage, but I think it’s also a potentially good way to build your net worth, when you can have rental property and live in less home than you need. For some folks who are underwater, they may find that they can charge more in rent than they are paying in mortgage, then rent out an inexpensive apartment, if need be… just some thoughts, every situation of course is so different, and asking your parents, older friends, anyone with more wisdom than you in this area. Great article.
I would like to know more. How are you managing it living across the country? How did you draft the rental agreement? Screen applicants? How are you managing repairs since you are so far away? How are you checking on your property to make sure the renters aren’t destroying the place?