Considering renting instead of selling
We moved to a new home but could not get to sell the old home yet. With the market on a down turn I am not sure selling is a good idea. I am starting to think if I should rent it out for an year or so. I tried putting the numbers together and looks like i will have a reasonable cashflow. My question is how do I know what updates (if any) should i do to get it ready for rent? Its in a live able condition but would that be sufficient to rent it out? What questions should i ask myself? Or is it easy to have the property reviewed by a property manager to het suggestions? This will be my first rental property so I am unsure about lot of things.
Quote from @Pradyumna Vanam:
We moved to a new home but could not get to sell the old home yet. With the market on a down turn I am not sure selling is a good idea. I am starting to think if I should rent it out for an year or so. I tried putting the numbers together and looks like i will have a reasonable cashflow. My question is how do I know what updates (if any) should i do to get it ready for rent? Its in a live able condition but would that be sufficient to rent it out? What questions should i ask myself? Or is it easy to have the property reviewed by a property manager to het suggestions? This will be my first rental property so I am unsure about lot of things.
Your on the right track, have a property manager walk it with you and get their thoughts.
Thank you! Any guidance you can provide how to find a good property manager in the are?
Quote from @Pradyumna Vanam:
Thank you! Any guidance you can provide how to find a good property manager in the are?
I agree. Find someone local to walk through and look at it in person.
Remember: cheaper doesn't mean you'll make more money.
Start by going to www.narpm.org to search their directory of managers. These are professionals with additional training and a stricter code of ethics. It's no guarantee but it's a good place to start. You can also search Google and read reviews. Regardless of how you find them, try to interview at least three managers.
1. Ask how many units they manage and how much experience they have. If it's a larger organization, feel free to inquire about their staff qualifications.
2. Review their management agreement. Make sure it explicitly explains the process for termination if you are unhappy with their services, but especially if they violate the terms of your agreement.
3. Understand the fees involved and calculate the total cost for an entire year of management so you can compare the different managers. It may sound nice to pay a 6% management fee but the extra fees can add up to be more than the other company that charges 10% with no additional fees. Fees should be clearly stated in writing, easy to understand, and justifiable. Common fees will include a set-up fee, leasing fee for each turnover or a lease renewal fee, marking up maintenance, retaining late fees, and more. If you ask the manager to justify a fee and he starts hemming and hawing, move on or require them to remove the fee. Don't be afraid to negotiate, particularly if you have a lot of rentals.
4. Review their lease agreement and addenda. Think of all the things that could go wrong and see if the lease addresses them: unauthorized pets or tenants, early termination, security deposit, lease violations, late rent, eviction, lawn maintenance, parking, etc.
5. Don't just read the lease! Ask the manager to explain their process for dealing with maintenance, late rent, evictions, turnover, etc. If they are professional, they can explain this quickly and easily. If they are VERY professional, they will have their processes in writing as verification that policies are enforced equally and fairly by their entire staff.
6. Ask to speak with some of their current owners and current/former tenants. You can also check their reviews online at Google, Facebook, or Yelp. Just remember: most negative reviews are written by problematic tenants. The fact that a tenant is complaining online might be an indication the property manager dealt with them properly so be sure to ask the manager for their side of the story.
7. Look at their marketing strategy. Are they doing everything they can to expose properties to the widest possible market? Are their listings detailed with good quality photos? Can they prove how long it takes to rent a vacant property?
This isn't inclusive but should give you a good start. If you have specific questions about property management, I'll be happy to help!
Shop local PMs. Ask for their advice.
First and foremost, it needs to be safe. Look at it not just from a tenant safety standpoint but also from a liability standpoint.
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@Pradyumna Vanam thinking you're going to have to rent it out for more than a year. Hopefully less than 3 years so you can sell and take primary residence tax advantages.
Regarding finding a PMC:
In our experience, the #1 mistake owners make when selecting a Property Management Company (PMC) is ASSUMING instead of CONFIRMING.
It's often a case of not doing enough research, as they don't know what they don't know!
Owners mistakenly ASSUME all PMCs offer the exact SAME SERVICES and PERFORM those services EXACTLY THE SAME WAY, so price is the only differentiator.
So, the first question they usually ask a PMC is about fees - instead of asking about services and HOW those services are executed.
EXAMPLE: PMC states they will handle tenant screening – what does that specifically mean? What documents do they require, what credit scores do they allow, how do they verify previous rental history, etc.? You’d be shocked by how little actual screening many PMC’s do!
This also leads owners to ASSUME simpler is better when it comes to management contracts.
The reality is the opposite - if it's not in writing then the PMC doesn't have to provide the service or can charge extra for it!
We have a 14-page management contract that we've added our real experiences to over the years, with the intent of protecting both us AND the landlord. Beyond the Monthly Management, Placement & Maintenance fees, all other fees in our contract are IF EVENT -> THEN fees.
We don’t know any PMCs to recommend in the area mentioned, but since selecting the wrong PMC is usually more harmful than selecting a bad tenant, you might want to read our series about “How to Screen a PMC Better than a Tenant”:
We recommend you get management contracts from several PMCs and compare the services they cover and, more importantly, what they each DO NOT cover.
EDUCATE YOURSELF - yes, it will take time, but will lead to a selection that better meets your expectations & avoids potentially costly surprises!
P.S. If you just hire the cheapest or first PMC you speak with and it turns into a bad experience, please don’t assume ALL PMC’s are bad and start trashing PMC’s in general. Take ownership of your mistake and learn to do the proper due diligence recommended above😊
@Pradyumna Vanam Make sure you keep your property insurance updated. If the home is vacant and has been for more than 60 days your insurance company can most likely deny a claim on the property. Also once you decide whether or not you are going to rent out your home make sure to change your coverage so that it is a landlord insurance policy and require your tenants to get renters insurance with you as an additional insured on the policy.
Hey @Pradyumna Vanam! Typically you would probably still have a net gain by selling your old home in this market if you bought it several years ago. If you bought it recently, and don't want to sell it now that makes sense - or maybe you just want to wait to possibly fetch a higher price later on.
To determine what updates you might need in the home, I would simply log onto Zillow and checkout other rentals in your area and figure out what $/month they're being rented for and what's being offered.
For example, if you have a 3br/2bt and other 3br/2bts are being offered at around $1k/month and look recently updated (open floor plan, nice bathroom, washer/dryer updated, etc.) then that's a sign that you should rent yours for less.
Alternatively, you could contract with a property management company and let them handle the whole process, but typically for single family homes you'd be looking at paying them around 10-15% of the rent/month + any fees associated with turnover (new tenant, repairs, etc.)
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Happy to chat! Market is still going strong if the home is priced right. I would do renting it out if you can. Rental market has been going strong and isn;t slowing down. What's the bed/bath count? KCK is decent size so there's great and rough spots in it