|If you unexpectedly find yourself with a home to rent, you’re what we call an accidental landlord. You never really planned on owning rental property, but maybe you’re facing a job transfer or recently inherited a piece of property. The local real estate market has rebounded nicely and homes in Jackson County continue to increase in value by about 8% a year; but, home values are still not where they were in 2004 and 2005 so it may not be advantageous to sell.Should you rent or should you sell?You have to look at the rental numbers before you put your home up for sale. Rental homes are in demand everywhere, especially in Jacksonville. A nice, newer 3 Bed, 2 Bath home can yield $2,000 + a month. If the current value of your home is $400,000 and you factor in appreciating home values which have averaged 8% a year, you can rent out your home for two years, receive $48,000 in rents, and the value of your home will go up to $466,000.
There are at least 6 things you must consider before you become a landlord.
#1 Know the law
Landlord tenant law is unique to each state and new laws are put into place every year so you need to make sure you follow the law. There are hundreds of tenant landlord laws that must be followed but here are the ones we see that come up the most often and get landlords in trouble.
· The tenant’s security deposit belongs to the tenant and must be kept in a special non-interest bearing client trust account registered with the state and cannot be comingled with other funds. By Oregon Law, you have 30 days in which to return the tenant’s security deposit, minus any repair cost.
· Tenants have the right to privacy and you must give them 24 hours’ notice if you want to go into or on the property.
· If a tenant has lived in a rental more than a year, you have to give them 60 day notice to vacate.
· The fair housing act covers most housing and ensures that landlords do not refuse to rent or set different rental terms based on race, color, national origin, religion, sex, familial status or handicap.
· You must provide a CO detector and smoke detector with a 10 year battery.
So make sure you keep up on tenant landlord laws to keep yourself out of trouble.
#2 Know your prospective tenants
You have to know who you are renting to. Obtaining a thorough application and verifying the information is vitally important. There are companies that specialize in resident screening and contract with property management companies. You can access an applicant’s detailed credit, criminal, eviction and rental history records. You also need to verify the applicant’s employment and income. Look the tenant’s employer’s number up yourself so you know you are talking to their actual employer not the tenant’s friend. All this screening will pay off as you would be surprised how many people dress well and drive a BMW but are overextended and can’t pay all of their bills.
#3 Check Your Emotions
If you’re renting a home where you’ve lived for many years, set your emotions aside. I remember my fist rental property that I rented out furnished; I could not get over someone else was sleeping in my bed. After a few months of steady income, I found myself quickly seeing my home as an asset that produces passive income.
#4 Compare Rental Rates
Don’t let your emotions set your rental pricing. Unrealistic expectations can keep you from meeting your goals. To determine your home’s rental value, look at Craig’s List, Zillow or Trulia and compare your home with homes in your neighborhood.
#5 Manage expectations
When you have completed your lease, go over every line with your tenant and set expectations. Owners often get in trouble when expectations aren’t set and tenants do not know what they agreed to. Do not be flexible on terms such as the rent due date and late fees. We make it simple; rent is due on the 1st and late on the 5th, there are no exceptions. Put in writing as to who’s responsible for what utilities how to report repairs and how general maintenance will be handled.
#6 Take photos of everything, then take more.
Having a photo record of the condition of everything in the home prior to the tenant moving in is crucial. Then repeat the photo upon move out. A picture tells a 1000 words and will save 1000s of dollars.
Becoming an accidental landlord has its privileges and drawbacks. The better prepared you are before you sign the lease; the more likely it is that you and your tenant will have a great experience. If the process overwhelms you, don’t hesitate to call us, your local property manager. Who knows, you might like it so much you invest in other properties to fund your retirement.