Thursday, July 2, 2015

I have a rental property, now what?

At Renting Authority, we have so many customers who accidentally have a rental property. What I mean by that is that we have customers who bought a house and couldn’t sell it so they decided to make it a rental. These are average every day people who are building wealth and don’t even know it. Here’s a scenario:
Bob Johnson lives in a basic 3 bedroom/2 bath home when the real estate market is going great. He buys another property when the market is going well and plans on selling his other house after the fact. Well, once he buys the 2nd house he can’t sell the 1st house for whatever reason and you have an accidental real estate investor.
Like I said, we have customers like Bob Johnson by the dozen and they are great people who are doing a great service for our country. See, not everyone has a 20% down payment and can buy a home. Not everyone has perfect credit. These people need good solid places to live and with the interest rates where they are now, these people can rent these homes under affordable circumstances.
One of the most important things someone can do when in this situation is to setup as a business entity first. If you have a rental property you should keep that property separate from everything else you have. When you rent a home you don’t want the liability of that property to effect you personally should something happen and that means to create a basic entity like and LLC and put that property under that umbrella.
Next, when you decide to rent the absolute most important thing about the rental property is who you rent it to. This is a marriage in a sense so it is key that you are comfortable with that person and that the rent is being paid and able to be paid. Let me be very clear, don’t rent a house to your friend if you friend has no job and a history of drug abuse. Unless you want to make 2 mortgage payments every month, be very picky about who you rent to. It is better that the home has a lapse in a renter than getting the wrong one.
Good renters: pay on time, treat the home like their own, have good communication with you about the property. Can fix things themselves if necessary.
Bad renters: Don’t pay on time, break rental/lease agreements, damage the property or don’t care about the property and are high maintenance.
When I say ‘high maintenance’ I’m talking about the renter that is always calling you for something. It might be a squeaky floor board or a light bulb issue. Maybe the water pressure isn’t exactly up to that persons expectations. You don’t want that person.
People ask me how I can tell if I’m getting a good renter and I ask them to always do a solid background check on the renter and then ALWAYS call past landlords. Find out about their history and take the extra 5 minutes to get it done right.

No comments:

Post a Comment