5 Must-Knows Before Hanging a For Rent Sign
This handy guide for ‘accidental’ landlords serves as a get-back-to-basics reminder for any landlord who wants to make a profit.
by Mary Umberger
They’re called “accidental landlords” or “reluctant landlords” — and during this housing downturn, more of them seem to pop up every day.
They’re the homeowners who have tried — and failed — to sell their houses, so they’ve decided to find tenants who will move in and pay rent.
That’s only the first of many decisions they’ll have to make, says Leigh Robinson, a landlord and writer with 30-plus years of experience with tenants, leases and maintenance.
Robinson is currently updating the 11th edition of his book, “Landlording: A Handymanual for Scrupulous Landlords and Landladies Who Do It Themselves” (from Express Publishing), an encyclopedic look at considerations that range from screening tenants to setting the water-heater temperature so the renters don’t scald themselves while showering.
One thing that can be surprisingly hard for novices to grasp, he says, is that renting out a property is a business. It seems like an obvious concept — until you find yourself facing the idea of installing strangers into your own home, especially if you’ve never done it before.
“What a lot of people think is that there ain’t nothing to it,” said Robinson. “But they need to be very businesslike and follow good procedures, and they’ll do fine.”
Five things Robinson says novice landlords should keep in mind if they’re hanging a For Rent sign on the house:
1. No matter how personable applicants may seem, screen them thoroughly, Robinson says. That includes getting permission to check their credit histories.
“The credit check is more important than ever,” he says. “And the information is now more readily available than ever before.”
The Internet, of course, has opened up access to this information. “As long as you’re registered with one of these sites that provides background and credit information (for a fee), you can get it in fairly short order,” he said. Credit bureaus’ risk-scoring (on a scale of 300 to 850 points) tells creditors, in its estimation, how likely someone is to pay bills on time.
Set a target credit score that’s based on the property, and stick to it, Robinson said. “There’s no one number,” he said. “Maybe you’ve got a little apartment and it’s renting for $300 a month, that’s one thing. But if you’ve got a house that’s renting for $2,000, you’re going to want better credit.”
Check personal references, verify employment and consult their current landlords, he says.
2. Deciding on the right monthly rent probably will require some study.
Robinson said “reluctant landlords” who are renting in order to ease their own financial burdens might set a rent based on the amount that will cover their homes’ mortgage, utilities, taxes, etc. But that would be a mistake, he said.
“Expenses don’t set rents; the market sets rents,” he said. “Your expenses may be $1,200 and you can rent it out for $2,500, for all I know. But the market could just as easily be $850, in which case you‘ve got a negative every month.”
Robinson said a simple starting point is to surf online apartment-rental sites such as Craigslist to see what’s out there, and at what price. A more thorough rent scan could be had by actually visiting properties that seem comparable, he said.
“If, after two weeks of advertising (your home for rent) nobody responds, you know you’re way over market,” he said.
3. Not all leases are alike, and a too-vague one can be costly, Robinson said.
“I have what I call a ‘kitchen-sink agreement’ in the book,” he said. He developed his own form because he found other widely available generic contracts to be so full of legal jargon that tenants wouldn’t read them thoroughly, he said. He has revised the contract over the years to reflect his experience, he said.
“Whatever agreement you use, you’ve got to know it,” in order for both renter and landlord to stick to the rules, he said.
One size does not fit all, he said.
“I tried to put in everything I could think of, but there are some things that might not be in there. In that case, the landlord and tenant could agree to an addendum,” Robinson said.
4. If you find a good tenant, you’ll have to work to keep him or her, as tenant turnover costs time and money, Robinson said.
“Your tenants are your customers,” he said. “Never forget that.”
Toward that end, landlords need to be on top of maintenance — in fact, he suggests offering a written guarantee that specific problems will be resolved within a specified time frame. If not, the tenant will get an abatement on the rent, he said. He says it’s a goodwill, public relations gesture that tenants love — and makes them more inclined not to move.
5. Sometimes, despite your best efforts, a tenant turns out to be a stinker.
Novice landlords have to come to terms with the sticky business of insisting that the rent be paid on time and that tenants can’t engage in forbidden behavior: smoking, having pets, extra residents who aren’t on the lease, etc.
Sometimes there are happy endings: Occasionally mediation can resolve disputes — or just talking quietly with the tenants about the problem can achieve surprising results, he says.
And, as distasteful as it is, a landlord has to accept the possibility that an eviction may be necessary, he says. In either case — resolution of the problem or eviction — be sure you know exactly what’s in the lease and what’s legal in your locality, as eviction laws can vary widely, he said.
Mary Umberger is a freelance writer in Chicago.
See Mary Umberger’s feature, 5 Home Innovations.
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