Accidental Landlord: What Do I Do First?
So, you got a great job offer and you're relocating, like, now. Or you found your dream home, in your price range, but you don't want to sell your first house just yet, because the market isn't right. Do you go for the quick and dirty sale, even if it means losing a little money, or do you find a tenant and become an instant landlord?
If becoming a landlord is the best choice for you, and you have to do it fast, start here:
Consider hiring a property manager.
Yes, it'll cost you some money, usually a portion of the rent you get from your tenant, but they're experts. They might have an easier time marketing your property and finding tenants, they can run credit checks and get references, and they can make sure rent is collected in a timely manner. They'll also handle all repairs and phone calls from tenants, which can help a lot if you don't live nearby. If you want to go it alone, consider acting as your own property manager instead of the homeowner.
Check out the rental market in your area.
Find out what renters want, and how much they'll pay for it. You want to set a reasonable rent, so you won't have to wait too long for a tenant. An empty place loses more money than you think. You need to meet your bottom line, but if the rent you can get for your place doesn't cover it, you need to consider other options.
Find out what utilities are and aren't included in your area.
Some of them will be determined by local law, and others may just be more or less common in your area. If there are any utilities you don't plan to include in your rental agreement, take them out of your name as soon as you can.
If you can't move all of your stuff to your new place just yet, consider offering your place partially furnished, or find a storage unit fast.
Or if you need a little cash to help with moving expenses, hold a garage sale. Moving is a great time to declutter, and you might as well make some money.
Consider working with a Realtor who also works with property managers.
You might be able to get a better deal if you lease your house through property managers who work with Realtors and agree to let them list it for sale when you're ready.
Get your finances in order.
Find out what expenses you can deduct, and what moving expenses your company might cover, if you're moving for work. If you'll own two houses at once, find out what the tax implications are. Your property taxes may be calculated in a different way on your old house, which is now considered an investment property. And your deductions will be different for a rental property than they will be for your primary residence. Make sure to cross your t's and dot your i's.
Beware of renting to a friend or family member.
It could be great, but if it doesn't work out, renting to someone you like can raise your stress level. No matter how well you know someone, get a contract and make sure all the details are understood. You never know who's going to develop a heroin habit and trash your place. Okay, you kind of do, but better safe than sorry.
If you aren't working with a property manager, know who to call when your tenant calls you.
When you lived there, it's was perfectly okay to wait to fix things: your place, your choice to suffer (briefly) when the light in the oven went out or the tub dripped. But your tenant will expect to have things fixed right away, in a way that won't inconvenience them. Make sure you have a roster of people who can fix things, and a process in place for them to access the home.
Make a contract.
If you aren't using a property manager, you may be able to download a standard lease agreement from the internet. You may want to take the extra step of calling an attorney and having them draft an agreement that includes specifics that are important to you.
Imagine your worst case scenario, then try to guess how likely it is.
What if you can't rent your place and it sits empty for months on end? In that case, you may be better off selling it at a loss. If you're moving for a job, you're probably also getting a bump in your salary, so you'll recover quickly. And if you're moving into your dream house, we hope you have a little financial breathing room. If not, remember that no house is the only house, and it may not be time for you to buy right now.
Not being able to sell your house when you want to is always a tough situation, but plenty of homeowners have weathered it, and you will, too. Who knows? You may even love being a landlord and want to start snapping up new properties all over town!
The more you know...
Planning on waiting to buy until you can sell your first house? Should you rent or buy?
Are you ready to be a landlord? Read more before you decide.
Could you rent your house out without paying taxes on the income? Um, yeah!
All property taxes are not created equal. Make sure you know what taxes you will (and won't) pay on your second home or investment property.
Try this one thing to make being your own property manager a lot easier.