Calling all landlords

My sis and I own what was my parents' home. It's been for sale for several months now and all we have received are what we consider to be low ball offers. The house is in excellent repair but the kitchen is dated and there is a lot of wood paneling in it. Has great curb appeal and is in a nice area. Since prime time buying season is just about over we are looking at either doing an interior face lift(most of the labor I can provide but may need some contractor work) and then hopefully selling in early spring or we may go the rental route.

I am hesitant to rent it since I am 1.5 hours away from the property but I'm really not looking forward to spending my late autumn and many winter weekends commuting to do the facelift. We need to make a decision though. Neither of us have landlord experience but are fairly aware of the possible negatives. So my question is.....what are the things we can legally do to screen potential renters? Does anybody have suggestions for lease agreements that protect the landlord as much as possible?

Maybe we will still get a good offer on the house before the current contract expires Dec. 1 but if not we need a game plan in place.
Yep, my name really is Bob.
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Comments

  • motorhead43026motorhead43026 Posts: 3,048
    edited September 2017
    Being a landlord is a PITA.
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  • tonybtonyb Posts: 30,572
    Before you decide to rent it out, first decide.....if those lowball offers and what you have in your mind as a fair price is worth you doing the work needed. In other words, those lowball offers are reflecting the work the place needs.

    Is it worth the time, costs to you, to get that difference in price ? Also the tax implications of the higher price you may be seeking. Maybe once you account for all that is needed, the difference between those lowball offers and what you think is fair won't be too far apart.

    If you decide to rent it out, look at your states laws first. Some can be pretty heavy towards favoring the renter, not the landlord. Most states have a standard lease agreement you can get, tweak if you like. Always ask for a security deposit, do credit checks, stable employment......and be specific about pets and damage.
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  • rooftop59rooftop59 Posts: 5,060
    I have done remodels at both our homes (some on my own, more by contractors) and rented our first house for about 1.5 years because we were in the same situation you are now. In hindsight, I should rented longer as the market has no exploded here due to Fixer Upper (I pass Magnolia Silos every day on my way to work).

    In my experience both being a renter and a landlord, the key is finding responsible tenants. When we rented, I was in seminary, and the landlord gave us $100 off per month because we had no pets (the rule), no kids (his preference) and I was a seminary student and my wife worked at the university. In other words, he knew we were responsible nerds lol. He owned multiple homes in that neighborhood, and he typically rented to grad students for the same reason.

    When we rented our home, the office manager in my university department's daughter was moving back to town, her and her husband had just finished MAs, and both had good jobs at the VA. I probably could have rented it for a bit more, but it was WELL worth it to me to rent it to them and know there would be no problems, and there were none.

    So all that is to say, if you rent, profile. It might be illegal in state, so be careful how you go about it. Now, if you own multiple complexes and lots of rental properties, I think that this an ethical problem and should be illegal. But if you own one home a good distance from you I don't have a problem with it.

    And I think that Tony's advice is sound. Here in Waco, I would higher the guy that did my kitchen in a heartbeat and have him update the kitchens and bath and put a fresh coat of paint on the whole house, maybe update a few fixtures as well. I know I would get my money back and more. But that's here. You need to run comps in your area and know what you can realistically get and whether or not the remodel is worth it...

    Good luck!
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  • DerfDerf Posts: 187
    muncybob wrote: »
    Neither of us have landlord experience but are fairly aware of the possible negatives. So my question is.....what are the things we can legally do to screen potential renters? Does anybody have suggestions for lease agreements that protect the landlord as much as possible?
    All good advice above. Being a "one off" residential landlord generally brings more negatives than positives, esp. time/aggravation negatives. What you can and can't do, and lease requirements, depend on state law. Go see a lawyer to make sure you comply. One little thing done incorrectly and you could owe your tenant money. It's worth a few hundred bucks to make sure you are protected.

    Now for the unsolicited advice--just sell it. Do minimal work to boost curb appeal if needed but don't start a "facelift;" you may run into unforeseen issues or unknown code requirements that will cost you much more than you can recoup in the end. The low balls may not be so low once the cost of a new kitchen, possible wiring upgrade, removing paneling, new drywall, paint, etc. throughout are factored in. Take what you can get, thank mom & dad for the blessing, use it in the best way to honor them, and thank your lucky stars you don't have to be a residential landlord!
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  • polrbehrpolrbehr Posts: 2,197
    Derf wrote: »
    muncybob wrote: »
    Neither of us have landlord experience but are fairly aware of the possible negatives. So my question is.....what are the things we can legally do to screen potential renters? Does anybody have suggestions for lease agreements that protect the landlord as much as possible?
    All good advice above. Being a "one off" residential landlord generally brings more negatives than positives, esp. time/aggravation negatives. What you can and can't do, and lease requirements, depend on state law. Go see a lawyer to make sure you comply. One little thing done incorrectly and you could owe your tenant money. It's worth a few hundred bucks to make sure you are protected.

    Now for the unsolicited advice--just sell it. Do minimal work to boost curb appeal if needed but don't start a "facelift;" you may run into unforeseen issues or unknown code requirements that will cost you much more than you can recoup in the end. The low balls may not be so low once the cost of a new kitchen, possible wiring upgrade, removing paneling, new drywall, paint, etc. throughout are factored in. Take what you can get, thank mom & dad for the blessing, use it in the best way to honor them, and thank your lucky stars you don't have to be a residential landlord!

    +1 to this advice. And if you do decide to rent, contact a local real estate agent; they
    may be able to put you in touch with "prequalified" tenants, and the best part is that they don't charge you a fee (it is usually paid by the people doing the searching).
    My mom did that with her house, she asked for a very reasonable rent and has had the same people for about 12 years now. I check the property now and then, and they
    take very good care of it. Could she get more every month? Probably, but there is
    a lot to be said for having a good tenant.
    Lease agreements are a necessary evil for all concerned, consult a lawyer or better yet, ask the agent finding the renters for you if they can recommend someone.
    So, are you willing to put forth a little effort or are you happy sitting in your skeptical poo pile?


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  • txcoastal1txcoastal1 Posts: 10,219
    If you decide to you rent, you may try to market as a 2yr lease. May be able to generate enough cash to pay for a decent percentage of the upgrades in the future. If they stay longer, that would be a bonus.

    I would also go ahead and calculate the upgrade cost to see where you'd be in the present and future with the property Weigh in all the current area comps.
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  • rpf65rpf65 Posts: 1,940
    My father had a small apartment building when I was growing up. The biggest thing I learned about rental property is that I never want to get into that line of work.

    As far as doing any renovations, about the only improvement you can recoup your investment on is paint. You may get 3/4 of your kitchen renovation if you do the work yourself, and are very lucky.

    People, in general, look at other sales in the area, attach sentimental value to property, and have very little knowledge of property values. You should consider contacting a realtor, get an honest appraisal, and then make a more informed decision.

    If you decide to sell, you really want to stay away from the private sale route.
  • muncybobmuncybob Posts: 1,971
    My sis and I have decided to limit the face lift to the following...if we even do it: Not gutting any area...new vinyl floor in kitchen/dining area, clean and paint the kitchen cabinets, possibly resurface the laminate counter tops, paint almost all the wood paneling, and possibly some new w/w carpeting. A neighbor had the old wood paneling in her house and she invited me in to see what she did. She applied & painted some sort paintable wall paper. I never would have known it..looked just like painted drywall. This should be fairly cheap as should the other painting. Flooring will be the biggest expense. The house curb appeal is high so no exterior work needed. Based on comps in the area I think if we spend less than $7500 we can recover 100% of the investment, we need to decide if taking a $7500 reduction and sell as is may be the way to go though. If we do the "facelift" it will require many weekends of me running in to provide the needed cheap labor.

    If I lived closer I would really like to pursue renting. Most renters are not going to be as picky on some of the cosmetic stuff and maybe we can even find a good DIY'r and work some sort of agreement on them doing the above work?

    decisions....decisions!
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  • cfrizzcfrizz Posts: 13,197
    edited September 2017
    If you and your sister don't NEED the income from the house or the house itself for your personal use, then it just makes sense to sell it as is for a reduced price that will get it off of your hands. You said it yourself it was your parents house so whatever you get is pure profit!

    Otherwise, it will definitely cost you more time and money, which you still aren't guaranteed to get back in a sale. Plus won't you will be stuck paying the taxes and whatever else on the property till sold?

    Thank your mother for the unexpected funds that you and your sister will get from splitting the proceeds and be happy.

    Post edited by cfrizz on
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  • motorhead43026motorhead43026 Posts: 3,048
    edited September 2017
    Use $7500 as a selling tool, like a flooring allowance etc.
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  • EmlynEmlyn Posts: 2,191
    If it is not selling for months it is overpriced for the market. Get a realtor to market it properly and sell it and use the money to invest in a more local property if interested in being a landlord or having an investment property.
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  • DerfDerf Posts: 187
    So if you only get the $7500 back, what have you gained? You need to make it back at least 200% to be worth your while. Your time away from your family to do all this work is worth an unmeasurable amount. Sell it, give a credit toward repairs to make a deal if needed, and move on.
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  • I think that you have a bad real estate agent. If the lowball offers are so much lower than the $7500 that you want to invest, the house isn't worth what you believe it is.

    If the lowball offers are from investors, not families, then upgrades may make the difference. I just finished doing my mother in-law's house this past year and put $12000 cost in materials and raised her $90k foreclosure investment into a $135k house. The appraiser said $25k was due to the upgrades and $20k was due to her diligence to wait until the house went into foreclosure and buy it right.

    Don't become a landlord by default! No one wants to be a long distance landlord! sell it and move on!
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  • rooftop59rooftop59 Posts: 5,060
    Yea, I agree that if $7500 is all that is keeping it from selling, then something seems fishy...
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  • muncybobmuncybob Posts: 1,971
    I agree with the remarks about the agent. If we re-list it won't be with him. Crunched the numbers today and I'm estimating we will only gain about $2k over the facelift costs if it sells for what I think it will...probably not worth it.
    Cathy, all the $$ from the sale of the home will go towards my mothers continued care(dementia). That is why every penny we can squeeze out of this is so important at this time.
    Yep, my name really is Bob.
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  • cfrizzcfrizz Posts: 13,197
    I'm so sorry to hear that Bob! :'( I hope you are able to get a good price for it, but we all know that the R.E. market is a rollercoaster.
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  • rpf65rpf65 Posts: 1,940
    All my best to your mother, deeply sorry to hear about her condition.

    Your agents advise is pure cr... You'll take at least an eighty percent loss on the flooring. Paint, if you do it yourself, and it has a professional look, will be a 10 percent loss. Unless of course your in a sellers market, like the area I live in. The exception is if the home hasn't been painted in 7 years or more. Then you will probably break even to making 20 percent. Again depending on market conditions.

    Most people are already envisioning a complete makeover when they are looking at anything other than site built.
  • smglbrthsmglbrth Posts: 1,117
    If you do rent the only advice I can give you is be as detailed as possible on what you expect of the renters in the rental contract. Depending on your state inspections are a must as often as you can. Talk with a lawyer in advance. Be very liberal about reasons for eviction in the contract. Remember, people who rent houses, not all but most, really don't care much about it. After all, it's not theirs but you are 100% responsible for pretty much anything that happens to it, even if it's their fault. Even if you have a pretty good inclination that the tenants did something you will need absolute proof (pictures, written testimonies, etc...) Most of the time best of luck getting money out of tenants (again, depending on your state), can't get blood out of a rock.

    I will never, EVER, be a landlord again, EVER...
  • One other thing to consider if you rent it.
    Look into having a management company handle all the dirty work for you.
    When my wife & I got married we moved into a new home & we are renting her townhouse.
    The management company handles *everything* for us. Especially the vetting of the tenants & the proper lease verbiage & legalities.
  • rooftop59rooftop59 Posts: 5,060
    Bob,

    I am sorry to hear about your mother. My father is headed in a similar direction (Alzheimer's).

    Can a family member live in the house? In several states you leverage the house and the state will foot your mother's care bill. My father in law did this with his mother, and the AZ has still let them keep the house even after she passed because it's in a really bad neighborhood and they don't feel like messing with it. I have a colleague whose dad was in Arkansas, he leveraged the house for a nursing home, and his dad passed shortly thereafter (2 weeks or less iirc) and he got to keep the house, he rented for a while long distance (from here in TX, but I think he had family nearby to help) and then eventually sold the house for a nice profit.

    Just some other options to consider. Sucks man, hang in there.
    Paul
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  • JstasJstas Posts: 13,709
    I'm not sure why everyone's advice is always "sell!"

    I've been looking in to this too.

    Things I've found out:
    - there are boiler plate rental agreements that cover all the legal issues without having to retain or pay a lawyer. They are binding in a court of law. Just make sure you understand it 'cause your renter likely won't. That said, it's not a bad idea to consult a lawyer.
    - You do not have to be the super as well as the landlord. There are property management firms that will give you package deals where they are the ones that are called at 3 am when something goes bad and they send someone out to handle it. Yes, it costs but, you adjust rental levels to compensate
    - Require your renter to have rental insurance and don't skimp on your own landlord insurance.
    - Anything you do/don't want them to have/do there, spell it out so there is no question or interpretation
    - Do not spend the money you get from the rental. Save it and use it to build up a "slush fund" so you have the financial resources to handle any issues that come up.
    - The best way to protect yourself, especially if you have more than one property, is set up an LLC for a property trust and put all your rentals into that trust. Then, the LLC gets put on the hook and nobody can touch your personal side. Makes taxes easier too.


    What you shouldn't do is:
    - Have any utilities in your name. Renter is responsible for everything from water, power, gas to cable TV and Internet access.
    - unless you have enough income to cover the mortgage payments yourself, if the property you are looking to rent is mortgaged, do not rent it out. You cannot rely on your renter to be reliable and pay on time no matter how nice they are. Stuff happens, protect yourself. Just make sure your sale is enough to get the mortgage gone. That alone can be worth the sale to not have that debt on your books anymore
    - if the house needs major renovations, unless you have no money in to it already and can spend very little getting it done just take a low-ball offer and sell to a flipper.
    - think that you can find your own renter. Like what was already suggested, hook up with a realtor that can get you a renter that is pre-approved. That doesn't mean everything will be peachy-keen it just means that there is a good deal of risk taken out of it.
    - think that you can handle all maintenance and repair costs/work yourself. If you have a partner that can help, maybe. But lawn services, a property management company, service contracts (plumber, HVAC, cleaning company, etc) can come in super handy when you are the only one handling everything.
    - do not leave property maintenance up to the renter. They may think they are saving a buck and try to get out of some rent costs by hiring their own service but you can likely get a better contract negotiated because you are a property owner and it will be cheaper for you than it is for them just due to quantity of work, type of work and a guaranteed contract.

    The main thing to think about is not how much being a landlord can suck because there are ways to make so that even if it does suck, you're not the one, or at least the only one dealing with the suck. You just have to protect yourself What you need to consider is the cost/benefit side.

    - How much will this cost you?
    - Will the income from the property be greater than the cost?
    - If something goes wrong, how insulated can you be from disaster/ruin?
    - If you don't have a renter, can you afford to maintain the property (not just physical, financial too with utilities, property taxes, mortgage payment, etc) without it generating income?
    - Will this be a hardship for you? (Like, do you have to drive more than an hour to get there? Do you need to retain an accountant or a lawyer just to do day-to-day business? Is the house in poor enough shape that you will be nickel and dimed on maintenance costs or have large, 4 to 5 figure expenditures before you can build a slush fund?)

    If you can't answer any of those questions with any kind of authority or certainty, you probably should just get out of it as soon as you can.
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  • afterburntafterburnt Posts: 5,013
    Sell, sell, sell!!!!! sell like a mad man! That thing will eat you alive just sitting there let alone having it infested with renters!
  • muncybobmuncybob Posts: 1,971
    I appreciate everybody's input here. We have decided to reduce asking price 10% and if it still does not sell by the end of the current listing(Dec. 1) we will look at renting just to reduce the current liability that the house is. First we plan to look for somebody that is recommended by somebody we know & trust...person will need to be willing to do some facelift related work for us in exchange for reduced rent. This seems to be working out for somebody we know and since I think we will probably need to sell to cover my mom's care expenses at some time in the future, at least we will then have the work done to make the house more marketable.
    I'm just glad that at this point we don't have our backs up against the wall and "have to" sell, so we can take our time and think things through....which is why I asked for input here. Lots to think about!
    I hope my preamp is out of the shop soon...I need some music down time!!!!
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  • exalted512exalted512 Posts: 10,796
    We rent out our house. Couple things I didn't see previously stated are you need to look up city restrictions as well. You can't rent out a house in our town WITHOUT a management company if you are more than an hour away. If you have a mortgage on it, you might have to notify them and get approval to rent. You will need to change the home owner's policy to a rental dwelling property.
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  • SherardpSherardp Posts: 8,048
    Being a landlord is very tough. I'm in the process of selling my properties I left behind in Japan now which made it tougher. Expect things to break, which should not break and you'll be out of pocket to fix. The money is great so don't hesitate to raise the cost. If it doesn't sell right away, give it a shot.
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  • exalted512exalted512 Posts: 10,796
    Few more things I'd like to say about it since I have a little more time. One of the things we've learned is that the nicer the house, the better the tenants. Of course there are exceptions, but if your house is dated or needs work, the likelihood of getting better tenants is less. I'm certainly not saying it's not possible. I've rented an extremely ghetto place before when I was in college and I was an excellent tenant, but it's generally easier to get better tenants when the house is nicer. The house we rent is pretty nice. Built in 2005, the only thing that would make it nicer is better kitchen counter tops (they're a nice laminate, but still laminate). Our renters have always been excellent.

    We were able to find our own renters using Craigslist. You might even try FB now as well. I don't pay a company to do any of that stuff for me. But our house is also newer, so there's not really much to break. We had two prices when we were first renting, one including yard maintenance, the other without including. Our current renters said they would take care of it and they have. I want to say we included wording in the contract that if it wasn't being completed to our standards, we would start charging extra to have a lawn service provided, but I might have left that part off when they renewed since they were doing such a good job I didn't even think about it. Our renter's now didn't have the best credit, but they disclosed that before I even asked about it and we have had no issues. We could tell they really fell in love with the house and we trusted our instincts with them.

    One of the things we put in the initial contract is that we would be responsible for replacing the HVAC air filters every month. This is two-fold. For one, we get in the house every month to check on it and secondly, we make sure it gets done. That's something I highly recommend. Doing your own 'pest control' also gives you a legitimate reason to walk around the entire house. It's your house, so you can legitimately do it anyway, but I try not to 'intrude' on our renters. Again, it's a nicer house and we've had better tenants who tend to prefer as little intrusion as possible. But I just have some pesticide that I spray around the foundation of the house on the outside to check on it...and of course to help the bugs as well.

    The first Christmas we ever rented our house out, our renters worked at an embroidery place. They knew we were having a baby and gave us a really cool embroidered Christmas onesie for our daughter. Since then, we have always bought our renter's gift cards for Christmas which typically get bigger in amount the longer they've been there. I don't know if it helps, but to me it shows some gratitude of them taking care of our house. If we ever get more rental units, I think we'll continue to do this.

    Anyway, there's a lot of doom and gloom in this thread about being a landlord, but our experience has always been positive. I know it has everything to do with the renters you get, but if it's a nicer home, I believe you have a chance of getting better renters. And go with your gut feeling when you show the place on how they might take care of it. Credit checks can help, but in Texas, you can usually get background checks as well, so look into that too.

    Good luck!
    -Cody
    Music is like candy, you have to get rid of the rappers to enjoy it
  • pitdogg2pitdogg2 Posts: 12,310
    exalted512 wrote: »
    We rent out our house. Couple things I didn't see previously stated are you need to look up city restrictions as well. You can't rent out a house in our town WITHOUT a management company if you are more than an hour away. If you have a mortgage on it, you might have to notify them and get approval to rent. You will need to change the home owner's policy to a rental dwelling property.

    To go along with that some cities you must get yearly inspections on your rental property. There is also a cost to those. One property not so bad but if you have several it gets pricey.

  • warrenwarren Posts: 637
    tonyb wrote: »
    Before you decide to rent it out, first decide.....if those lowball offers and what you have in your mind as a fair price is worth you doing the work needed. In other words, those lowball offers are reflecting the work the place needs.

    Is it worth the time, costs to you, to get that difference in price ? Also the tax implications of the higher price you may be seeking. Maybe once you account for all that is needed, the difference between those lowball offers and what you think is fair won't be too far apart.

    If you decide to rent it out, look at your states laws first. Some can be pretty heavy towards favoring the renter, not the landlord. Most states have a standard lease agreement you can get, tweak if you like. Always ask for a security deposit, do credit checks, stable employment......and be specific about pets and damage.
    Great advice!!

    Some final words,
    "If you keep banging your head against the wall,
    you're going to have headaches."
    Warren
  • BlueFoxBlueFox Posts: 10,476
    After my father died I purchased his house on MD's Eastern Shore, and I live in CA. I have been renting it for three years, and the income is nice. Find a property manager to take care of finding a tenant, collecting rent, maintenance, and other things. They want 10% of the rent, but to me it is worth it.
    Bud - Silicon Valley

    Lumin S1 - X1 power supply
    Sony XA-5400ES SACD
    Pass XP-22 pre, X600.5 amps
    Magico S5 MKII Mcast Rose speakers, SPOD spikes

    Shunyata Triton v3/Typhon QR on source, Denali 2000 (2) on amps
    Shunyata Sigma XLR analog ICs, Sigma speaker cables
    Shunyata Sigma HC (2), Sigma Analog, Sigma Digital, Z Anaconda (3) power cables

    Mapleshade Samson V.3 four shelf solid maple rack, Micropoint brass footers
    Three 20 amp circuits.
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