So, I’m renting out a home. I have never done this before. But for some reason, without really trying, I have found a
renter. Then I just realized that I don’t really know what I’m doing. She and her family look very friendly and all, but I
don’t know them of course.
Typical stuff is:
background check
credit check (needed?)
There are a whole bunch of websites with contract templates etc.
Last thing is, she is considering a rent to buy option (which I know even less about, aside from the fact that if it’s decided
ahead of time, you can save a lot on closing costs even if buyer did FHA).
check references on her last couple rentals. Did she pay on time, did she leave the place in good condition, did she call about every single little thing and/or ask for reimbursement for light bulbs and burner plates she replaced. (sure she might have been able to, but really, light bulbs and small things are a cost of ‘living’ not owning). Ask other people who rent for ‘horror’ stories and decide what you will be okay with and then ask her previous landlords about it.
Getting someone evicted for not paying rent is a LONG process, so the credit check and previous rental check will go a long way to make sure it doesn’t happen.
Not sure if you’re going to be local or not, but I’d give some serious thought to getting a property management company, unless you like dealing with the 2am “the heater’s not working” calls. When my husband was transferred out of town, he found a property management company that finds tenants (including doing the background checks, etc.) and, much more important, deals with the inevitable maintenance issues that come up. We’re back in the area now, but are still with the management company because it’s just so much easier.
but to your question, when the mgmt co. found potential tenants, they looked at credit ratings, background, and employment status, at the very least. The length of the lease a tenant was willing to enter into was also a factor, and that was the deciding one for us. One potential tenant was 1 year, that’s it. The other tenants wanted at least an 18-mo lease and, six months into it, are already making noises about extending.
Would it be legal to enter a contract with a tenant, and half way through (if indeed things get to be a pain in the butt), get a property management
company to take care of it? The person who wants to rent now actually said she was interested in a rent to buy, which is an even better option
for me.
I don’t see why it wouldn’t be legal (freedom to contract and all that), especially if that possible contingency is written into the original lease. Not sure, though. Definitely worth mentioning the possibility.
As an aside, I think we pay ~ 10% of the rent to the mgmt co.
At lease signing we require first and last month’s rent plus security deposit equal to one month’s rent. This weeds out a lot of people who have no $$. Checking references is always a good idea (and/or credit report). Our state landlord laws require us to keep the last months’s rent + deposit in an interest bearing account and we have to pay the interest (if any accrues) back to the tenant when they leave. Make sure you check into your state’s laws and follow them!! When we lived in MA, our landlord didn’t properly handle our $$ or give it back in a timely manner. By law we were entitled to 3x damages (we got 3x our security deposit back plus interest).
We have a property manager for our rental. We don’t use a management company, but there are lots out there that charge 10% or so. We pay our guy by the hour if there are any issues. The companies are good to help with screening tenants, but it sounds like you’ve already done that.
We also “provide” grass mowing, leaf removal, and snow removal services and charge higher rent to “provide” this service. That way we don’t have to deal with the tenant potentially neglecting those things. Make sure you spell out in the lease who is responsible for what.
Would it be legal to enter a contract with a tenant, and half way through (if indeed things get to be a pain in the butt), get a property management
company to take care of it? The person who wants to rent now actually said she was interested in a rent to buy, which is an even better option
for me.
Ask yourself WHY it is an even better option for you, in light of the fact that VERY FEW ever exercise the option to buy, yet many end up in court over non-payment of rent.
So the potential renter wants to tie up your property for 1-3 years while they rent it and save money for the down payment? Will they also be asking for reduced rent in order to save up for the down payment because, you know, they REALLY want to buy your house? (Here they look into your eyes to see how you respond, looking for the desperation, searching for the weakness which you prefer to call your empathy or compassion.) Would they like to lock in a purchase price right now, at today’s real estate market values, hoping that in 3 years they can cash in on what may be a recovered(ing) market while you are left to fume that THEY take the profits?
Been there, DIDN’T do that!
As a landlord, I just shrugged off those offers and tried to rent it straight up, telling them if they liked it enough to buy it in a few years and I was looking to sell, of course I would offer it to them first! Every one of those potential renters walked away and I never saw them again! They could not take advantage of me and thus lost interest in doing business.
You CAN write up an agreement of that sort successfully if you are willing to include language to cover a whole host of possible scenarios. You can charge an upfront fee in consideration of the fact that they have tied up your property and are now in the driver’s seat for a few years. It’s just not worth the hassle though. Deadbeat renters have a lot of free resources to help them fight you in court. You have to pay an attorney or do it yourself.
Well the rent to buy thing seem to be a pain. I went to Barnes and looked at it. I talked to the potential renter and she agreed.
So, provided all goes well, she will move in at the end of next month, for 18 months, and if she likes the area, the house etc.
and I put the house on the market, I told her that I would give her priority.
So, looks like I foresaw the kind of crap that could happen doing this. By the way, she hadn’t said per se ‘rent to buy’, but rather
that she would be interested in buying later.
That’s exactly what I did. Asked for first and last month plus security deposit. I did get a book to make sure I do everything right.
Little details like application fee is non refundable (provided you detail to the applicant under what condition they could be rejected)
etc.
1 - Previous landlord
2 - Credit check (remember, there are probably reasons that they rent, one of which is bad credit)
3 - Sex Offender list
1 and 3 should give you a clear cut answer. 2 is where you use your judgement.
Make sure you lease states “Landlord or Landlords agent” if you will be using a service, no smoking in home (if that’s how you roll), clear instructions on how they get their security $$ back, clear information on notice for you to come into the home (FYI - I replace all my furnace filters. I can a) see how well the place is being kept and b) sure it’s done right) and clear info on what is not covered (bulbs, drip pans, mowing, etc)
Feel free to PM me if you have specific questions.
some states have laws limiting what a landlord can ask for. Some don’t allow first AND LAST, and security deposit. So double check what you ask for is legal and also check what is required for security deposit return. Some states require interest paid on the deposit if you hold it over a year or something like that. Anything you require that’s not legal can invalidate the lease (even if she pays it) and then you can get screwed over past due rent etc…
There are a whole bunch of websites with contract templates etc.
Last thing is, she is considering a rent to buy option (which I know even less about, aside from the fact that if it’s decided
ahead of time, you can save a lot on closing costs even if buyer did FHA).
You should definitely talk to a RE agent about the rent-to-buy option.
As far as contract templates for a simple lease, there is some language that may be required, or may not be permissible depending on your state. I became a landlord for the first time this past December. I got a template that was written by the state’s professional RE Agent association.
Do everything in your power to cover your ass - have contracts written favorably to you, check credit, get references, etc. Then hope that you made the right choice and don’t ever need to utilize any of your legal options.
I use LawDepot.com for my leases. http://www.lawdepot.com/contracts/residential-lease/ I used to worry about credit, but just about all my prospective tenants had pretty bad credit. Now I ask for recent pay stubs to prove income and employment and their current utility bills to make sure they’re current. I do month to month rentals, easier to evect and there’s almost no recourse if they do break a yearly lease.