When I meet with sellers these days the discussion of renting their home has become a popular topic. Maybe they are in a situation where they cannot sell and clear enough money to justify selling the home, but they are in a situation where they can keep their current home and still move on to their next home.
In order to do this there are some financial requirements your next lender will require of you in order to qualify for your next mortgage, please consult with a competent mortgage professional to make sure you qualify and help you make sound decisions about your mortgage situation.
In the event you decide to become a landlord because it makes financial sense for you some of the things you will want to consider are ;
1. Get a good accountant. They will be a Godsend at the end of the year for the items that will now become tax deductible to you. Things like capital improvements, depreciation, writing repairs off etc. When you have these types of things to consider as a landlord, you don’t always have to get even steven rent to mortgage payment. For me personally, I lose a little on one property but it comes out in the wash at the end of the year and I have a great tenant, which is worth it’s weight in gold to me.
2. You will need to emotionally detach yourself from the property. You notice I called it a “property”? It is not your home so much anymore, think of it as an investment. I will tell you that you will need a strong stomach to be a landlord. One reason is that most people will not love your property as much as you do and you may have to deal with a tenant that doesn’t pay the rent on time and you may have to juggle the payments sometimes.
3. Make sure that each person interested fills out an application that lets you verify their employment and their credit. You will want to make sure that your potential client has a steady job and that they make the income that they say they do. There are a couple of ways that I verify this as an agent. The first thing I will do is ask for a copy of identification and two copies of pay check stubs. That way you can see that they get paid about the same amount every couple of weeks. If the potential tenant wants you to verify their employment with a phone call to a supervisor, make sure you call the main company phone number and ask for the human resources department to verify their income and employment. You will want to make sure they don’t have you calling their friend. Get something in writing from the HR department verifying the information.
4. Pull Credit. When you have pulled credit on the potential tenant, you will want to review their credit. If you do not know how to read a report, contact the person who pulled the report and ask them to explain it to you. Optimately you will want to have someone with a score near or above 700. That is the number I look for. This will show that they tenant has a good track record of paying their bills in a timely fashion. It is really the only gage that shows how timely they pay their bills. It is not a guarantee, but it is probably your best gage of how timely you will be paid.
5. The last item I make sure that EVERY landlord in Montgomery County Maryland knows about is the fact that you must have a license to be a landlord. It costs $95 a year and you have got to have it. The county says so, and it is part of a standard Montgomery County lease. If you, as a landlord, have a dispute with your tenant – I am even talking about whether or not the rent has been paid or not – and you do not have a license you may not be able to make a claim on the back rent. You will need to consult an attorney, but I personally know someone that lost thousands of dollars by simply not having their county license to be a landlord. If you need an application Click here for one now.
These are basic tips to get you started as a landlord. Remember the people living in your house are people and have feelings. I find that by treating my tenants with respect, fixing things immediately if they are broken they in turn take better care of my property and treat me with the same respect in turn.
If this information seems like too much for you to deal with, you can always hire a professional property management company to manage the property for you. They will most likely charge you a monthly fee, but will be the person that screens the applicants, fields the calls in the middle of the night when the A/C breaks for you so you don’t have to deal with these items.
If you would like information on property management companies feel free to contact me and I can put you in touch with a professional management company.