Would you pay 1 months rent to verify your tenant?

Question

I'm a new landlord and I'm second guessing renting my farm house because I'm afraid a tenant will trash our house that's been in my family for 6 generations. A realtor is willing to advertise my home for rent - run background check, credit check, verify income and rental history. Question for you - would you pay 1 months rent as a fee to realtor if you were to get the right tenant for your home? Rent on this property is over $5.000 because it includes farm land.

Richard C. · Answer

You have bigger issues than background checks if you are renting farmland.  You should get a farm rental lease from your cooperative extension, that will cover issues like maintaining fertility, length of term (even if you evict from the house, they are going to get to continue to farm the land until any crop they plant is in), etc.

Jon K. · Answer

Good point.

Farm land rentals have their own issues.

And, rentals at $5000 or more in most areas are "high-end" and it takes longer to find a tenant willing and able to pay that. For farmland with a "high-end" rental house in (I'm assuming) a rural area, I would probably pay a realtor 1/2 or maybe even 1 month's rent for a 1-2 year lease for a qualified tenant. 1/2 month's rent is much more reasonable, though it is quite difficult to find tenants for $5000+ properties, let alone rural farmland rentals, so I might just do it if it was a very well-qualified tenant and a 1-2 year lease.

Derek Gendig · Answer

In addition to the screening required, there may be quite a bit of targeted marketing to be done to find the correct fit between renter and property. We are a Professional Property Management company in Indianapolis and we charge the first months rent as the placement. We do not charge for any marketing, professional photos for marketing, signage, lockbox, prescreening callers, background, credit, financial checks.  There is quite a bit of education, network and experience needed to place the correct tenant. If you were to try to do it yourself, without these things, it may cost you more in the long term depending on how long it takes for you to find the right person. Obviously, I am not aware of your level of placement experience so I am not saying you can or cannot do it yourself, I only wish to provide additional insight.

Michael Jobe · Answer

@Andrew S. Lots of good input has already been given so instead I'll share a brief story about my girlfriend's grandfather whom, like you, had a significant piece of vacant farm land with a decent house built on it that he wanted to rent out. Similar to @William Hochstedler in-laws, this property was also located in rural West Virginia (Greenbrier County) and was something of a family heirloom. Rather than continue paying for the upkeep of the house & land he instead ended up renting the place to a farmer. Now he just collects a check every month and gets a rather steep discount on ground beef.

You mentioned that you are a new landlord. Are you planning on doing this with other farm houses & rural estates? If so, I say handle it yourself for the sake of learning. And when you get confused, come here and ask questions about whatever you need help with! Let us know when you figure it out.

Account Closed · Answer

If you do hire a PM to get you a tenant please get copies of the reports the PM ran just to make sure they are doing their job.

Joe Gore

Justin Pierce · Answer

$5,000 is a lot.  Just because you're paying a lot doesn't mean you'll get what you pay for.  I would negotiate with the realtor.  I bet they'd do it for half a months rent in this case.  Make sure you ask to see all the reports.

Good luck.

William Hochstedler · Answer

Absolutely!

My in-laws had a similar rural family estate on 150 acres (woods and rivers) in West Virginia @$2500/mo.  They weren't prepared to sell psychologically or market-wise.  The farm sat vacant for 2 years before we were able to fill it ourselves from CraigsList postings in nearby metro areas (DC & Baltimore--about 2 hours away).

Interestingly, the tenant we found was from another rural area in WV who had a unique story and has turned out to be great.  They couldn't find anything suitable in their local listings and were looking at the same metro CL listings for rural properties.

We would gladly have paid  2 months rent to any professional who could have placed a tenant and we even let a local PM have a six month shot at it with no results.

I would discuss the possibility of full commission to the agent if they find the tenant through their own marketing or MLS and a reduced commission if you find one.  This way you won't be competing.

You may be looking at many months with a property like this, so certainly pay a commission for broad exposure to find the right tenant.

Why are you not trying to lease the home and the land separately, perhaps to a neighbor, if its farmable?

Wm

Azeez K. · Answer

Hi @Andrew S.

Ans: Sorry to say that the answer depends on person to person and cash flow. If your profile is a newbie investor/landlord then you should make an attempt to rent out the property on your own.

Trust me the process will teach you a lot and before you hire some one you should know what it takes to rent out a property and go through the entire life cycle yourself. This will put you in a better position to hire a person for your property and ask relevant questions before hiring someone else.

There are a lot of tools available for you to rent out your own property and makes the process much easier.

1. You can post ad for your property on postlets, biggerpockets marketplace etc.

2. For background check you can use smartmove https://www.mysmartmove.com/ and other similar sites where you can set a criteria or the tenant such as income = X amount, Credit score = X etc

3. You should create a google number for voicemails since you may get a lot of calls or few calls depending on your property.

4. Ideally, you should schedule one day a week (an hour or two) to show the property around to prospective tenants.

5. Educate yourself on fairhousing act so you know what types of questions you can and cannot ask

This will help you screen clients or at the very least get a sense of what it takes to get a tenant in place. Experiment with the above and see if you are successful.

If your profile was more of an seasoned investor with multiple properties in your portfolio chances are you already have someone on your team dealing with property management. In this case I would just pay the management company as my time would be a lot more valuable and I would not want to spend time doing administrative tasks such as described above.

An important consideration is also your cash flow outlook so keep that in mind before you make your decision.

Hope this helps.

Matt R. · Answer

1/2 month seems to be typical for PM companies. I would do my own evaluation and screening on top either way. For that amount of rent I would not hesitate to pull all stops on the screening including a private investigation.

Thanks,

Matt

Benjamin Timmins · Answer

You can do that on your own for a lot cheaper.

Would you pay 1 months rent to verify your tenant?

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