What process do people use to rent out a unit that is in another state?

Question

Hello Real Estate gurus!I live in Chicago and have a condo unit in Scottsdale. I currently short term rent it; however, since the short term rental market is flooded and demand has gone down it seems, my strategy is to turn it into a long term rental to ensure cash is flowing. How would you go about this? How do you find someone to show the unit to potential renters? What is the best criminal/credit/eviction solution that I can use to check people’s background? Thanks in advance!!

Allan C. · Answer

@Steven Rago I have LTRs in 3 different markets and for each market I set up a team of folks. The most important is getting a realtor who can handle rental listings and tenant screening for you. Over time your trusted realtor should have your best interest in mind in securing quality tenants.

A good handyman is the next important resource, along with plumber, electrician and HVAC tech. I self-manage the properties, but will qualify that I own mostly B class.

Bob H. · Answer

First of all, you're in Chicago. It's way too cold in the winter. Make your leases end in February or March and go spend some time in Scottsdale before it gets too hot. Take care of anything that needs to be done to your condo while you're advertising the vacancy and showing the unit to prospective tenants.

If you get a good, tidy tenant -- which you can verify if you have an opportunity to visit after the tenant has moved in -- you may be able to advertise the unit near the end of the tenant's term and get the tenant to show the unit. Offer $50 or $75 for each showing, possibly with a bonus if you rent to the prospect. Don't do this, of course, if the tenant has safety concerns or if you think the tenant will not have the unit in good condition for a showing. If this works, you can minimize your vacancy and make a short trip to Scottsdale to inspect the unit when the current tenant moves out and to do a walk-through inspection when the new tenant moves in.

There are many companies that offer screening services. I have been happy with RentPrep. Don't rely on your screening service for everything, though. It's important to personally speak with prospects by phone or video call when they inquire about the property. A credit check should come at the end of this process.

My suggestion: 1. Advertise the property through Zillow and TurboTenant. 2. Speak to prospects by phone. Politely decline those with poor credit or insufficient income. Send a rental application and a list of acceptance criteria to the others. 3. Show the property to prospects who seem well-qualified after they have reviewed the acceptance criteria. 4. For prospects who are interested in renting, get an application from each adult and carefully verify everything on it. You'll need to call previous landlords and employers. 5. If everything checks out, send a lease to the prospect. Collect a security deposit when the lease is signed and require payment of the first month's rent at move-in. (There are many payment processors; I use ZRent, which has free payments if you have an account at a member bank.)

Samuel Diouf · Answer

Most people hire out PM's to handle all of this. They usually charge the first months rent and will qualify and show properties to prospected tenants.

I recommend getting a PM if your investing OOS just to keep your property in order.

Patrick O'Sullivan · Answer

Hi @Steven Rago,If you just want someone to show it, hire a real estate agent to market it, you can probably find one on Zillow or other similar sites. I don't recommend the agent doing the tenant screening unless they are experienced doing it. If you go this route, having the rental criteria that you are willing to accept is common to let the potential tenant know. Another thing to consider is after they move-in, how will you handle rent collection and maintenance.

If you want someone to handle the whole process, hire a property manager. Using Google and looking at reviews should help you narrow it down. Many of the property owners we work with are out of state owners, feel free to reach out if you would like to talk.

Michael Smythe · Answer

@Steven Rago legally, whoever shows the property has to be a licensed agent.

You can try to play games with that and have a handman allow "access", but it's a BIG risk.

So that leaves agents & PMCs.

You have two choices with agents:

1) Pay per showing: since any agent can show a property, find the cheapest.2) Pay Listing Fee: typically 1 month of rent to put in MLS and place a lockbox so any/all agents can show.

We do NOT recommend allowing agents to screen applicants - it's a conflict of interest! Many agents will place the first applicant with the necessary funds, take their commission and leave you high & dry with a bad tenant.

YOU SHOULD DO YOUR OWN SCREENINGS! Just be ready to arm-wrestle with lazy & incompetent agents that will argue with you about your document & approval requirements.

Hire a PMC:Several will do just a placement, which because they are used to properly screening tenants they will have to manage, you will benefit from.

Have you fully thought this through?

Who will address tenant nonpayment issues, including evictions?

What about maintenance when occupied?

John Warren · Answer

@Steven Rago I would start with an investor friendly agent in the area. You probably will pay in the 1 month rent ballpark to get it rented out, but that is way better than having it vacant. With this being a condo, I would also think carefully about how much you will realistically need a PM. Sometimes it might make sense to have full service, but if you are just fixing a drain once every other year then it probably won't.

Ko Kashiwagi · Answer

Hi Steven,

As @Noah Corwick mentioned, using a PM would probably be the easiest way to go. Otherwise, you could use a real estate agent. Getting a lease listing with an agent is a way for you to create a relationship with the agent, and it could be lower cost than having a PM over the long run.

Noah Corwick · Answer

Hey Steven!

The easiest route for showing the property and running background checks would be to hire a property manager. This allows you to be mostly hands off and have the property serve as a true passive investment.

The other good thing about PMs when it comes to LTRs instead of STRs, is they take less of a percentage from the profits since it's much easier for them to manage.

If you would like to be the PM and just need someone to show the property, then you can work with a realtor to list it and show it