Logistics and Best Practices for the Actual Rental Process

4 Replies

Hello all:

Great information and I appreciate the opportunity to learn from your experiences.

I am just finishing the renovation on my first property and have a couple of questions:

1) Could you describe your logistics and/or best practices for the actual process of renting out a property? I understand that screening for tenants is among the most important tasks and Bigger Pockets has an interesting and informative guide on that topic.

Another subject I am focusing closely on is drafting of the contract with an attorney, as I can be fairly ornery and/or litigious and want to avoid problems before they arise. I would be interested if there are any particular clauses beyond the standard language of contracts that you have found helpful in avoiding problems. For example, this is a condo so I am adding a clause that they must follow all HOA rules or pay corresponding penalties.

2) What is the actual process to rent? Sorry for the amateurish nature of this question but I don't plan to use a real estate agent.

- What marketing methods do you use (Craigslist, FRBO, MLS flat-fee listing, etc.)?

- Do you show via an open house or private showings?


- What is the follow-up after that? At what point do you give someone an application? If multiple people are interested, how do you ensure you get the best client while still abiding by Fair Housing laws? Do you process applications (and application fees) and credit checks for all before deciding or one at a time?

- Do you use a program such as Rentalutions or EasyRent to secure the application, perform background and credit checks, and collect rent? Any preferences?

3) Unrelated question but anyone have experience with furnishing their rentals? Based on the prices I got from Cort Furniture (a furniture rental company), the ROI on purchasing furniture and electronics and including them in your rentals would be far higher than even the ROI on the property itself. I understand not all tenants would be interested in that arrangement but the ROI makes it very appealing.

4) One more unrelated question: yields on high-end vs. mid-range rentals? I spent a year and over $250,000 (down payment, renovations, and furnishings) on this two-bedroom condo outside of Washington DC, so I'll report back if it turns out to be a mistake. But if you have a unique property that can command high rents and have doctors and lawyers as tenants, that seems like it would make the entire process much easier for someone who has another full-time job.

I am estimating cash-on-cash returns of 6% on this property and I have read about double-digit returns on some of these boards (I did not purchase below market value). I am sure the issue of exact cash-on-cash yields has been discussed elsewhere but basically my question is what level of renovations you have found to be most profitable.

Thank you!

I assembled a lease based on leases from multiple sources, including the one we have here, then had an attorney review it.  He gave me a few additional suggestions.

I have a written set of criteria tenants have to meet.  I take calls, then show a vacancy once a week.  During the call, I tell them the high points of my criteria and ask "will any of that be a problem."  I give applications to anyone who wants one when they show up.  I have my printed criteria available.  I note the date and time I receive back completed applications on the application, and process them in order.  Have pens and applications available during showings and encourage folks to fill them out.  They rarely come back if you just hand them over as they're leaving.  

First acceptable candidate gets the place.  But to "get the place" they have to sign a lease and hand over money.  Otherwise, I continue to the next applicant.  I will only hold a place a short time, and require a non-refundable holding deposit.  If they sign a lease, that becomes their deposit.  If they don't, I keep it.   When we sign the lease, we both sign, I go over the lease paragraph by paragraph, they hand over one month's rent and the full deposit in cash or equivalent, and I hand over the keys.  The place is theirs at that time.  No pre signed leases.  Do it all at once.

I use a yard sign.  Nothing else.  Craigslist produces mostly scammer responses.  YMMV.

Make sure your condo HOA allows rentals and find out if they have an approval process. Some require they approval all residents.

Furnished rentals are a completely different ballgame than regular rentals.  That gets you much more into a "short term housing" or vacation rental situation.  If you're looking for long term tenants, rent it unfurnished.  They will have their own stuff.  If you're in an area that supports short term, furnished rentals, figure out how others in the area are being rented.  E.G., VRBO for vacation rentals, or by direct contact with major corporations for short term housing.

Expensive places rarely make profitable rentals.  How much rent are you getting for your $250K investment?  Sounds like you have $250K and a loan in this deal.  Sorry, but that's definitely in "expensive" territory.  How much is your loan balance?  The best rentals are in lower-middle working class neighborhoods.

The market sets the rent, not you.  A common misconception is that by pricing your unit above market, you can get a better tenant. Just the reverse will happen.  If you overprice your unit, you'll get a crummy tenant who's been rejected elsewhere and will put up with your high price.  Price it at or a little under market and you'll have your choice of tenants.  

Be careful thinking your place is unique.  Its not.  You're competing with other similar units in your area.  If you've over-improved yours compared to the competition, you've wasted your money.  You won't get above market rent.  Make your unit just a little nicer than the competition.  Any money spent going further than that is just wasting money.

Originally posted by @Rishi Ramlogan :

Hello all:

Great information and I appreciate the opportunity to learn from your experiences.

...

2) What is the actual process to rent? Sorry for the amateurish nature of this question but I don't plan to use a real estate agent.

- What marketing methods do you use (Craigslist, FRBO, MLS flat-fee listing, etc.)?

- Do you show via an open house or private showings?

...

- What is the follow-up after that? At what point do you give someone an application? If multiple people are interested, how do you ensure you get the best client while still abiding by Fair Housing laws? Do you process applications (and application fees) and credit checks for all before deciding or one at a time?

- Do you use a program such as Rentalutions or EasyRent to secure the application, perform background and credit checks, and collect rent? Any preferences?

...

A few answers:

I use Craigslist, Zillow, Trulia and, mainly for reference, my own website. To post to Zillow, you now must enter the listing through Postlets. Watch for duplicate photos when your new listing is merged with existing information on Zillow or Trulia.

Zillow gets the greatest response. Trulia is second and also takes the Postlets feed. Craigslist is fine and works better than it used to because of the map view. I've never seen a need for MLS on a lease. I also put a sign in the yard with the number of bedrooms and bathrooms, a phone number and the URL of my website.

It's important to be very responsive. If I get email late at night, I reply by email and promise to call the next day. During the day, I call and email. After an initial conversation, if the person is interested, I email copies of the application and acceptance criteria.

To avoid vacancy and attract people who plan ahead, I always advertise well before the current tenants are moving out -- up to 60 days ahead. Because tenants have to give long notices elsewhere, I want to have a new lease signed a month or more before it starts. This doesn't always work, but it often does. This week I will have only a one-day vacancy between great tenants of 18 months and a new tenant who is moving in.

If I do have a vacancy, I try to show it at all reasonable daylight times that a seemingly good prospect wants to see it. If the property is occupied, I try not to interrupt the current tenants too much. I group prospects into consecutive 20-minute time slots in a one- or two-hour period on a weekend, preferably Sunday afternoon to include people who are looking on Saturday. If that doesn't work -- perhaps for someone from out of town who is in the area for just a few days -- I schedule a showing on a weekday.

I don't expect people to fill out an application on the spot. I ask for rental and employment history, and people need time to look up addresses and phone numbers. The application includes a form authorizing landlords and employers to release information to me.

I give a copy of the application and the acceptance criteria to every adult who comes to the property -- to avoid being accused of discriminating by selectively giving out information. I also like to give out a sales-style information sheet with pictures of the house, basically a copy of my website listing. I think it's good for people to leave with something tangible that will help them remember the house.

If I get an application, I first look at it to see if the applicant can afford the rent. If so, I call previous landlords first. If that looks good, I call employers and get a screening report from the service I use, National Tenant Network. I don't promise first-come, first-served processing of applications. I promptly turn down someone who is clearly not qualified, but those applications are rare because people see the acceptance criteria. For a marginal applicant, I go slow while hoping to get someone better. I refund the fee if I never request a screening report. For a good applicant, I process the application as soon as possible. It typically takes two weekdays. If I accept the applicant, I send a lease and get back a signed lease and deposit. I make first month's rent due at the time of move-in.

Hi Rishi,

I offer a lease renewal to tenants I would like to keep, let them know that the rent will increase to XX, and give them a deadline to decide and sign the new lease.  I make sure that deadline will give me enough time to find a quality tenant, I like at least 2 months since the better tenants in my market tend to plan ahead.  If they don't sign by the deadline, I begin marketing.  If I don't wish to renew the lease, I give them as much notice as possible, usually 2-3 months.

I use Rentlinx.com which will post your listing to multiple sites and help you set up a Craigslist ad.  Leads tend to come from craigslist mostly, but there are a few others.  I don't always use a yard sign, I feel like I get more tire kickers and less desirable prospective tenants with the signs.  

I set up a couple of "Viewing Windows" per week until I have it rented- 2-3 hour blocks of time seem to work well.  I let the current tenant know when I will be showing their apartment at least 3 days in advance in writing.  I schedule the individual appointments within the windows, allowing 15 minutes per appointment.  I put a not on the door indicating this  so if they are early, they know I will be right with them.  And it creates a sense of urgency when they know there are multiple parties viewing the unit.  My units are still occupied, so I do private showings.  If I did an open house I wouldn't be able to watch everyone to make sure they aren't swiping things.

I try to outline our guidelines on the phone: 3x monthly rent in income or personal guarantor with students, no criminal record, no evictions.  Explain the pet policy, when the apartment would be available, and what the security deposit is, see if they have any questions.  Jot down some notes about the caller- did they say where they work, why they are moving, who is living with them?

On the day of the viewing, I call and confirm appointments.  I deal with a lot of students and sometimes they forget, so this is helpful.  Sometimes they have already signed another place and forgot to cancel.  Sometimes they are embarrassed to tell you they won't pass the background check and will no show anyways.

When they view the place, I give them an application if they want it and a flier with the property stats on it, and our policies on the back- each adult must submit an application, pay the $30 for the background check, and must be on the lease.  I will process applications once I have them all from one group, holding the others in case they don't qualify.  I do the background checks and accept or reject the group or individual.  If I accept them, I collect a holding deposit (half month's rent which will be credited against first month's and security deposit) and we sign the lease.  I return the app fees to any applicant I didn't run a check on, people really appreciate that, and they go on a list to be notified of any other openings.  

I use Intuit's Payment Network to collect the app fees (costs $.50 per transaction) if they want to pay online, cash or check in person.  I use Rentecdirect.com for background checks ($29.45 for criminal/credit/eviction checks).  I call current and more importantly past landlords and verify employment.  I have only rejected one couple in 2.5 years, they didn't know I would talk to their landlords but I found out they left owing money for rent and utilities.  I think a lot of people don't apply (or show up) when they hear my criteria.  

I keep my rents on the lower end for the quality they are- I often get compliments about our apartments being the nicest they have seen.  

I hope that helps!

Kelly

Originally posted by @Rishi Ramlogan :

Hello all:

Great information and I appreciate the opportunity to learn from your experiences.

I am just finishing the renovation on my first property and have a couple of questions:

1) Could you describe your logistics and/or best practices for the actual process of renting out a property? I understand that screening for tenants is among the most important tasks and Bigger Pockets has an interesting and informative guide on that topic.

Another subject I am focusing closely on is drafting of the contract with an attorney, as I can be fairly ornery and/or litigious and want to avoid problems before they arise. I would be interested if there are any particular clauses beyond the standard language of contracts that you have found helpful in avoiding problems. For example, this is a condo so I am adding a clause that they must follow all HOA rules or pay corresponding penalties.

2) What is the actual process to rent? Sorry for the amateurish nature of this question but I don't plan to use a real estate agent.

- What marketing methods do you use (Craigslist, FRBO, MLS flat-fee listing, etc.)?

- Do you show via an open house or private showings?


We use Craigslist, zillow, rentbits, etc. We have high volume and feed our listings out on a number of paid sites. The paid sites tend to yield the highest quality tenants, for rent signs bring a lot of phone calls, and not a lot of applications.

All of this is subject to your local market

We have found private showings and open houses to be a waste of time. We will often use lockboxes, and pre-screen people over the phone and give them the code to the lockbox. This saves HUGE amounts of time!

Whenever someone is interested, we ask them to fill out an application and pay the application fee online (another huge time saver). Plus, everything is automated, and documented. I would strongly suggest you use an online software that handles this.

We don't ever furnish our rentals. That is just more to track and deal with. In our market furnished rentals are not common either.

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