As home values continue to drop, more homeowners are mulling over renting their property instead of selling it at a depressed price.
Sometimes, the idea of becoming a landlord scares people, said Bryan Mize, a board member of Snohomish County Apartment Operators Association. The group of local landlords has about 550 members.
Some people worry they might get stuck with bad tenants. Others are concerned about frequent turnovers that will cost them money.
If you do it right, renting a property can not only help you weather the recession, but also bring you prosperity, said Mize, a real estate broker and a mortgage loan officer.
Mize, who rents five single-family houses in Snohomish County, shared his thoughts during a recent interview about how to be a successful landlord.
Question: Why do you think more people are trying to be landlords these days?
Answer: “There are more and more people who need to be landlords not because they want to, but because they’ve become de facto landlords,” he said. “They can’t sell their house for what they owe or they won’t sell it at its current value.”
Q. What are the pros and cons of becoming a landlord?
A. First, you get some leverage for your investment if you manage the process well, Mize said. You let others pay for your mortgage, and you can reap benefits in the long run. Remember the real estate market always goes up and down in short cycles, but it has appreciated over decades. Also, in most cases, you can save on your income taxes by renting your properties.
One of the downsides is that you are responsible to pay your mortgage whether it’s rented or not. A vacancy costs you money. “You have to keep it in your mind that this is an investment,” he said. “It’s not free. Sometimes, you have to pay for it.”
Maintenance can be challenging. If you don’t keep it up to good standard, you can’t keep renters for a long time. “I wouldn’t rent a property that I don’t want my family to move into,” he said.
At the same time, you have to let your emotional attachments go. You need to be able to look at a property objectively. “This is business,” he said.
Q. Where should people start if they want to learn how to become landlords?
A. First, read RCW 59, the state landlord and tenant laws. You need to know the provisions. Otherwise, you might make yourself vulnerable to a lawsuit. Joining an organization like the Snohomish County Apartment Operators Association helps you understand what you should do and what you shouldn’t.
Then, set up a bank account to deal with tenants and put out an ad to attract applicants. Once you get applicants, it’s time to screen them. Let applicants pay for credit and criminal background checks, which should be done by a licensed third party. You also need to talk to references and check applicants’ employment.
Incomplete screening could cause you a trouble.
“I’ve only had one eviction during my 10 years as a landlord,” Mize said. That happened because he relaxed his standards and let in a tenant with insufficient income.
Q. What other tips do you give to budding landlords?
A. Each case is unique, Mize said. Open communication is key. Most importantly, treat your tenants like clients.
Yoshiaki Nohara: 425-339-3029, ynohara@heraldnet.com.
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