Rental Property Series: Let’s Drink to Having Tenants

It has been a little while since our last rental property update. In case you’re new to this site, we purchased our first rental property at the end of August this year. My husband and I became slaves for a month to get it renovated and ready for rental.  You can read about it here if you missed it.

Our goal was to have it ready for rent by October 1. We decided to use a property management company because we are just too dang nice and might let in a criminal if they look sweet and have some money. We were hoping to get $750 per month in rent. With our mortgage, insurance, taxes and property management fees paid, we should net around $340 per month from this property. Sweet deal, right?

Well, we did have the property ready by October 1. I assumed there would be a line of people waiting to rent the place. We worked so hard, and I got a pretty shower curtain and mirror for the bathroom.  Reality is that it takes a while to find the right renter. One thing I like about property management is that they have no emotional attachment whatsoever. Sob stories don’t hold any water. Potential renters have to pay for a background check and credit report.  We had two very interested parties. One never brought back the paperwork to be screened. The other did not have a good rental background or good credit.

My husband and I were really getting frustrated. Did we do the wrong thing by going with property management? Did they have too many rentals to manage, and we were not high enought on the list? Should we lower the rent? Finally, we got the call we’d been waiting for. Renters who had decent credit and good rental history wanted our place. Their last landlord said they aren’t the best house cleaners, but didn’t do any damage. They are actually two bachelors who have a long work history for the same company. I believe they are related in some way, but never quite figured out how. They travel quite a bit for jobs. They make more that enough money for rent, and have no criminal history. Doesn’t mean they couldn’t trash the place, but it probably isn’t likely. After the condition of the house when we bought it, I can live with a little poor housekeeping. I guess they probably didn’t care about the fancy bathroom mirror and shower curtain either, but you never know.

They were set to move in last Monday. I got an email asking me to sign off on the final paperwork. On my way home from work, I drove by the place, expecting to see lights on and cars in the driveway. I was surprised to see total darkness and the “For Rent” sign back up in the yard. This couldn’t be good.

After a call to the property manager, we learned that only one of the two showed up for the move in appointment. He came with another unknown fellow who was driving. Good thing, because our tenant was drunk as a skunk. He showed up wasted to meet the manager needing to go over the rental checklist and sign the lease. She was so mad that she made them leave and put the rental sign back up. You can’t have someone incoherent sign a lease and expect it to be binding. About an hour later, another lady viewed the house. She was very interested, but was in the midst of changing jobs and wouldn’t know what she wanted to do until later in the week. Back to waiting.

Of course, the next day our two bachelors called wanting to move in. They had taken the previous day off to move, and well, I guess they just had a little too much time on their hands. We went back and forth. Does one episode of bad judgement mean they will be poor renters? The property manager called their former lanlord again. Maybe she lied to get them out? She confirmed her good reference and said this was not normal behavior. These guys go to work at 5AM every week day, and have excellent work history. If they are drunk every night, they seem to still manage getting to work. We agreed to let them move in, and we never heard from the other lady, so hopefully this is the right decision. I’m thinking they are probably no worse than if we were renting to college kids. They paid the deposit and first month’s rent in cash.  I guess if we decide to send a holiday gift, we can give a case of beer!

If you are thinking about taking the plunge into investment property, as a first time landlord, I’ll share my advice.

  • Have enough of a cash cushion that you can carry the property longer than you plan. We had to pay an extra month of mortgage and utilities because we didn’t get a renter right away.
  • Renters don’t like to look at a place that isn’t fully renovated. If your rental needs major work, plan to complete it before renters seriously start looking. We had several showings during construction, but no one was really interested until it was all done and cleaned up. Most people can’t see your vision with renovation debris everywhere.
  • Wait  for a good tenant. I highly recommend doing a background check and credit report before taking on a renter. Check out this post at Free Money Finance for some great tips. If you don’t want to do it yourself, hire someone. If someone hasn’t paid bills in the past, there is a good chance they won’t pay you, and it can take months to evict someone who doesn’t want to leave.
  • Even if you get a “good” tenant, you just never know what might happen. If you can’t roll with the punches, rental property maybe isn’t for you.

We are glad at this point that we chose property management. They really did come through. Hopefully we won’t find anything terribly wrong with the property after it has been lived in. The house has been vacant for several months, so you never know. I guess that would make another good post, but one I hope to avoid. I’ll keep you updated.

If you are a landlord, how do you screen potential renters? Would drunkeness exclude a tenant?

 

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54 Comments

  1. Kim, rental properties are such a great forced savings plan. I for one, would like to invest in a few more, but my wife is apprehensive. We have 2, a four family and a small single family home on 14 acres. Working diligently on paying off the mortgages!

  2. Pingback: Personal Finance Week in Review #37
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