In this economy, the draw to rent an unoccupied residence can be especially alluring. The added rental income, alone, is nothing to sneeze at nor is the peace of mind provided by having an empty home inhabited. Taking both benefits into account, it is easy to understand why overlooking the downside of renting a single family dwelling happens on more than one occasion. Unfortunately, it also explains why so many novice landlords become ensnared in rental nightmares that end up costing them -- in blood, time and money -- much more than these unfortunate folks could have ever anticipated in the onset.
The fact is that there are hoards of stories that reflect bad rental experiences amongst unsuspecting landlords and the newer and more naive you are at the game, the more likely you are to become a victim, especially by those tenants who have made a career out of cheating landlords, including squatting for as long as the laws and courts allow. Real Estate attorneys will be the first ones to tell you that "the person you rent to is not the person you evict." And to evict can take months, sometimes years, along with loads of patience, perseverance, hard work, and money. To top it off, once you do get your property back, you may very well be missing a few pieces of it such as appliances, plumbing, furniture (if rented "furnished"), and anything else saleable that is or is not nailed down. If you merely get away with cleaning, repairing, and repainting the place, consider yourself lucky.
Given that I count myself amongst the sorely "burned" who have all adopted the mantra, "I will never rent again," I wanted to share with you a few tips that will help make your own experience better than mine... hopefully, that is!
1. Background checks are important: Before you rent to a tenant, check a potential tenant's credit, call a minimum of three references, and do not overlook speaking directly with his or her employer. You can learn a lot about a tenant given you do the proper background check prior to renting. If you can't afford to take the time, contact a service such as the National Tenant Network to do the legwork for you. They can provide you with an extensive history and everything else you need to make an informed "rental" decision.
2. Real Estate or Relocation Agencies are good options to consider when renting: Both agencies provide added assurances that renting on your own will not. In addition, any applicable fees to be paid by the tenant will stand as welcomed deterrents to the less than honorable renter.
3. "Out-of-State" landlords BEWARE: If you plan on renting a residence that is not convenient for you to return to on a regular basis -- whether it be for repairs, inspections, or tenant issues -- do not rent. If you insist on renting, hire a professional or a company who will manage the property for you. It is worth the cost (fees range normally between 5-7 percent of the gross rental income).
4. Thoroughly educate yourself to the landlord-tenant laws of your city and state: The more knowledge you have in this regard, prior to renting, the more apt you are to make an informed and more advantageous decision when it comes to taking on the enormous responsibility of becoming a landlord. Increasing your awareness will also help you to avoid errors and gauge expectations ahead of time, which will save you both money and pain in the end. Included in this should be a reasonable understanding underlying the propensities of the landlord-tenant courts of the state the home you are renting resides in. For instance, if the home is located in Texas or Florida, these two states tend to lean on the side of the Landlord when it comes to landlord-tenant cases. However, if you live in California or New Jersey, the tenant is heavily protected and favored. How the court leans will help you to navigate the formal eviction process and prepare properly for court whether or not you employ an attorney to handle the matter for you. Knowledge is power and especially in landlord-tenant cases.
5. Contact the "Holy Trinity" of Rental Properties before agreeing to any lease: Although, it may be tempting to download a generic rental agreement to save on legal fees, doing so may just cost you a whole lot more in the end. It is much wiser to have a real estate attorney draw up a current and proper lease -- adherent to all of the legalities and accounting of all the technicalities that could provide a savvy tenant with all of the ammunition he or she needs to circumvent you from being able to formerly evict the scoundrel in a timely fashion if at all. Your attorney can also provide you with valuable insight that may lean heavily on your decision to rent prior to becoming knee-deep in doing so. In addition, contact your home insurance agent and your accountant to ensure that you have the necessary insurance coverage in place as well as fully comprehend the impact renting will have on your overall financial position, including tax advantages and disadvantages, write-offs, and required income filings.
6. Place all utilities applicable to the rental residence in the tenant's name: If you do not, you will be responsible for paying the whopping bills inevitably left by a tenant who flees in the night.
7. Legal fees, late fees, unpaid utility bills, and any other costs associated with renting, maintaining, or evicting a tenant should all be clearly defined as RENT in your rental agreement: If you don't classify these expenses as RENT in your rental agreement, you can't claim them as RENT due to you in an eviction proceeding. You can file an alternate law suit to try to recover these costs but in most cases, all you are doing is throwing good money after bad. Be clear in your rental agreement as to what the term RENT includes.
8. Evict early: Every tenant has a heart-wrenching sob story to tell. Evict first, listen later or you will be listening yourself to the poor house.
9. Don't take matters into your own hands EVER: Abide by the law and keep your attorney on speed dial. It is the best way to ensure a successful, timely eviction.
10. Make sure you have enough savings on hand to cover the costs of carrying the rental premises and supporting the tenant living inside through to the last day of formal eviction: This could be two months or two years. Realize the entire endeavor and eviction process can be long, costly, and draining. Many landlords have to sell the rental property in the end due to the financial strain it has imposed upon them. If you neither have the money nor the stamina to support another home and family until the courts can resolve the matter, do NOT rent.
It is without question that all landlords agree, "A good tenant is truly a blessing -- financially and otherwise." But a bad one feels like a fate worse than death when in the throes of the escapades that stand between you and getting your house back. You cannot begin to understand the downside of renting until you are holding on for dear life and praying that the slope you mistakenly placed yourself on won't take you under before all is resolved.
The most intelligent approach you can take to renting your home is to prepare for the worst and then be happily surprised when the best shows up on your doorstep, every day, for the entire length of the lease. Keep in mind, though, that no matter how diligent you are in covering all bases when renting, certain situations will end up in court. There is just no getting around it. If that reality is not something you are willing to face or the idea of becoming a real estate attorney without the actual degree makes your eyes roll to the back of your head, you may just consider selling the property and move on with your life.
I assure you, as stressful as selling a home might be, it cannot compare to the amount of stress you will endure in renting your home to a bad tenant. Just ask any landlord that has been through the situation. He will tell you and probably still seething when he does...or shaking his head! The response is always the same. All I can say is, "Let this not be you!"