Going to be landlord, need screening advice

Parent Cafe
1

We are going to buy a condo. It’s in a nice development that seems to rent to a lot of older people and probably young professionals. It’s not really going to attract the college crowd. Our realtor is happy to find us a tenant, for one month’s rent, which we are considering while we get our feet wet. I am assuming (but would ask) that realtors do credit checks or something on prospects, correct?

We could also list on Craigslist. If we decide to find our own tenant I have no idea how to run a credit and/or background check or how much it would cost. I jokingly (or not…) said that while he meets with the people that I go out and check out their car. If their car is totally neglected then I believe they are less likely to take care of the condo. My car is messy, but not piggy messy. I am talking about people who leave spilled coffee and piles of trash, not just people who have a few papers and gym stuff and maybe a drink in the cupholder. Hopefully you understand what I mean. I wonder if it really would be a good indicator.

We looked at a fair amount of places and I can’t believe how some people keep house. (or don’t). The nicest (but overpriced right now) place had a sweet elderly couple in place. They’ve been there 8 years and are paying rent about 20% below current market. They’ve had one rent increase in 8 years. We would consider an offer if the price goes lower, but I would feel terrible to raise their rent to where we need it to be. They are in a 2br/2b and paying less than a 1br/1ba goes for in the complex. They have kept it in awesome shape though. He is almost 80, not sure about her. She doesn’t know where they will go if it sells. Any thoughts on that situation? Obviously, if I wanted it to live in I would get past it, but to either raise the rent, or see them have to leave is just sad. For now we are negotiating on another nice place, 2br/1ba.

We did consider some college rental houses, but this condo seems like an easier place to start. Less maintenance and a different kind of tenant.

Anyway, what tips do you have on how to screen renters? We still have accounting decisions to make as well. (keep it in our name or do subS corp)

2

Screening is everything. Get a management company that is good at it.
Craigslist would be a mistake.

3

The first month’s rent for finding a tenant seems high. We have a good property manager who charges us 7% and handles all vacancies, evictions, repairs, leases, credit checks, etc., reducing the headaches of owning property and being a landlord. He also sends us itemized statements of income and expenses and balances them at the end of every year. The CPA says he’s very accurate and everything tallies up. He calls us when repairs or maintenance is higher than expected.

I have several relatives that do their own property management–they interview the tenants and run credit checks. I believe they have listed in Craigslist. It can be time consuming to properly screen tenants and do any needed maintenance.

H said he had enough of it in his bachelor days and is happy we pay someone to handle it all, especially since one of the properties is old and requires significant maintenance.

4

We rented a condo for 10 years via craigslist. Have applicants provide their own credit reports along with their applications. You could state in your ad that you are holding an open house for prospective tenants on a sunday afternoon. This might save time with showings and you might catch a current renter out looking at open homes.

The only bad tenant we had was the one with poor credit and a good sounding sob story. Look closely at the credit report history… it doesn’t tell the whole story but it is one of the best indicators of responsibility. If you have doubts about an applicant, listen to your intuition.

If you are new at it, suggest reading up on becoming a landlord because there are many fair housing laws/tenant’s rights to be aware of. College rentals can be risky.
HOA’s may have restrictions on rentals. We got to know the neighbors who were mostly owners, and we tried to rent to people who we thought would fit in and respect the association’s rules. Most of them were previous homeowners looking to buy to downsize but wanting to lease in the interim.

Best of luck!

5

Regarding the possible elderly tennent. I would consider them as prime tenants. Perhaps you could compromise and raise the rent less as a trade off for having good long term tenants that pay on time and keep the place in good shape.

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^^ I was going to say the same thing, Mamom. It’s worth taking a bit less in rent for the security of knowing the place is well taken care of and rent is paid promptly. I rarely raise rents on that type of tenant when I’m lucky enough to get them!

7

The only thing I can add here is that you have to project by worst case, not best case. Each time you have to change tenants can cost you a half to a full month’s rent. (Time to repaint, repair, whatever.) The new folks may- or may not- want to move in on the 15th, may need til the 1st to clear their own old leases. And then subtract whatever you’re paying as commission to an agent. Many landlords do keep rents under market value, to keep tenants longer term. Also make sure you check insurance needs for rentals. And remember this income can count if you’re going for finaid.

Himom, he charges 7% monthly? Adds up to 84% of one month’s rent, but a good deal, to have them on call.

8

I listened to a radio show about being a landlord one time and they suggested that as part of the screening process landlord’s drive by the prospective tenant’s current residence to see if they maintain it neatly and properly. This really won’t work if they currently live in a condo, but something to keep in mind.

9

What is the purpose of you buying this condo? Are you looking for a future retirement home for yourself, or is this a way to make additional income? I think it matters, in terms of risk-taking, conveniences that cost extra but would make retirement life nicer, etc.

A month’s rent to get a stable tenant could be a good deal. My inlaws manage a large number of apartment units, and I’ve seen the worst of the worst. The eviction process is lengthy, and the number of months rent you could risk losing would have you wishing for only giving away one month’s rent to find a stable tenant.

Educate yourself as much as possible, and decide if you are willing and able to be your own management team or if you will hire someone. How close will you live to the condo? Getting to know competent, reliable repair service people ahead of time would be a good move also. When the pipes burst is not the time to be scrolling through a service directory. Talk to others in the building you are interested in buying at. Chat long enough to hear the good and the not so good. (Questions like “what would you like to see done differently?” might help get the info you want.)

Think of it like the process of choosing a college. Every place will have good points and not so good points. Neighbors can be grumpy and turn you in for every slight violation of homeowners’ restrictions. Amenities promoted as fabulous can actually be run down. Location, the views, the noise level–maybe there is ongoing construction everywhere. It all adds up. Is there a “type” of tenant that fits best in a particular condo? An older folks’ place vs. working families with kids vs. college grads in their first job?

Lots to consider. Best of luck to you.

10

I am managing a rental for a family member, we have used a local realtor (the place is out of town for me) to place the tenant twice, at a cost of 1 months rent. She did all the ads, screening, etc. First tenant lasted 4 years, second tenant is in their 2nd year, everything has been smooth, not even 1 day with no rent between tenants as the prior one bought a house and moved mid month.

The whole rental thing can be great, unless and until you get a horrid tenant and then it is overwhelming.

11

What? One month’s rent, purely to get a tenant? What a massive ripoff, unless rent is only $200. Seriously. Oh sure, it would be worth it if you could get a tenant that will be the most awesome tenant and stay there for years, and years, but nobody can guarantee that. Somemom has been very fortunate, but that may be more a matter of luck, offering a good rental rate, anything. If someone is signing a typical one year lease, they can pretend anything they like, but the reality is, after a year, they can leave with no penalty.

This sounds local for you. If you are planning on keeping this as a rental for a long time, maybe now is the time to figure this out for yourself. It’s a learning process, and it’s fairly easy. We’ve been doing this for years, have four condos (have had houses in the past), post on Craiglist for free, and get credit checks, always.

You can get a credit check that includes a criminal background check for about $30 (we require the tenant to pay for that). There are many companies that run credit checks. In fact, I think for a relatively small amount, you can get a company to do the full background check, including calling employers, previous landlords, credit, etc.

As far as checking out someone’s car, I don’t know that a spotless car means much. Who cares if they keep the home spotless if the rent check doesn’t come? Some people are so in debt up to their eyeballs, that they have no extra money and can’t afford your place. There is a perfect tenant for us, and it is one that does not have absolutely perfect credit and no debt. That tenant (no matter what they say) is only there while they are looking to buy a house, and might break the lease on you or move the day the lease expires. The perfect tenant for us has a fair amount of debt, decent and secure jobs that leave money left over at the end of the month. But not too much money. Someone who will call you when something major happens, but just take care of the little stuff on their own, without asking for help. Please don’t call us to change a light bulb! That happened, and is now securely in the contract that they will take care of minor maintenance, plugged up toilets and light bulbs. Oh the joy of rentals…it’s joyful when you get the checks on time, and no phone calls!

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@busdriver11, They aren’t checking out the car, but their current home. People who do not care for their current residence will not care for the next one. Thus a landlord who allows these people to be come tenants is ensuring himself substantial repair and replacement costs down the road.

As I said, these might not work for someone living in a condo, but it’s a great way to screen renters in single-family homes. Also, I just realized I misused an apostrophe in my previous post. Someone should just kill me now.

13

Our property manager performs ALL the other services I listed as well as find the tenants. He doesn’t increase his rate when we have a vacancy or repairs/maintenance is needed. He also deals with any needed inspections and provides photo proof that we have current fire extinguishers and meet all other requirements for insurance. He handles all complaints and issues promptly, so we don’t get calls or any contact from tenants.

He keeps track of market rental rates and advises us when a rent increase might be appropriate. I would not pay one month’s rent just to have someone find me a tenant. HI has lots of folks looking for decent, reasonably priced rentals.

14

True, Busdriver, I have been lucky & if I were not 1500 miles away, i likely would consider doing it myself.

15

But one month has been in practice since my grandmother was a landlord, 40 years ago. I suppose commission for an expensive rental could be negotiated.

16

“@busdriver11, They aren’t checking out the car, but their current home. People who do not care for their current residence will not care for the next one. Thus a landlord who allows these people to be come tenants is ensuring himself substantial repair and replacement costs down the road”

Actually, earl, I was referring to the original post, that actually does specify the car. I’ve just seen people driving the nicest new leased car, perfect condition…and not pay their rent. So I personally don’t take a lot of stock in a spotless car, or even a spotless house/condo. Something kept in decent shape, not trashed, but being perfect doesn’t mean they will take care of the rent payment. I don’t know if it is a good indicator. This is the part I was referring to:

“I jokingly (or not…) said that while he meets with the people that I go out and check out their car. If their car is totally neglected then I believe they are less likely to take care of the condo. My car is messy, but not piggy messy. I am talking about people who leave spilled coffee and piles of trash, not just people who have a few papers and gym stuff and maybe a drink in the cupholder. Hopefully you understand what I mean. I wonder if it really would be a good indicator”

17

“But one month has been in practice since my grandmother was a landlord, 40 years ago. I suppose commission for an expensive rental could be negotiated.”

One month, just for finding a tenant and doing nothing else? That could be thousands of dollars for just a few hours of work. I realize there are crazy places like NYC, but in the rest of the country? And that tenant could still trash your place, and walk out without paying the rent, there are no guarantees.

HImom’s situation sounds far more normal and reasonable. And often, the difficult thing isn’t just getting a tenant, but getting rid of a tenant, getting the property ready, and dealing with the issues that come up. Getting a tenant (in the right market) can be the easier part of the process.

18

We have been renting property using an agent since I was married in the 80s. We have never paid a month of rent for finding a tenant. The original property managers took 10% and our current ones are much better and only take 7%. Our property is old and needs a lot of maintenance and repairs, so I am happy with them handling it. They have relationships with the termite treatment folks, appliance repair folks, renovators and pretty much everything we’ve ever needed. They call us if the work will be 4 figures or higher and get pre-approval. We give them discretion to proceed on everything else.

19

If you want to be more secure get a criminal background check and make sure you know the tenant-landlord rights in your state… There is no greater headache than having a tenant who not only turns out undesirable but even harder to kick out. and it’s always the bad apples that stick to their rights. Some states are skewed towards tenants rights.

Out of curiosity–is this just for investment or future retirement maybe? I can see vacation rental but as long term investment? Sounds like more risk than anything else but that’s just me. Are many units for rent in the development?

20

assuming you’re in NJ–certain cities have rent control ordinances now–make sure you know what you’re getting into.