Advice for First-Time Landlords

With home prices plummeting over the last few years, my husband and I decided to take advantage of the market and purchased a condominium. Although we truly enjoyed our large historical home, we were feeling a little tied down with the maintenance and upkeep. Additionally we like to travel which can be less convenient when you are a homeowner. Now, with owning a condominium, we can leave knowing the yard upkeep and outside maintenance is taken care of.

Although it was a great time to purchase a home, unfortunately, we found it a horrible time to sell. After just a few months on the market along with a couple of price drops, we quickly realized we might not fare well in a sell. Consequently, we chose to hold on to the property and become landlords.

Both my parents and grandparents were landlords; however, I was reluctant to get into the business myself. I'd put so much work into my home and was afraid that renting it to someone could potentially result in the home being destroyed. However, I was also aware that there were good tenants out there just looking for a quality place to live, and landlords who operated with integrity.

Having been through this process only once, I am far from being an expert. Nonetheless, being so new at this, who better to help another first-time landlord than myself. Learn from both my experience and mistakes.

Property Managers Are Not Always the Answer

My husband's job can be quite demanding, thus, we determined that I'd be the best to handle the management of the property. I in turn decided that I would ease my duties by hiring a property manager. In theory this sounds like a great solution. For some it is, but, if you are very particular about how things look and are done, it may be best that you manage the property yourself. Sure there are well qualified managers out there, but remember, they are managing numerous properties and your home will be just one in the bunch. In most instances, you will be charged an initial fee of from 50%-100% of the first months rent. This fee covers the cost of finding and screening tenants, as well as handling the lease agreement and other rental documentation. In addition to the initial fee, you will also be charged a percentage (typically 5%-15%) of each month's rent to cover costs and fees for monthly management. I began this journey with a property manager, however, for me it just did not work out. Fortunately, I was not in a long-term contract, but did waste a couple of months (that is no tenant and no prospects for one at the close of the agreement).

Advertising Sources

Although advertising is just the beginning of your search for good tenants, it is a crucial aspect of managing the property. I used a number of on-line sources including Craigslist, nonetheless, I had the most success with Trulia, a real estate website. Clearly the internet provided me with the most leads. Nonetheless, it is also important to use print media and traditional advertising methods such as posting fliers to get the word out. I received some of my most qualified applicants from friends, neighbors and associates. Consequently, word-of-mouth may be your greatest advertising source.

Showing the Property

Calls for showings can come at anytime of day or night, therefore, it is important to keep the property clean and attractive at all times. Because you will likely get a slew of calls, save yourself some time by conducting a quick pre-screening. In my case the home was extremely large, so I was sure to reiterate the fact that it was over 2300 square feet in size. This became the norm after showing the home to several people just to hear them say that it was too large. You will find your own questions to ensure that you are seeing serious candidates, however, I would also ask when and why they were looking to move. Surprisingly enough, I would get some people who might not be interested in moving for a few months. Lastly, I would repeat the monthly rent for the home and the estimated cost of utilities followed by a request for confirmation that the home would fit into their budget.

Screening of Candidates

After having shown the property over a dozen times, truthfully I was getting exhausted. I'd also declined a couple of candidates, one for insufficient income and another for inadequate work history. By the time I got a couple of quality applications, I was tempted to just accept one of them without conducting a background check. No matter how good the application looks, conduct a thorough background check. This includes verifying employment, talking with former landlords, and conducting both a credit and criminal history. There are a number of companies that will do the credit and criminal histories for you for a small fee. In my search, I found that AmerUsa.com was a good source for landlords with just one or two properties. I was pleased with the work they did as well as the quick turn around on screenings.

Declining or Accepting Applicants

Either accepting or rejecting an applicant should always be done in writing. It might be tempting to try and explain your decision over the phone, however, this can potentially lead to misunderstandings or confusion. There are many simple acceptance and rejection letters on line that can aid you in drafting your own. Keep it simple and to the point. Also, I found that applicants respond more favorably when you can give them an answer in a short period of time.

Whether talking with prospective tenants over the phone or in person, keep your relationship professional. Always reiterate your screening process and your desire to find the best possible tenant for the property. Becoming too friendly or personal may lead to you making a wrong decision merely based upon emotions.