DIY landlording first-timer in Washington, DC ...covering my bases

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DIY landlording first-timer in Washington, DC ...covering my bases

Leland F.
Washington, DC · Member since 2014 · 18 posts · 6 votes

I purchased a small studio condo in DC a couple miles away from downtown and a 5 minute walk from a popular metro line.

It has been my primary residence, but I'll soon be moving out and I'd like to make it my first rental property. I've done a lot of research on the topic, including some of the great content here at BP. Thanks!

The problem with full-service property management companies is that while I'm sure they offer a valuable service, the fees will cut my monthly profits in half. Not to mention losing a full month's rent for finding the tenant.

Cashflow isn't so good in Washington, DC so there's no chance I'll be able to pull off the "50% rule". Although I have an idea of how to maximize monthly revenue, which involves furnishing and taking care of all utilities.

I've been talking to a property manager although I'm more interested in their a-la-carte screening and lease signing service for a relatively small fraction of the first month's rent.

Here's my strategy:

  1. Acquire appropriate business license from DC. Clean hands certificate. Rent control exemption. (Any other legal things I'm missing?)
  2. Use the money I save from not signing on with a property manager to purchase decent furniture to furnish the place. It's a full-service building with all utilities included. I'd pay for internet/cable.
  3. Advertise on Craigslist. Will look at competing ads to see what works. (Where else? Zillow? Trulia?)
  4. Conduct open houses and showings myself on weekends. I'm very familiar with the unit and building and am confident I can answer any questions about it.
  5. Find a tenant (fingers crossed) and send to the property manager for screening, reference checks, etc.
  6. Tenant signs lease (again, fingers crossed). Collect security deposit to put in escrow account and first month's rent.
  7. Instruct the tenant to pay me directly via check or wire directly to me every month.

Am I missing anything? Is this too ambitious or am I crazy and should just go with full service property management? Is the furnished apartment rental idea dumb or should I just leave it unfurnished and let the tenant do their thing?

I've also heard that you should call yourself the "property manager" and not refer to yourself as the owner or landlord. What are your thoughts on that?

Sorry for all the questions. In the meantime...I'll continue reading BP articles on the subject.

Thanks in advance!

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Robert Williams
Residential Real Estate Broker · Washington, Washington D.C. · Member since 2013 · 150 posts · 77 votes
11y

Hi Leland,

Since you still live in DC, there's no need to hire a management company unless you really want to be totally hands off.  It sounds like you've got a great plan, just make sure it includes registering the property with DCRA (which is separate from the business license).  

Finally, I would not spend the money to make it a furnished rental.  I've found that every time I've had a furnished rental in the past that inevitably I'd get a tenant who wanted us to take the furniture out and the extra rent just isn't worth the short term costs or long term hassles.  

-Rob

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  • Clay SmithBusiness Member
    Investor · Louisville, KY · Member since 2013 · 419 posts · 244 votes
    11y

    Sounds like you read Mike Butlers "Landlord on Autopilot".  My tenants rarely know I own the property. My wife is the property manager and I am the guy who schedules repairs. "The company" owns the building.

    Furnishing the place does not sound ideal unless renting weekly.  I do not know your market though.

    Can you provide the numbers, appraised value, loan amount, payment, rent comp, etc?

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  • James Wise
    Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
    11y

    If your local you shouldn't need a PM company. I'd recommend self managing with no furniture.

    1Reply
  • Dawn BrenengenBusiness Member
    Moderator
    Real Estate Broker · Raleigh, NC · Member since 2014 · 2k+ posts · 1k+ votes
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    unless you are doing very short term rentals or vacation rentals, don't do the furniture. Tenants will have their own things. 

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  • Leland F.
    OP
    Washington, DC · Member since 2014 · 18 posts · 6 votes
    11y

    @Clay Smith I haven't read Landlord on Autopilot but I must've heard that from someone who has. Will put it on the reading list. Weekly rentals wouldn't work because the association requires a minimum of a 6 month lease.

    As far as rent comp, there's a comparable apartment building in the same "complex" with one studio apartment left at $1650/mo. At that amount, I'd be clearing a few hundred a month when you take out the mortgage and condo fee.

    @James Wise Got it. Is there any particular reason no furniture would be recommended?

    1Reply
  • Leland F.
    OP
    Washington, DC · Member since 2014 · 18 posts · 6 votes
    11y

    @Dawn Brenengen Got it, yeah this wouldn't be short term (6 months would be the minimum) so I'm leaning toward no furniture now.

    0Reply
  • James Wise
    Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
    11y

    You prolly don't need it.

    I'd recommend you do the following.

    Search what comparable properties are renting for in your area.

    Clean up your unit, make it look nice.

    Post the ad online at a competitive price.

    Wait for the phone to ring.

    If after 2 weeks you are not getting any traction then maybe try spending some more money.

    I think you will find it's actually easier then you think.

    1Reply
  • Leland F.
    OP
    Washington, DC · Member since 2014 · 18 posts · 6 votes
    11y

    @James Wise Got it. I think I have a good idea of the pricing sweet spot when it's unfurnished.

    When you say "If after 2 weeks you are not getting any traction then maybe try spending some more money." ...spend more money where? On online listing sites? Any ones recommended?

    0Reply
  • James Wise
    Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
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    Originally posted by @Leland F.:

    @James Wise Got it. I think I have a good idea of the pricing sweet spot when it's unfurnished.

    When you say "If after 2 weeks you are not getting any traction then maybe try spending some more money." ...spend more money where? On online listing sites? Any ones recommended?

     On furniture or other improvements to the property. Or even better just lower the price $100.

    You want as little breakable stuff in the rental as possible.

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  • Clay SmithBusiness Member
    Investor · Louisville, KY · Member since 2013 · 419 posts · 244 votes
    11y

    How much can you increase rent with furniture?  How long will it take to recoup the furnishing costs with that extra income?  That is why I don't do furniture, there is no upside.

    How much of your own cash is in the property now?  How much is it worth? Can you sell and do more with the money?

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  • Leland F.
    OP
    Washington, DC · Member since 2014 · 18 posts · 6 votes
    11y

    @James Wise Got it, thanks for the tips!

    @Clay Smith I've heard of fully furnished studios in the building getting ~$1900/mo, although I'd consider that to be pretty lucky. Unfurnished, a more realistic going rate is about ~$1600/mo.

    50 of my own is in the property. It's worth 200 (which is what I paid for it less than a year ago). I wouldn't break even considering closing costs. Even with that, to answer your question, I probably could sell now and do more with the money...just not in DC. Time is a factor (I work full-time) and it's a little too risky of a move for me to consider at this time in my life. Worth revisiting later on though.

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  • Clay SmithBusiness Member
    Investor · Louisville, KY · Member since 2013 · 419 posts · 244 votes
    11y

    do not think of it as break even.  Disassociate yourself from the property. You bough a property to live in. Just like Rich Dad Poor Dad says. This property will give you back 40k or so. Use that to buy two to three rentals using 80/20. Be sure they net $200 a door. Now you have real cashflow.  You also reduce the impact from a vacancy, tenant vandalism, and unexpected insurance claims.

    never evaluate a projet by how much you have spent.  Consider long term goals and opportunity costs.

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  • Leland F.
    OP
    Washington, DC · Member since 2014 · 18 posts · 6 votes
    11y

    @Clay Smith Very interesting. Thanks so much for this perspective because it's definitely something I wouldn't have considered before.  Now I have a few more ideas.

    0Reply
  • Robert Williams
    Residential Real Estate Broker · Washington, Washington D.C. · Member since 2013 · 150 posts · 77 votes
    11y

    Hi Leland,

    Since you still live in DC, there's no need to hire a management company unless you really want to be totally hands off.  It sounds like you've got a great plan, just make sure it includes registering the property with DCRA (which is separate from the business license).  

    Finally, I would not spend the money to make it a furnished rental.  I've found that every time I've had a furnished rental in the past that inevitably I'd get a tenant who wanted us to take the furniture out and the extra rent just isn't worth the short term costs or long term hassles.  

    -Rob

    2Reply
  • Jen Kurtz
    Professional · Pittsburgh, PA · Member since 2013 · 88 posts · 42 votes
    11y

    I agree with the above posters that if you live nearby, you might as well manage it yourself- just refer to yourself as the manager. This way you can keep it professional rather than get too personal, and you don't have to "be the bad guy" should you need to enforce rules. Establish your criteria for selection (credit, criminal, references, etc), have a nice all-inclusive lease, have a licensed contractor in mind for things you don't know how to fix. I'd stay away from the furnishings too unless your aim was for short term rentals to out of town business people or something like that (if it makes sense in your market). People that have asked for furnished rentals, in my experience, have been contract workers like consultants working on a 3 month project or doctors completing their residency at a local hospital.

    1Reply
  • Payam Dastmalchi
    Investor · Washington, DC · Member since 2014 · 54 posts · 28 votes
    11y

    I am local to DC and as others have mentioned; you don't need a PM for just one unit considering that you live closeby.  The numbers for going through PM only starts to make sense once you have 5-10+ properties so you will be cutting into profits now. 

    DC is a hot rental market and you should be able to rent it out very quickly at $1600. 

    Here is a quick step by step process that I've used to rent out my properties:

    -Clean up the place and take a few good pictures

    -Post it on Craigslist and ask the interested parties to provide you with a paragraph of why they would make an ideal tenant 

    -Select those that catch your eye to an Open House (Sunday afternoons from 1-4 works great in this area)

    -If there is a party that wants to move forward with renting the place; have them submit an application (search online for rental applications)

    -Use online services such www.tenantverification.com to run their credit and background check

    -If everything checks out and everyone is happy with the terms and conditions then sign a lease and set a move-in date. 

    Again this is a hot market and you have the leverage. PM me if you have any questions. 

    2Reply
  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
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    @Leland

    I would not furnish it. You are more than capable of managing a studio condo yourself. There really isnt much management involved in it. I get almost all of my renters off of Craigslist, and I am a licensed agent...but its just not worth the effort to go through the MLS when you will get 10-25 applicants pretty easily. What metro is your studio near?

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  • Leland F.
    OP
    Washington, DC · Member since 2014 · 18 posts · 6 votes
    11y

    Okay, it's going to be unfurnished and I'll be self-managing. I'll be putting it up on Craigslist and see what comes back. Thanks for the advice everybody!

    @Russell Brazil It's right next to the Van Ness metro, so super convenient to grocery stores, drug stores, liquor stores, restaurants...and of course, the metro. Hoping it'll go fast!

    0Reply
  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
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    yeah at van ness it will go quickly 

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  • Robert Marek
    Investor · Elizabeth, NJ - NEW JERSEY · Member since 2013 · 26 posts · 3 votes
    11y
    Originally posted by @Robert Williams:

    Hi Leland,

    Since you still live in DC, there's no need to hire a management company unless you really want to be totally hands off.  It sounds like you've got a great plan, just make sure it includes registering the property with DCRA (which is separate from the business license).  

    Finally, I would not spend the money to make it a furnished rental.  I've found that every time I've had a furnished rental in the past that inevitably I'd get a tenant who wanted us to take the furniture out and the extra rent just isn't worth the short term costs or long term hassles.  

    -Rob

    Hi - Picking up this thread...you mentioned "just make sure it includes registering the property with DCRA (which is separate from the business license)."

    I have a rental in DC and am not sure what this means. I have a DC business license for the rental....what is DCRA?

    0Reply
  • Yung-Mei H.
    Washington, DC · Member since 2015 · 2 posts · 1 vote
    11y

    @Leland F.  Hi, I just saw your post and am in a similar situation with my condo. (Ie want to rent it out but do not want to get a property management company as its a pretty new building and I will be 5 miles away from it). I went through rent jiffy to get my BBL and the other paperwork, now I just need to find a renter. I am pretty sure that will be no problem (I live near U st) but want to make sure I am ok/don't get into trouble with the screening/reference checks. You mentioned some places offer a la cart services - could you please share what you used and how that worked? Thanks! Yung-Mei

    1Reply
  • Max T.
    Investor · Philadelphia, PA · Member since 2015 · 3k+ posts · 3k+ votes
    11y
    Why do all that work and then send them to a property manager for screening and paperwork? It's so easy!
    0Reply
  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
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    Send me a PM with location as I know of a large corporation looking for rentals. They pay top dollar and you know your getting paid every month but it depends on location as need to be close to their offices Thanks Chris
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  • Yung-Mei H.
    Washington, DC · Member since 2015 · 2 posts · 1 vote
    11y

    @Max Tanenbaum - I am concerned because I keep hearing about very strict DC tenant laws and everything I read about DC renting makes it seem like I am going to get sued for something if there is more than one applicant (and I am sure there will be given my location!). I was thinking if the property management company did the checks then perhaps it would be "safer."  Anyone in DC have any guidance into this?

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  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
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    Having a real estate agent does give you the extra layer between you and the renter.  Also an agent should be very familiar with all the legalities involved.  As an agent I have placed renters in units, but as a landlord I myself would be less apt at using an agent (If I were not an agent).  

    My recommendations are to make sure you screen your tenants thoroughly and equally. Have some minimum qualifications like a 620+ credit score.  Research the numbers and names of the employer and landlord references....make sure you arnt just calling their best friend.

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