Question: As you know, selling a home now is a tough business. We are considering renting out a vacant house that we would prefer to sell.
Do you have a website, book or article to which you could refer us to learn more about the logistics of renting a property (i.e. rental contracts, deposits, renter screening practices, rental laws that protect the property owner, etc)?
The idea of renting is a whole new ballgame for us.
S.R.
Answer: A lot of would-be home sellers are now finding themselves reluctantly becoming landlords in this slow housing market.
Frankly, that is a difficult position to be in because most of the horror stories that I have heard in the 21 years that I have been writing this column come from amateur landlords.
A classic amateur landlord mistake is to rent to the first person who shows interest in your rental house because you don’t want to “waste time” showing the property to several different rental applicants.
You should thoroughly investigate each and every rental applicant by checking their credit, criminal history and prior landlord references. The first person who wants to rent your house may be a perfect tenant, or you may have to take five or 10 rental applications before you find the right tenant.
The key to success is to be patient enough to wait for a good tenant rather than desperate to fill a vacancy as quickly as possible. As someone once said, “The cheapest eviction you will ever do is the one before they move in.”
So what is a “good tenant”? Here is what I am looking for when I rent a property:
• A good credit rating, which means they are likely to pay their rent on time.
• Good references from prior landlords, which also shows that they are willing to pay their rent on time.
• Stable and sufficient monthly income, that is ideally at least three times the amount of the monthly rent. For example, if you are charging $1,000 per month rent you would like to find a tenant who earns at least $3,000 per month.
• In the real world, you often have to compromise on the income-to-rent ratio, but you want to get as close to the “three times rent” rule as possible.
• Long-term residents are better than short-term renters, so I give preference to tenants who want to stay in the rental for two years rather than six months.
• No criminal history. You can run a criminal records check for $10 at the Washington State Patrol’s “WATCH” website: watch.wsp.wa.gov/.
The best book I’ve found on landlording is called, appropriately, “Landlording,” by Leigh Robinson.
It is now in its 11th edition and you can buy it at Amazon.com and many local bookstores. The book covers rental contracts, tenant screening and basically everything you need to know to successfully operate a rental property.
I also suggest you consider joining the Rental Housing Association of Puget Sound: http://www.rha-ps.com/. It is a great resource for all the latest landlord-tenant laws and other legal issues involved with landlording. And there are also local organizations such as the Snohomish County Apartment Operators Association: http://www.scaoa.com.
To be a successful landlord, you must treat it like a real business. Study the books and resources listed above and learn the Landlording business BEFORE you let your first tenant move into your property. That way you learn from other people’s mistakes rather than making the same mistakes on your own.
Steve Tytler is a licensed real estate broker and owner of Best Mortgage. You can email him at features@heraldnet.com.
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