Duplex rental concerns
Hey everyone, I just closed escrow on a duplex but I have been having some concerns regarding renting both units out to tenants.
First, I am going to be placing a community washer and dryer but powered by one of the unit's gas and power, should I go about reimbursing the tenant for the utility costs? I'm sure the costs are negligible but it just occurred to me.
Second, while the trash pick-up is paid for by the tenants, how should I go about collecting the payment since there is only one bill. Can trash companies provide a split bill? Or should I just receive the bill and add the halves onto the tenant's monthly rent?
Also, can I trust that the tenants share the backyard in relative peaceful manner? I know most of it is up to me to pick compatible tenants but has anyone ever had to deal with something like this? It's just laughable to imagine a scenario where I have to start designation certain parts of the yard.
Last but not least, am I allowed to screen multiple tenants' application at once? I believe I read somewhere(maybe here somewhere perhaps) about not landlords not allowed to take multiple application fee's at once. I'm going to be holding a open house in a few days and didn't want to blatantly commit something illegal by taking multiple application fee's.
Thanks!
1) Don't provide the washer and dryer. A dryer's cost is not negligible. Nor is the hot water for the washer, which has to come from somewhere.
2) You pay the trash and charge each half. Just figure out how much its going to be and tell each tenant "you must pay me X each month, in addition to the rent, for trash".
3) Divide the back yard with a fence. This isn't laughable at all. A friend sold his only duplex rentals because he was tired of hearing the tenants complain about each other.
4) Be nice to have that problem. Tell them you take the applications in order, screen them in order, and will offer the unit to the first acceptable tenant. If they want it, they sign a lease, pay, and move in. If not, you will offer it to the next acceptable tenant. I tell applicants "first one to sign a lease and pay gets the unit". So, if the first one you tell yes says, let me think about it, I tell them I will continue to show it and screen other applicants. If I find another qualified applicant, and they want to pay and move in, I will let them know. The first applicant can either pay and move in or I give it to the second applicant.
Unless your market is super hot, this really won't be an issue.
I would strongly recommend you find a landlord tenant lawyer now. You're in a VERY tenant friendly location. So, you better really know the law. Pay them a few hundred to look over your lease and discuss issues of concern with them.
Also, NOBODY moves in and gets keys unless they pay the FULL security deposit and ONE FULL months rent. If they move in mid-month, and you want to pro-rate, prorate the second month. This payment should be in cash or money order.
If someone wants the place in the future, and you're willing to hold it (I might do this for a week or so), get a hold deposit. If they sign the lease on the agreed-upon date, it becomes their deposit. If not, you keep it and resume marketing the unit. Again, discuss this with a lawyer in your area and be sure you know both local laws and how this would be treated if you end up in court.
Jon makes many valid points.
I agree, don't supply a washer or dryer...avoid headache.
With trash pick up and the back yard...what ever you decide spell it out in a lease. That is how you protect yourself if there is damage or arguments.
When you hand out applications, it should say on there somewhere that you reserve the right to accept multiple applications and once and reserve the right to accept the best qualified tenant. With that spelled out, you don't have to accept the first tenant...although that is often the practice.
Most important thing to remember is what ever you decide about policies, put them in writing. That way tenants and perspective tenants will sign something that shows they read your policies and agree to them.
best of luck
Jon Holdman thanks for sharing the "pro-rate the second month vs. the first month" idea. Very simple rule but for a new investor I never would have thought about that myself.
Hey Jon, thanks for your extremely helpful and timely reply. Can you stick around for a bit more?
3) Should I consider giving the entire backyard to one unit? I ask this because my duplex is more of a front/back design. The back unit, which is considerably bigger and has a pricier rent has direct access to the backyard whereas the front unit has to walk by the back unit's front door.
4) Is it unethical to change the rental listing price? My ad listing has been up for a few days and received a few inquiries already. I'm quite confident I can receive more considering the inquiries I received so far.
Also, I'll start looking into a lawyer right away. Thanks again!
You could split it up however you want. Just spell it out explicitly in the lease and when you're showing the units. If it makes sense, give the front yard to the front unit, and back yard to the back unit.
I don't see a problem with pulling down your ads and putting up a new one with a higher price. Now, don't get greedy. A fellow landlord and I were discussing this today. If you price your unit high vs. market, its our experience you will get a worse tenant. Because the people willing to pay the higher rent are the ones that can't get in somewhere else. Price it at market (do your research!) and you will get a good cross section.
To do your research, pretend to be a tenant. Drive the area, look on craigslist, etc. And CALL these listings. Find out not only rent, but deposits, about the property, amenities, etc.